43: IEEFA's Tim Buckley - Climate Risk, Stranded Assets and the Energy Transition

Note: This podcast was recorded before Blackrock announced to divest from thermal coal in its active strategies. Climate change has been a divisive issue in the investment world, as many investors struggle to articulate the impact of this development on their portfolios. But Tim Buckley brings clarity to this discussion with a sharp analytical framework of how climate change and the ongoing transition to a low carbon economy will impact corporations and, ultimately, institutional investors. After all, you don't want to be left holding the 'canals of the 21st century' in your portfolio. Tim is a Director of Energy Finance Studies, Australasia at IEEFA, the Institute for Energy Economics and Financial Analysis. He spent most of his career in the asset management industry, including 16 years at Citigroup, where he was Head of Equity Research. Overview of Tim Buckley podcast: 1:00 You were involved in equity research. How did you get into the climate change sector? 1:35 Chinese companies were involved in clean technologies that we were conceiving off in the West 4:30 Focusing on the energy sector 7:00 What was an example of an interesting Chinese energy technology disruptor when you were investing? 9:00 Next Era Energy CEO predicts renewable deflation of 50 per cent in the next 5 - 10 years 9:30 Clean energy in Japan after Fukushima 13:00 Nuclear energy is low emission, but is it really sustainable? 14:30 What are the major risk from climate change for investors? Let's take a look at what Mark Carney, Bank of England, estimates. 16:00 The train wreck is coming, but the sooner the better because financial markets will adapt 17:00 Do you look at climate change risks as unaccounted-for costs? 19:00 Stranded assets and why they matter. 21:00 Coal will have a market share of zero per cent by 2030 23:00 Are funds already holding stranded assets? Oh yes! 25:00 Let's just put a price on carbon and let investors make an informed decision. 26:00 Infrastructure investors will be a core part of the solution 28:00 Talking about divestments: how far can you go before running into fiduciary issues? 30:00 You have a fiduciary duty to factor in a known risk. 36:00 Some of the developing economies are further ahead on transitioning to low carbon than the developed world. 39:00 The disruptive technologies are truly disruptive; it is not just positive. It will destroy more shareholder value than it creates. It is a risk that needs to be addressed. 42:00 Who will be the winners of this disruption? 45:30 Tail risks, an example of General Electric