The world is on the brink of the "largest bubble ever" in finance, because of the undisclosed value of high-carbon assets on companies' balance sheets, and investment managers who fail to take account of the risks are failing in their fiduciary duty to shareholders and investors, Al Gore and his investment partner, David Blood, have said.
"Stranded carbon assets" such as coal mines, fossil fuel power stations, and petrol-fueled vehicle plants represent at least $7 trillion on the books of publicly listed companies, and about twice as much again is owned by private companies, state governments, and sovereign wealth funds.
As the danger from climate change intensifies, and as rules on carbon and the introduction of carbon pricing in many parts of the world start to bite, these assets are expected to come under threat, from regulation and from the need to transform the economy on to a low-carbon footing. The "carbon bubble" has been identified by leading thinkers on climate change in recent years, but so far the findings have had little real effect on investor behavior.
Now Gore and Blood, the former U.S. vice-president and ex-chief executive of Goldman Sachs, who are partners in the Generation Investment Management firm, have brought forward a four-point plan that they say will protect future investors. They are calling on companies, investors, and regulators to identify the carbon risks in their portfolios; to demand of company managers and boards that the risks should be publicly disclosed; to diversify their investment portfolios to include low-carbon infrastructure such as renewable energy and electric vehicles; and finally to take their money out of fossil fuels and other high-carbon assets, or turn them into low-carbon assets -- for instance, by installing carbon capture and storage units on power stations.