Publication / 08 Apr 2014

Stranded Assets: Fossil Fuels

The Environment Agency Pension Fund asked Trucost to assess its exposure to the risk of carbon intensive ‘stranded assets’ in its investment portfolios.

The Environment Agency Pension Fund commissioned Trucost to assess and analyse sixteen of their active and passive equity investment portfolios with regard to their exposure to the embedded carbon emissions within fossil fuel reserves held in their funds.

The analysis identified the absolute level of embedded carbon in the investment portfolios, the relative level of embedded carbon for the active portfolios, and the most emissions intensive companies across the consolidated portfolios. It also assessed the capital expenditure of the largest fossil fuel companies in the portfolio, issues for funds in addressing carbon risk in investment portfolios, and areas for engagement with companies and regulators.

Among its recommendations, the report proposed that the EAPF should engage with legislators and reporting bodies for comprehensive fossil fuel reserves data to be disclosed in publicly available corporate reports with reserves split out by each type of fossil fuel and accompanied by industry accredited emissions factors. It also advised that the EAPF should engage the management of fossil fuel extractives companies to ask them to explain their Capex program regarding the development of new fossil fuel reserves and what plans they have in place to make a transformational shift to a lower carbon economy.

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