Guest essay by Eric Worrall
The cash strapped European Union has usurped greater control over three trillion Euros of private pension funds, by issuing a directive which requires EU based funds to consider “Climate Risk” as part of the basis of their investment decisions.
EU requires pension funds to assess climate change risks
EU pension funds will have to include environmental risks in their investment strategies, under a law passed on Thursday, that ecologists hope will encourage money to flow out of fossil fuels and into greener sectors.
A large majority in the European Parliament backed the law that requires managers of retirement funds to take into account the “environmental, social and governance risks” of their investments.
…
Under the new law, the potential negative effects of climate change or political factors on retirement funds will get the same level of attention as liquidity, operational or asset risks.
“This is a big success for the promotion of investments in sustainable products,” German Greens lawmaker Sven Giegold said, adding that the law “paves the way for the introduction of fossil divestment by European pension funds”.
The pensions industry holds in Europe assets for a value of about 3 trillion euros ($3.17 trillion) on behalf of around 75 million people.
…
Read more: http://www.reuters.com/article/us-eu-finance-climatechange-idUSKBN13J1SV
Given the disastrous track record of renewables giants like Solyndra and the giant Spanish renewables business Abengoa, I would say banks and pension fund managers have good reasons to steer clear of renewables.
Coercing banks and pension funds into tossing depositors cash into subprime green energy projects in my opinion is unlikely to improve European pension fund performance.
It is also worth noting that until Britain invokes Article 50 and leaves the European Union, the City of London is subject to this new European climate directive, as are any EU based pension funds managed by US banks.
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..Most people just shoot themselves in the foot, but the EU just shot itself in the head…Expect more Brexit style rebellion among the masses…
I’m waiting for that! I’m looking forward to that very much!
I would have expected a pension fund that covers 75M Europeans to have a value far greater than €40k each
I mean, our Pension Fund at work is valued at over $6B and it is only for 22,000 EEs
or just opened themselves up to the worlds largest lawsuit….
They are going to dictate how you can invest…and what in
…when those investments don’t pay off
Yes but they also control the legislation that that those lawsuits operate under.
The EU “commissars” are protected from any and all prosecution both from individuals or governments to do with their work for the commission. Also their pensions are dependant on them never saying anything against the EU and are paid for by the proles who get no say in the decisions made.
James Bull
I was thinking the same thing. Who in the EU can be sued when the next wave of green co.’s go belly up and their pensions only have a value of 2 Trillion. They need to stop digging their own graves! Just stop doing stupid liberal actions. JUST STOP!
More likely first they shot themselves in the foot……then the leg (Pain!), then the other foot (more Pain!)
When the Globalist Delusional’s finally disband, the last shot will be to the head…..(Out of Pain!)….:-)
EU needs leathers that put the welfare of the people first and the politician last we will see when the cold
hits hard and the pensioners start to die in mass as before!
Retards at the European Commission are determined to drive straight into the wall in front of them.
Having said they’d “got the message” just before the Brexit vote when polls showed a large opposition but still predicted remain winning, they have now forgotten that they said they would have to have a fundamental rethink and are now just doubling down and calling for “punishment” of Britain to deter other countries and keep them in tow.
They are doing their best to ensure that Le Pen wins next March and then the whole european project will fall apart.
Every time I see the word ‘subprime,’ the First thing that comes to mind is Bankruptcy.
ClimateOtter, I think Clinton. (and am grateful HRC lost)
To think I’ve been labelled “uneducated” for supporting Trump.
Who’s assessment of “climat risks”? If the pension fund managers are honest, much of the green renewables are at severe political risk, as they are dependent on subsidies and special treatmant in the market for their viability, and politics can change at the next election. (I wonder what Warrren Buffett thinks of his investment in wind in the US, given the new Trump adminstration?)
If the pension funds are forced to invest in “green energies” …… then that will force the EU government to continue funding the subsidies given to the “green energies”.
They don’t have a clue. Not a clue! Then they wonder why the masses turn against them.
It’s just a question of communication. They have not explained themselves as well as they should have done. The plebs still have not understood. They will have to try harder to “explain”.
Government bureaucrats micromanaging the economy. That always works out well.
not elected government bureaucrats….
‘Under the new law, the potential negative effects of climate change or political factors on retirement funds will get the same level of attention as liquidity, operational or asset risks.
“This is a big success for the promotion of investments in sustainable products,” German Greens lawmaker Sven Giegold said, adding that the law “paves the way for the introduction of fossil divestment by European pension funds”.’
First and second paragraphs aren’t connected. First one says they have to think about what effects climate change will have on their business investments. Like, if the temps go up 2°C, how will it affect your holdings. How this would promote investments in sustainable products, whatever they are, is not clear.
By political factors, think Sharia law coming into force. Sharia prohibits interest. Adios to the bond funds in your pension plan.
“This is a big success for the promotion of investments in sustainable products,” German Greens lawmaker Sven Giegold said, adding that the law “paves the way for the introduction of fossil divestment by European pension funds”.
In other words, pension money will be diverted into the Greens crony money sinks.
Don’t think the Greens this one through. Given the political “factors” in the United States, the logical move for a EU pension fund administer seeking to minimize his clients financial risks would be to sell all holdings in the EU and transfer them to the U.S.
Think about it from a financial strategy point of view:
Case 1 – Climate Change has no long term impacts. The value of U.S. investments rise faster than EU investments. Client wins.
Case 2 – Climate Change has a long term impact. The value of U.S investments rise faster then EU investment to that point and then rise even faster as the U.S. adapts. Client still wins.
and
This law creates the governance risk that it warns about. This law is now dictating the terms under which investments can be made. This is a huge new liability, and with the passage of this law, and this new intrusion into the market, there is no telling what else might be in store. So now, investments must be made based on what a reckless and capricious government *might* do next. Get your money out now.
In a larger view, is the EU headlong rush into “renewables” not wrecking the EU economy fast enough?
“Faster, faster, more, more. This should do it!”
Taking the IPCC figures about the total impact of reducing carbon emissions at this time they will be able to demonstrate that it will be immeasurably small.
This law simply obliges them to do that calculation and present it. Sounds like a good idea to me.
With the developing situation in France I expect EU to declare All Pension Funds as EU property and dispense with the “climate risks” bullshit. It’s the money that is of supreme importance as the German Federal State crumbles under the weight of their errors and the “Putin Pincer” closes on Merkel and destroys her in the early months of 2017.
Wait for the end. 😉
I am in the middle of a Masters Degree in Quantitative Finance and we cover all the areas of risk.
If a bank needs to know about it then it researches and quantifies all risk.
Climate is irrelevant and whatever tiny effects it might have are already handled in the other categories of risk.
A bureaucrat will never be able to comprehend how irrelevant he is.
Giving EU bureaucrats more say over what constitutes investment risk probably substantially increases the legislative risk profile of European investments ;-).
Lew, please consider submitting a story to Anthony about how you think climate issues and the government response to those issues are impacting the global risk landscape – I’d love to read a detailed analysis by someone of your skills.
Big government pension funds are almost irresistible to politicians. Big company pension funds are almost irresistible to company executives.
You left out the Union Bosses.
“A bureaucrat will never be able to comprehend how irrelevant he is.”
Everybody likes to believe they are relevant and saving the world from disaster clearly fits this bill.
I am looking forward to the world heating up when Trump becomes president because if it doesn’t, then Obama’s legacy will be revealed as a very costly hoax.
“I am looking forward to the world heating up when Trump becomes president because if it doesn’t, then Obama’s legacy will be revealed as a very costly hoax.”
Did you leave out “not”?
Because Old Europe isn’t bankrupt enough…
The UK figured out the EU scam in time to extract themselves with minimal damage. Why they still believe they owe any….any…fealty to the EU is beyond me. Europe will in time become devoid of Democracy and trapped in the web of Socialism/Marxism (spare me your expert opinion) that even Russia had enough sense to leave.
Did you know there’s such a thing as a Markl machine?
http://www.paulin.com/Images/MarklTest.JPG
No….I’m afraid to ask what it does 🙂
“A stress intensification factor is a multiplier on nominal stress for typically bend and intersection components so that the effect of geometry and welding can be considered in a beam analysis. Stress Intensification Factors (SIFs) form the basis of most stress analysis of piping systems.
SIFs are obtained from tests and equations written to extend the usefulness of the tests. The Markl machine is is the standard machine used to develop SIFs.”
http://www.paulin.com/web_sifandfesif.aspx
https://www.paulin.com/PVP2008-Hinnant_and_Paulin.pdf
Note: PiperPaul is NOT Paulin or associated with Paulin Research.
This idea that only governments can manage technological innovation a la “Apollo”-style projects is ludicrous.
History will not be kind to Europe if it continues down this path.
The madness of the climate consensus has lingered far too long
They’ll feelgood themselves right into another financial crisis. Who’s to say that’s not the actual intent?
By the way, has anyone caught the 2015 Norwegian TV mini-series, “Occupied“?
“In the near future, Norway is occupied by Russia on behalf of the European Union, due to the fact that the newly elected environmental friendly Norwegian government has stopped the all important oil- and gas-production in the North Sea.”
A fantastic tv series, recommended.
European financial crisis…
http://www.alexcartoon.com/index.cfm?cartoons_id=5265
Oops, wrong link;
http://www.alexcartoon.com/cartoons/6892_22.11.16_colour_ML.gif
Typical EU: totalitarian at heart, forcing investors to buy in the green scam or else.
Brexit first… Next France etc…
In fact Papa Schulz is leaving the EU parliament to run against Merkel… Two fingers of Soros…
http://po4ep.s3.amazonaws.com/549/l/26900681.jpg
It would be ironic if pension manager would state ‘The production of Co2 benefits our assets therefore there is very little risk to our holdings’
My guess is that eventually, the risk assessment will have to be in accordance with United Nations view will be regarded acceptable by auditors. This looks more like totalitarian government in the making.
“The Utopian attempt to realize an ideal state, using a blueprint of society as a whole, is one which demands a strong centralized rule of a few, and which is therefore likely to lead to a dictatorship.”
― Karl Popper, The Open Society and Its Enemies
Yeah, they can consider the risks – and determine that they are negligible and go out and buy some gas stocks. No problem.
WOW!
“In order to secure your retirement and financial future you must invest in that which jeopardizes your finical future.”
They are building a “house of cards” … all dueses.
More reasons for people in different countries to vote to leave the EU.
Josh tweeted this connection. It would appear the “Law of Unintended Consequences” is biting Europe in the Environmental tooshie – along with the Tropics:
https://www.theguardian.com/environment/2016/nov/24/protected-forests-in-europe-felled-to-meet-eu-renewable-targets-report
If Europe destroys enough of their forests they just may get the man made climate change they were looking for.
Be fair, we are also trying to destroy enough of USA forests (for biomass) to get the man made climate change everyone is looking for….But sod the forests, investors ( on both sides of the pond) are making money !!
The EU is a prime example of the lunatics being in charge of the asylum. And the EU (affectionately known as the EUSSR) is now an asylum.
Over Thanksgiving dinner I was talking to the owner of an American company that specializes in the construction and demolition of wood mills, wood chipping/pelleting plants, and bio-energy plants. He’s made a very respectable living building plants in the Southeastern U.S. to meet demand for lumber, paper, wood products, and pelletized fuel. The pelletized fuel is, of course, produced mainly for export to the EU.
In particular he builds the plants (cash up front of course) and demolishes them when they go bankrupt (again, cash up front).
He was musing on the prospects of his latest client… a German company. He pointed out the plant had three time the capacity that the surrounding land could support. The Germans were oblivious. So, he was building the plant in a manner likely maximize his profits when he’ll be asked to demolish it – the Germans, he noted, like to build “sturdy” structures. Bankruptcy, he estimated, would occur about three years after the plant was constructed.
American capitalism in action… got to love it.
🙂
Risk is a two-way street with probabilities (either way) weighted by observation, trends, science, analysis and yes bias. So those with a longer term view of the globe may take a more balanced view of cooling/warming risk. Unfortunately, but realistically, this current argument has more to do with political risk than scientific risk in the time frames most of us are capable of understanding, being a lifetime or less. Practically, money managers and other fiduciaries, regardless of their scientific understanding, will be forced to toe the party line while hedging their bets against the long term advance of climate reality: adaptation, which is humankind’s best, proven response to change of every kind.
We have all been suckered into the small-beer argument of CO2, which is a bit player at best. We have accepted the false premise, which is the first mistake. How do we now focus our fellow citizens and political representatives onto the issues which really count? Continue focusing on science, economics, education and self-interest, though in a modern-world marketing way combined with an old world bluntness. We must call out the liars, especially those of us without mortgages and jobs. The truth will out, particularly when economic self-interest becomes apparent, as in Germany, UK, South Australia, Ontario, etc. Painful and frustrating in the short term, as we are all pariahs at the cocktail parties, vindication is coming.