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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the appropriate video for more Eu-exits:
https://m.youtube.com/?#/watch?v=-wntX-a3jSY
https://youtu.be/-wntX-a3jSY
The EU wants to make life as difficult as possible for the UK as they want to teach us a lesson in order to ensure that no other inmates try to leave the asylum
tonyb
“Shot while trying to escape?”
Dear Lord, I think it’s about time for another one of those deluges of yours. Please limit this one to the Western Eurasian peninsula and North America’s Eastern Seaboard. A medium-sized asteroid strike near the Azores should do the trick. Thanks.
So, investing in renewable crap is risky…
Subsidies could be withdrawn by any elected, rationally-minded government.
Yes investors should certainly take that into account.
The sad part of all of this is that, even if the modern witch doctors are exposed as lying and redirecting valuable resources toward an “issue” that either has no impact, or was a complete fraud, the people who suffer from the loss of wealth created will probably vote for the same people—or their anointed replacements.
We humans, as a whole, never seem to learn. During the Neanderthal period—and beyond—people were told that the evil deeds they did caused the bad weather, the earthquakes, disease, or whatever was a convenient excuse to wield power over others. And we’re still doing it. Today it’s cloaked in the terminology of science, even if not its essence of seeking truth.
Whether it’s a population explosion and the imminent mass starvation we were told was coming in the late 20th century, or the ozone hole that will fry us, or DDT, even the lingering lies remain and many people still believe.
The wrong part is bolded in the Reuters para. It should be
“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.”
They aren’t being told to invest in renewables, or whatever, to do good in the world. They are being told to consider risks to the safety of client’s funds. As surely they should.
You haven’t had much experience with government thinking have you? Reading between the lines… it’s obvious that they want the funds to make statements that climate change is real and dangerous… and to withdraw funds from reliable heat and power sources in order to put it into unreliables.
This is rather conspiratorial. The matter has a straightforward prudential aspect. For example, one of the odd aspects here is that a major backer of the Sydney Desal plant is the Ontario Teachers Pension Fund. Now they obviously have a major stake in the climate future there. I believe it is a well-run fund, and they have probably worked it out, but it could seem that they may not have judged climate prospects properly. It seems to be proper for an oversight body to mandate reporting on consideration of climate risk for such ventures.
…but it could seem that they may not have judged climate prospects properly.
===========
It could be that they were soaking in global warming propaganda at the time of the decision.
====
“DROUGHT will become a redundant term as Australia plans for a permanently drier future, according to the nation’s urban water industries chief. […] The urban water industry has decided the inflows of the past will never return,” Water Services Association of Australia executive director Ross Young said. “We are trying to avoid the term ‘drought’ and saying this is the new reality.”
(The Age, 2007)
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“Drought is too comfortable a word,” said John Williams, the New South Wales state Commissioner for Natural Resources. “Drought connotes a return to normal. We need to be adjusting.”
(Cosmos, 2007)
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“The pattern that we’re seeing now in the weather in Australia is very much the pattern was predicted by computer models as much as a decade ago.We will have to get by with less water. The CSIRO’s telling us that. We’re seeing it now, in the evidence before our eyes in our rivers and creeks, and of course the computer models in the global models have been predicting just this now for some years. I think all evidence says that this is our new climate and we have to get by with less water than we’ve ever had before.”
(Tim Flannery, 2007)
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I don’t want to be enslaved to foreign investors for my water supply, btw,
Why don’t they assess the risks of meteorite impacs – which is much more probable than anything else?
Provided the models they use in their forecasts conform to some sort of standard, should be OK.
http://forecastingprinciples.com/index.php/629-forecasting-climate-in-paris-ignoring-the-golden-rule
“… found that the IPCC’s procedures violated all 20 of the relevant Golden Rule guidelines.”
Solyndra and Abengoa?
So no failures or bankruptcies in other areas of the energy market (coal mining?) – really that’s a cherry pick in a very successful market (which the US is about to leave or fall behind in).
All the world’s insurance companies take account of climate risk – do you suppose that’s some sort of UN influence or a hard headed assessment of the actual state of things?
If by ‘hard-headed’ you mean ‘thick-skulled’ I couldn’t agree more!
You are confusing weather with climate. But don’t fret. Warmunists of all stripes frequently make that mistake.
The EU and its bloated undemocratic, unaccountable, bureaucracy is a major threat to all our investments. If left as is the Brussels/Strasbourg cabal will eventually self-destruct resulting the mother of a global financial crisis. Better a controlled stage by stage dissolution, good start made by the UK.
Like all despotic regimes the EU are mentally unbalanced, this is why GB are standing at the exit gate, shame that the leftists are not on the side of democracy and Brexit.
and certainly in the UK now, its mandatory that you and your employer shovel money into a pension fund.
For what?
Your retirement of course, idiot.
But in the meantime, where does the pension fund manager put this money if not into Government bonds/loans/gilt-edged-securities.
And how do they work? By letting inflation devalue the money so gov’mnt only pays back a fraction of what it borrowed when the bonds mature 10/15/20 years later.
What could possibly go wrong?
Meanwhile it is mandatory to buy insurance on many things.
In steps Insurance Premium Tax. started at a very low level a few years ago, went from 9.5% last year to 10% this and will be 12% next year.
In the longer term, where will this end…………….
Risk assessment for pension funds is not a new requirement. More than twenty years ago, as a trustee of a defined benefit scheme, I always insisted in placing possible Government action as the most serious risk to the the solvency of the fund.
Starting with Kenneth Clark, successive Chancellors of the Exchequer have done more damage to UK pension funds than even the worst outcomes predicted by CAGW model forecasts could possibly do in the next 100 years.
Those political jerks …
I know of a law that requires every new law to prove it will be beneficial. So … in the process of lawmaking, they just added a piece a paperwork that just say that : “i hereby swear than my new piece of BS is so good and cost so little, i wonder how we could live so long without it”. The paperwork is done by some newbie clerk, smart enough to copy-paste some officials’ BS on a couple of pages (no more). And never read by anyone (is it there ? checked !).
So
I guess “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.” : for sure, “potential negative effects of climate change” will benefit from the same kind of paperwork.
Great, isn’t it ?
They already do assess climate risks. They assess all risks. This directive will change nothing if implemented honestly. And what will the European Parliament do if the pension managers conclude there are no risk-management steps to be taken?
Oh, right. It won’t be implemented honestly.
I bet the UK is sure glad they left!
Please can I ask Being And Time to refrain from wishing for an asteroid strike on the Azores – did he or she have a bad holiday experience? – as the local population aren’t to blame for the EU. These things have a disturbing way of turning into strange coincidences and anyway the resulting tidal waves etc might be somewhat more unpredictable than you think.
As the EU recently published a report telling us that 42 million EU citizens are now living in fuel poverty and having to choose between heating or eating and no one in our useless broadcast media in the U.K. even reports it – certainly not the BBC, I doubt that there will be much fuss about pension funds being embezzled by the limitless greed of the green lobbies fellow travellers.
To all our American friends, please please encourage Donald Trump to take an axe to all this nonsense, my greatest fear is that he’ll be got at.
Moderately Cross of East Anglia commented: “..To all our American friends, please please encourage Donald Trump to take an axe to all this nonsense, my greatest fear is that he’ll be got at…”
He understands the economic implications of the AGW scam very well and puts prosperity above dodgy science. He’s already stated he will “make America energy independent through increased fossil fuel production nationally” and has called AGW a “hoax”. One of his first cabinet appointments was Myron Ebell
…. “Mr. Ebell, who revels in taking on the scientific consensus on global warming, will be Mr. Trump’s lead agent in choosing personnel and setting the direction of the federal agencies that address climate change and environmental policy more broadly.” Look up his name. He was voted “as one of seven “climate criminals” wanted for “destroying our future.” And remember….Trump has no political baggage and his agenda is his own 🙂 Time will tell but he’s stubborn, arrogant, a change agent, and doesn’t shy away from a good fight.
The reality is that, thanks to previous regulatory overkill,the pension funds in Europe are almost entirely invested in bonds, so the idea of the green activists of corrupting the legal system to achieve their aims of killing off energy companies by starving them of investment capital was always doomed to failure. All they really achieve is to deprive savers of access to stable high dividends from the likes of Royal Dutch Shell. The real risk is that the green blob issues billions in ‘green bonds’ to fund otherwise uneconomic projects and the drones that sit atop the pension schemes misallocate capital on a grand scale. The original plan of Goldman Sachs et al was to create a cap and trade system to make millions out of carbon credits, but that hasn’t worked, so this looks like the new plan.
On an optimistic note, this might (possibly) blow up in their faces. Forcing investment managers to publicly assess climate change risk could actually let some sunlight into dark corners. Up until now, the very smart minds in the Fund management industry (and there are many) have tended to let the Climate change circus chatter away in a self righteous froth on the basis that they were a mild nuisance at best. This could change things. Due diligence requires proper research, not simply parroting the accepted wisdom. A good fund manager is not swayed by so called experts and recognises that if he was running a fund that had failed to deliver the performance predicted by his modelling for 18 years that serious questions would be asked. It wouldn’t matter how many Nobel prize winners he had doing his backtesting, people would want their money back. Moreover if the clients discovered that he had not only fixed his back test performance period to start at the absolute low but also that he had ‘smoothed’ some of the track record he would be looking at prison.
Thus if for example a UK pension fund manager writes in his report that based on the IPCCs own estimates, decarbonising the UK economy will have zero effect on predicted temperatures (which is a true statement) and that therefore the activity of UK based carbon producers can not be deemed to be harmful it will raise an awkward problem. The manager has stated a fact that up until now has been swept under the table (there are multiple other such facts on this site and others) and unlike other debates it can’t be shut down by the NGOs. He could state that the risk is that irresponsible government beholden to green lobbyists represented a threat to the cash flows of certain companies (which is also true) which would set further cats running amongst the proverbial pigeons.
Bottom line is that to date, the money has all been made by the few powerful people on the side of AGW at the expense of millions of small consumers. If they present a large threat to a large and sophisticated counter party then we might just have a fair fight on our hands – and many more readers of WUWT!
I think the “governance risks” are the main point.
“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”
They better invest in values not very influenced by government, and green investments are very dependent on government.
But so far they only have to concider it, and thats ok as long as they are free to come to their own conclusions.
You could also turn it around, and ask the governments to concider how to make green energy a good investment, or why it is not so.
Workers in Europe want to be taken care of by the state and don’t mind having their investment decisions handled by others who know best. Look at the governments they elect. They will get the pension investment strategies and results they deserve.
The California Employees Pension fund managed to get an amazing 0.69% yield last year from their demands that the fund can only invest in green companies. Pensioners may soon be paid in karma enhanced organic tofu and not actual money.
This is great news for EU pension funds. We know that all human life will cease within the next ten years due to locked-in climate change, because Guy McPherson of the University of Arizona tells us so. We know this is true because Professor McPherson is a scientist. So pension funds which take into account climate change can prove that they will have no retirement liabilities beyond 2026, which should put them all in a healthy surplus.
I am reminded of the City of Los Angeles, which spent many millions over many years on ‘feasibility studies’ of various regional mass rapid transit system options (bus, train, streetcar, etc.) until they realized that if they had simply picked a system at the beginning and run with it, they would have had a working system with lots of money for upgrades.