Climate Change Will Affect Millennials’ Pension Prospects

Financial Times - Mark Fawcett*

Nest’s Mark Fawcett says the long-term future of the global economy is green

Getty

Millennials aren’t thinking much about retirement, but climate change is something many of them care deeply about.
That’s smart, because by the time they retire, climate change and whatever humans do in the next 30 years to mitigate its effects will almost certainly have transformed the way we live; a transformation that could also have a big impact on their prospects for retirement.
Donald Trump, the US president, signed an executive order in March rolling back his predecessor’s Clean Power Plan, rejecting with a stroke of the pen what one commentator called “the most important thing any nation had ever done to reduce carbon emissions”.
Will that alter the long-term picture? We don’t think so.
It is not clear what impact it may have, but we believe the long-term future of the global economy is green.
The reasons are political, technological and financial.
The cost of generating solar and wind power is becoming cheaper than fossil fuels in many parts of the world.
Renewable capacity overtook coal-fired generation for the first time in 2016.
China and India, respectively the world’s biggest and third-biggest polluters, have been investing heavily in green energy at home.
China is planning to spend £292bn on its domestic green-energy market in the next three years and India’s Central Electricity Authority recently said that no coal-fired power stations will be built over the coming decade beyond those already in the pipeline.
It is predicted that renewable-energy capacity in India will overtake that of new fossil fuel plants from 2018.
The energy infrastructure market appears to be heading in the same direction.
Once again, where the US appears to be pulling back, China is stepping forward.
Not only has it invested in more clean power at home, it is pouring money into developing economies’ energy infrastructure, spending $165bn since 2000.
And the focus of that money, while fossil fuels still dominate, may be starting to shift to cleaner sources such as nuclear, hydropower and renewables.
China outspent any other country in the world on overseas investments in green technology in 2016.
Closer to home, commitments made in Paris at the global climate talks in 2015 have spurred many businesses into action.
Utility companies in almost every EU country pledged in March to phase out coal-fired plants from 2020.
These companies are not waiting around for governments to shift the ground under their feet.
Those that are not thinking about how to diversify away from heavily polluting fossil fuels will probably face future losses as markets leave them behind and policies penalise them.
For institutional investors with long-term horizons, the debate is not whether there will be a transition to a lower-carbon economy, it is about how quickly it occurs.
Pension fund trustees in the UK have spent some time pondering the legalities of climate-related de-risking strategies, and some still are.
Now these strategies are becoming an investment imperative.
Short-term policy shifts may well have short-term effects.
But for millennials saving into pensions for the next 40 to 50 years, the global transition to a low-carbon economy, which appears highly likely, is a more significant trend.
Among the world’s largest institutional investors, whose ranks Nest will join in the coming decade, that long-term picture is guiding our thinking.
The smart money is being used to signal to businesses that a profound economic change in the way power is generated is happening.
This is not about divestment.
It is not in our members’ interests for companies to make losses or become unprofitable.
But we do need to plan ahead and prepare their portfolios for the evident investment risks and opportunities that climate change and the transition to low carbon represent.
That means finding scaleable, cost-effective ways to invest more in those companies that are well positioned for the low-carbon future, investing less in those that are not and engaging where progress can be encouraged.
Over the next 15 years or so, £1.7tn is due to flow into defined contribution pensions in the UK.
We believe a significant proportion of those assets will be channelled towards a greener global economy.
There may be mixed messages coming from the US at the moment, but the signals from the rest of the world, including the world of finance, are clear.

*Mark Fawcett is chief investment officer of Nest, the UK state-backed workplace pension provider.

Links

• Donald Trump’s power plan: Why US coal jobs are not coming back
• China is shaping up to be a world leader on climate change
• The Big Green Bang: how renewable energy became unstoppable
• Environmental campaigner challenges forecasts for global oil and coal demand

Climate Change: Model Predicts Australia To Lose Iconic Sites In New Sea-Level Rise

ABC News - Tom Wildie

Tourists would be disappointed at a visit to Sydney under new climate change modelling. (Supplied: Coastal Risk Australia 2100)

Major sites at risk NSW: Sydney International Airport, Circular Quay, Botanic Gardens QLD: Brisbane Airport, Stradbroke Island, Gold Coast and Sunshine Coast VIC: Docklands, Bells Beach, Greater Geelong WA: North Fremantle, Cottesloe and Coogee Beaches, Elizabeth Quay, WACA Ground SA: Glenelg, Hindmarsh Island TAS: Lauderdale

Sydney's iconic Circular Quay and Botanic Gardens, Brisbane Airport, Melbourne's Docklands and Perth's Elizabeth Quay will all be underwater in dramatic new climate modelling.
The projection used data from the National Oceanic and Atmospheric Administration (NOAA) in the United States which revealed global sea levels could rise by 2 metres by 2100 if emissions remain at their current levels.
It is substantially higher than the 74-centimetre increase proposed in a 2013 Inter-governmental Panel on Climate Change (IPCC) report.
Professor John Church from the Climate Change Research at the University of New South Wales said while rising sea levels cannot be stopped, they could be slowed.
"We cannot prevent all sea-level rise, but we can certainly rein in the worst-case scenarios," Professor Church said.
"With business as usual emissions, the questions are when, rather than if, we will cross a 2-metre sea-level rise."

Brisbane will lose the airport, islands off the coast, Wellington Point and parts of East Brisbane.

Professor Church said the Australian Government needed to prepare for inevitable rises.

"We need to do two things. One is we need to urgently mitigate our emissions," he said.

"But because we can't stop all sea-level rise we will have to adapt, so we will need to think about appropriate planning measures for Australia, for our coastline."

Animals at Melbourne's Sea Life Aquarium will probably be the only ones happy with the projected sea-level rise. (Supplied: Coastal risk Australia 2100)

Professor Church said the Government also needed to consider the impact rising sea levels will have on Pacific neighbours, which did not have the same resources as Australia.
Faster melting of the Antarctic ice sheet is the major contributor to the revised increase in sea levels, but Professor Church said it could be mitigated.
"With the strongest emissions reductions, the Antarctic contribution is very much in line with what the last IPCC report said, whereas if we have unmitigated omissions, then the Antarctic contribution starts to become the dominant contribution fairly quickly," he said.
According to the Coastal Risk Australia website, which maps predicted sea-level change, major infrastructure could be lost by the end of the century.
Website creator Nathan Eaton said 80 per cent of Australians lived in coastal areas, and it was critical people appreciated the impact rising levels would have.

Perth will lose all of Langley Park, Elizabeth Quay and the WACA. (Supplied: Climate Risk Australia 2100)

A predicted sea level rise of 2m by the year 2100 will see Adelaide's Glenelg and Hindmarsh Island at risk. (Supplied: Coastal Risk Australia 2100)

Links

• Coastal Risk Australia
• NGIS Australia
• CRC for Spatial Information
• Geoscience Australia
• Antarctic and Climate & Ecosystems CRC CANUTE Sea Level Rise Calculator 
• Department of the Environment
• NCCARF Coast Adapt: A Coastal Climate Risk Management Tool
• CSIRO Climate change in Australia
• Climate Change Science in the Australian Government
• Bureau of Meteorology
• IPCC Fifth Assessment Report, Climate Change 2013: The Physical Science Basis
• Geoscience Australia DEM download
• OzCoasts FAQ
• OzCoasts DEM
• Monumental hands emerge from Venice canal to highlight climate change
• Erosion threatens weakened mangrove ecosystem in Australia's north
• Coral bleaching on Great Barrier Reef could be normal within 20 years

'The Great Unknown': New Climate Change Data Lifts The Sea-Level Threat

Fairfax - Peter Hannam

The giant ice sheets of Antarctica and Greenland are melting faster than scientists previously estimated, raising the prospect of faster sea level rise placing at risk low-lying areas of Sydney and similar exposed cities around the world.
New research, including from the US National Oceanic and Atmospheric Administration (NOAA), has lifted the "plausible" sea level rise by 2100 to as much as two metres to 2.7 metres.
That has superseded earlier estimates, such as the 2013 Intergovernmental Panel on Climate Change (IPCC), that placed the likely top range of sea level rise at about one metre if greenhouse gas emission rises continued unabated.
Those higher forecasts have now been included in new mapping by Coastal Risk Australia that combines the estimates with national high-tide data and the shape of our coastline.
The resulting maps show airports in Sydney, Brisbane and Hobart will be largely under water by 2100 if that two-metre rise happens.
Other areas at risk in Sydney from such a rise include Circular Quay, Wentworth Park, the Royal Botanic Gardens, Woolloomooloo and Rose Bay. (See map below of indicative water-level increases.)

"Our worst case scenario [for 2100] is now looking three times worse than it did previously," said Nathan Eaton, a senior principal with NGIS, a digital mapping consultancy that compiled the maps.

Collaroy beach front after last June's huge east coast low. Photo: Peter Rae

Elsewhere in NSW, at-risk regions include low-lying parts of Newcastle, Port Macquarie, Ballina and Byron Bay.
Among exposed areas of other states are the Port of Melbourne, St Kilda and Docklands in Melbourne, parts of Noosa, the Gold Coast and Port Douglas in Queensland, and the WACA ground and Cottesloe beach in Perth, WA.
"Every state has got an area that's massively different [from previous forecasts for 2100]," Mr Eaton said. "For a lot of low-lying areas, it makes the inundation that much further inland."

Rising seas
NOAA estimates global mean sea levels have risen about 3.4 millimetres a year since 1993, roughly double the average rate of increase during the 20th century. (See chart below).
Even the last century's pace of increase was the fastest in at least 2800 years, NOAA said.
Global warming is driving the increase in sea levels by melting land ice - such as glaciers and ice sheets - and from the thermal expansion of the warmer oceans.
John Church, a global sea level expert at the Climate Change Research Centre at the University of NSW, said other new research indicated Antarctica's contribution to rising seas appears to particularly sensitive to carbon emissions rates - underscoring the urgency to reduce them.
"With 'business as usual' emissions, the questions are when, rather than if, we will cross a two-metre sea-level rise," Professor Church said. "This scenario would result in major catastrophes and displace many tens of millions of people around the world."

Serena Lee, a research fellow and coastal dynamics specialist at Griffith University, said the rate of Antarctic ice melt was "a great unknown", limited by the relative lack of long-term data and the region's inaccessibility.
Of particular concern was the melting of the ice sheets from below of ice sheets as they come in contact with warming seas.
The newest studies indicate a two-metre rise by 2100 "would probably be more towards the conservative mean" of outcomes, Dr Lee said.
The mapping tool - which Coastal Risk say should not be relied upon for site specific decision making - may itself underestimate the speed threats will increase for some localities.
Some areas of Australia, particularly the north, are recording much higher rates of sea level increase than the global average, Dr Lee said.
The mapping also doesn't take into account the impacts of more extreme weather, such as the destructive storm surge triggered by last June's huge east coast low off NSW.
Cyclone Debbie also caused severe flooding in northern NSW in some of the regions in the state that are also particularly exposed to rising seas.
Even with those uncertainties, the updated mapping "can't do anything but help someone's understanding" of those changing coastal, ocean and flooding processes, Dr Lee said.

Links

• Coastal Risk Australia
• NGIS Australia
• CRC for Spatial Information
• Geoscience Australia
• Antarctic and Climate & Ecosystems CRC CANUTE Sea Level Rise Calculator 
• Department of the Environment
• NCCARF Coast Adapt: A Coastal Climate Risk Management Tool
• CSIRO Climate change in Australia
• Climate Change Science in the Australian Government
• Bureau of Meteorology
• IPCC Fifth Assessment Report, Climate Change 2013: The Physical Science Basis
• Geoscience Australia DEM download
• OzCoasts FAQ
• OzCoasts DEM
• Monumental hands emerge from Venice canal to highlight climate change
• Erosion threatens weakened mangrove ecosystem in Australia's north
• Coral bleaching on Great Barrier Reef could be normal within 20 years
• The difference half a degree will make for Australia