Dec 7: Poring over a Bangladeshi flood map as a London financial
analyst 12 years ago, Mark Campanale had no idea the moment would spawn a
financial concept powerful enough to rivet central bankers, anger oil
moguls and fuel a grassroots movement to get investors to dump their
fossil fuel holdings.
The map was in the prospectus of a British firm
seeking to raise money to build a coal-fired power plant in Bangladesh.
Not only was Campanale angry that a company would pump more carbon
emissions into the air from a low-lying country vulnerable to climate
change in the form of rising sea levels; he was also mystified that
investors didn't see the financial risks that went with it.
offended that the markets weren't picking up the risks, given what we
knew about coal and climate change," Campanale recalls. "I thought:
'This is mad'."
More than a decade later, Campanale's eureka moment
has grown into a powerful - and vigorously contested - theory: that
energy investors are sitting on a $2 trillion "carbon bubble" because
vast amounts of coal, oil and gas companies' reserves will never be
extracted if the world is to limit itself to a rise in global
temperatures of 2 degrees Celsius over pre-industrial levels.
concept has rippled out from that Bangladeshi map to become part of the
climate change lexicon. It has formed the basis for warnings about
"stranded assets" by Bank of England Governor Mark Carney and inspired
groups like Norway's sovereign wealth fund to divest billions in fossil
It has also been embraced by green activists usually
hostile to market solutions for climate change, igniting a global
campaign to get investors to divest from fossil fuels. It has resonated
across global climate change talks in Paris this week, even if it has
not yet entered the formal agenda.
The concept "shifted the argument
fundamentally from an ethical or moral issue into one which has an
impact on risk to portfolios", says Charlie Thomas, manager of Jupiter
Asset Management's Ecology Fund, valued at 429 million pounds ($648
In the years following the Bangladeshi prospectus,
Campanale began honing the issue with Nick Robins, a former HSBC
analyst, and Jeremy Leggett, an oil and gas
consultant-turned-environmental-activist. In the early days, they called
the phenomenon "unusable reserves". It didn't stick.
failed 2009 climate summit in Copenhagen, Leggett wrote an opinion piece
in Britain's Guardian newspaper highlighting long-term risks to coal
"Of the 2.8 trillion tonnes of carbon bubble,
two-thirds of it is coal," Royal Dutch Shell's chief financial officer
Simon Henry told Reuters. He says only 1.5 per cent of the total is held
by international oil and gas companies. "This idea of stranded assets
is just arithmetic nonsense."
Indeed, coal is suffering most. On the
eve of the Paris conference, a $34 billion state pension fund in Sweden
pulled out of 28 coal companies, and Allianz, Europe's biggest insurance
firm, said it would cease investing in coal-heavy mining and utility
"What was an obscure report three years ago is now the talking
points of the World Bank, the IMF and so on," says McKibben. "It's
become clear we simply have to keep the carbon in the ground."