Monday, 6 May 2019

I'm Getting Up to Speed on Climate Emergency

With the direct action of Extinction Rebellion in London over the Easter period (over 1,000 arrests), the BBC's hard-hitting "Climate Change - The Facts" and the rise of the school strikes for climate started by Greta Thunberg, there is no doubt that our climate crisis is quickly climbing to the top of the political agenda. 

The focus of the challenge is directed towards governments which have not been taking climate seriously. As a result, last week our parliament declared a climate emergency - the first country in the world to do so! It's not so clear what action this declaration will bring about but there can be little doubt that there will be some big changes to come.

Over the past six months or so, I have tried to get my head around this important subject - the science, what the consequences may be if we carry on with business as usual, what that may mean for our economy and my investments, what needs to be done to avert the worst-case scenarios. So, in this article, I wanted to clarify my thoughts on the subject.

Of course, climate change is nothing new - our climate is continually changing. The last ice age ended some 12,000 years back when vast areas of the Northern hemisphere including the UK and much of Europe and N America was covered by a vast ice sheet. The Earth has moved in and out of these naturally occurring interglacial periods for at least two million years.

The current man-made climate change however is interrupting this natural cycle and the warming we see today is well outside of the pattern of the past 800,000 years. The problem we are facing at present is the speed at which our planet is warming and our ability to adapt to the relatively rapid increase in temperature.

The Problem

Over the past 150 years or so, the average global temperature has increased by around 1C. This is due the industrial revolution and increasing reliance on coal, oil and gas. These are fossil fuels which release greenhouse gas emissions (GHG) such as carbon dioxide and methane into the atmosphere when burnt to create energy for our homes, transport and factories. The scale of these emissions has gradually increased due to an ever accelerating global population and growing affluence of developed nations which means more houses, cars, lorries, shipping and airplanes.

GHG Concentrations over past 1000 years
(courtesy of

These GHGs are trapped in the upper atmosphere and hang around for many years after they are released. Some of the gases are naturally absorbed by the seas (25%) and by our trees but we have been producing much more than nature can deal with. Over time, these gases build up and form an ever thicker layer in the upper atmosphere which traps some of the sunlight and causes gradual warming.

The levels of CO2 in the atmosphere is measure and currently stands at 415 parts per million (ppm) which is the highest concentration for the past 3 million years. The average over the past 500,000 years has been 260ppm. When I was born in the 1950s it was 310ppm and the global population was 2.5 billion.

The last time we had CO2 levels this high, the global temperature was 3C to 4C warmer than today and there were trees growing at the south pole.

Despite the agreement reached in 2015 in Paris by 200 world leaders, CO2 emissions continue to rise. In 2018, global emissions rose by a further 1.7% to a record high of 33.1 Gt of CO2 and the highest increase since 2013. Coal for power accounted for a third of this, mainly in Asia. China, India and the US were responsible for 85% of this increase whilst emissions reduced in Japan, Germany, France and the UK.

The global population is growing - currently 7.5 billion - and as the economy grows to meet demand for more goods and services, the demand for energy increases.

The Consequences

This rapid rise in GHGs which has caused the 1C rise in global temperature is starting to impact our global weather patterns. The past 5 years have been the warmest on record all over the planet and this trend is due to continue due to the GHGs already locked into the atmosphere. This is leading to more powerful cyclones/hurricanes, severe flooding, more intense wildfires, droughts and changes to natural habitat which is already leading to the extinction of animals and plants as well as coral reefs.

These severe weather events have already caused loss of human life - 3,000 people died in hurricane Maria in 2017 when it hit Dominica and Puerto Rica. In Kerala, India last year an estimated 500 people died during storms and flooding. In March 2019, cyclone Idai stuck Mozambique with devastating effect - hundreds killed and up to 2 million people displaced and made homeless by flooding. These are just three examples of the hundreds of extreme weather events of recent years.

In addition to the impact on every days lives, there is a massive economic cost from climate change. Insurance group Swiss Re have reported that climate-related losses have averaged $180 bn each year over the past 10 years. In January 2019 the World Economic Forum's Global Risks Report at Davos ranked extreme weather and failure to adapt to climate change as the top two global risks

The polar ice caps are warming at a faster rate than the global average. The latest estimates are for at least 3C by 2100 which would lead to the thawing of large areas of permafrost and the release vast amounts of carbon dioxide and also methane gas which is 20x more potent than CO2. This would cause additional warming and result in a tipping point which could lead to a runaway warming which far exceeds current forecasts.

The world's largest ice shelf in Antarctica - the Ross Ice Shelf - is the size of France and several hundred metres thick. It is melting ten times faster than originally thought. This could lead to rapidly rising sea levels around the globe.

Some Solutions

We have reached a crossroads - if we carry on without making any serious changes to the way we live our lives, we face unimaginable consequences. If we continue to do what we've always done, we will get what we've always got - an ever warming world. So it follows, we need to change what we've always done in order to get a different outcome.

We have collectively generated more GHGs than the planet can reabsorb. We understand the problem and we know what needs to be done - and, importantly, we have all the tools and technology already to address the problem. We now just need to get on and DO IT.

We need to get to net zero emissions quickly. Some people suggest 2030 and others a more realistic transition of 2050. The term 'net zero' includes reductions in all GHGs such as methane and nitrous oxides - carbon neutral only refers to carbon dioxide. Perhaps a clearer term would be 'climate neutral'.

1. Plant more trees - trees absorb CO2 and if we quickly plant millions more trees and stop clearing rainforests for cattle grazing, it will provide a breathing space for other initiatives to kick in. Support more tree planting via The Woodland Trust.

2. Energy - transition from coal,oil & gas to renewables such as solar and wind. These renewable sources of power are now actually cheaper than fossil fuels so just on economics alone, it makes sense to speed up the process.

3. Transport - a top consumer of fossil fuel such as petrol, diesel and kerosene (aviation). It is responsible for around 25% of energy-related emissions. Electric vehicles are part of the solution...provided the electricity comes from renewables.
International shipping is a major polluter and accounts for around 3% of global emissions and around 20% of emissions from transport. Maersk, the worlds largest container company has recently announced a policy to be carbon neutral by 2050. It would be technically feasible to decarbonise shipping using biofuels and renewable energy by 2035 according to the OECD.

Aviation is one of the fastest growing sources of GHG emissions. If it was a country it would be in the top 10 emitters. One round trip from London to New York is the equivalent of heating a house for the whole year. Aircraft are becoming more efficient all the time but we are flying more. Until electric planes are introduced on a commercial basis (trials underway), the only solution is for individuals to choose to fly less.

4. Food - Our global system is responsible for a whopping 40% of global emissions. Transport accounts for around 17%, packaging a further 10%, refridgeration 4%, distribution to retailers 4%, our journeys to the shops and when we get it home, a further third is thrown away which adds further to emissions. We need to become more self-sufficient as a country, to stop wasting food and also think about food miles.

Meat and dairy is a huge factor in global warming. Emissions are on track to become the worlds biggest contributor to climate change and already surpass the likes of Shell and Exxon Mobil. As well as the increasing levels of GHGs such as methane from livestock, there is deforestation to create more pasture and pressure on water supplies. Much of the forest is cleared by 'slash and burn' which adds to the problem.

The solution is relatively simple - people can consume less meat and dairy and move to a plant based diet. Check out your diets carbon footprint.

The UKs Performance

Here in the UK, our record on cutting back on CO2 emissions is good compared to many other developed countries. We have reduced emissions by 39% compared to 1990 levels. This figure however excludes emissions from air travel and shipping.

Our emissions levels are now back to where they were in the 1890s when Queen Victoria was on the throne.

Much of the reductions in recent years are due to moving away from coal as a power source - down 16% in 2018 and 80% over just the past 6 years.
According to the latest analysis of government projections, around 50% of our electricity will come from renewables by 2025. This is mainly due to the rapidly falling cost of solar and wind generation rather than any change in government policy.

However the Committee on Climate Change are concerned that we are not making sufficient progress in many areas of our economy. Whilst we are doing well on power generation which accounts for around 25% of emissions, we are not doing enough in other sectors to reduce CO2 emissions, particularly transport/aviation and housing.

Greta Thunberg

Our current target is 80% reduction by 2050 but this lacks ambition and we are off-track to meet our 4th and 5th carbon budget targets. To meet our obligations under the Paris agreement, we need to achieve net zero emissions by 2050 and this is the recommendation of the recent report from the independent Committee on Climate. This would involve a reduction of around 8% each year. Hopefully, as our parliament has now declared a climate emergency, there should be no problem in adopting the new targets.

It's one thing to adopt a recommendation, and quite another to implement the policies to make it happen.There could well be much resistance to the transition from the familiar to the new. For example, around 90% of our homes have gas central heating. Most systems will have been fitted in the past decade and will be very expensive to replace. People are used to the technology and it works - heating and hot water at a reasonable price at the flick of a switch. Millions of home owners will need to be persuaded to switch to electric heating - the costs of the switch will need to be affordable and the technology reliable. I suspect the transition to a carbon neutral UK will be a monumental effort and certainly take much longer than the 2025 demanded by the protestors.

Here's an excellent in-depth analysis from Carbon Brief


Most savvy investors understand that in order to secure our long term financial goals, we first have to learn to live within our means and then save for the future. This principle can be applied to global warming - we must learn to live collectively within the sustainable limits of our planet. There will be few attractive investment opportunities for a world above 2C.

So, what are us small investors supposed to do? I guess we are all different with our individual perspectives and goals so there is no 'one-size-fits-all'.

Personally, I have decided to reduce my overall exposure to equities. I have moved from Lifestrategy 60 to LS 40 (but this is still a problem), I have reduced my exposure to big oil via the sale of City of London, I have recycled some of the proceeds into Vanguard SRI Global, I have built up my 'green' portfolio which now accounts for just over 1/3rd of my total investments. I have contacted Blackrock requesting they offer climate-friendly index funds. Last week I had a long conversation with Vanguard's senior management in the UK to urge them to introduce a climate-friendly option for my investments (following many email requests!). I am assured they are actively looking to introduce ESG or fossil-free funds but no time-frame.

The more pressure from concerned investors, the more they are likely to act so if you are one of the investors who would like to see more ESG options from Vanguard, please email :

I have lowered my expectations for future returns. The 9% or 10% nominal average from my portfolio over the past decade is unlikely to be repeated. I suspect the average could well be nearer to 5% or 6% and I am expecting more negative years as volatility increases.

Fund managers probably don't pay much attention to the likes of Extinction Rebellion, however when the Governor of the Bank of England, Mark Carney warns on the dangers of climate and says "take global warming seriously or you will lose money", it is language they understand. In a recent address to the City, he told them that companies that don't adjust to the realities of climate change will simply cease to exist.

The B of E is part of a global Network for Greening the Financial System who are collaborating on plans for the reallocation of capital on a massive scale to ensure we can meet the Paris Climate Agreement.

Around $1 out of every $4 of professionally managed investment in the US - a total of $12 trillion in assets -  is now invested in ESG or SRI funds according to CNBC and this has grown by 40% over the past 3 years.

According to a survey by UK Sustainable Investment & Finance, less than 1 in 5 fund managers believe oil companies will remain a good investment in 5 years time if still focussed on fossil fuels. Survey participants manage over £10 trillion and included HSBC, Schroders and UBS.

In 2018, Aviva assigned £1.8 bn of new investment into wind, solar, biomass and energy efficiency which takes the total invested in low carbon to £3 bn. In addition they hold a further £1.3 bn in green bonds to support the transition to a sustainable economy. They are committed to delivering on their responsibilities under the Paris Agreement and say :

"There is no greater collective risk we face today than tackling climate change. If we do not take urgent action to limit global temperature increases to within 2°C, the impacts upon the economy, society and our business will be nothing short of devastating. Aviva is determined to make its own contribution to tackling climate change. This is not at odds with business or investment. In fact, it is a business imperative".

The way we use money has a knock-on affects to the wider community. We can use it to support companies that are drilling in the Arctic for more oil reserves, or we can invest in companies which are installing wind turbines and solar panels. Governments can spend tax receipts on subsidies for home insulation or for airport expansion. Every decision, large or small, will impact on the environment and climate change.

Norway's sovereign wealth fund with assets of £1 bn recently decided to divest away from 134 oil/gas companies in its portfolio as they now regard them as risky assets. For the time being, they will retain holdings in Shell and BP but this could signal the thin end of a very large wedge. Large companies which fail to comply with the Paris Agreement face increasing risk of divestment from the growing impact and ESG funds. In addition, these companies will face big litigation cases for damage resulting from their activities.

I think it's becoming clear to many that companies which damage the environment will be increasingly marginalised as the financial community responds to concerns about climate. Sustainable and ethically sound investing which respects the environment will become the norm - possibly more quickly than many people imagine. Investors will still want a return on their investments but equally, they want a planet that is clean and healthy which they can enjoy in their retirement and will remain so for their children down the line.


Of all the 450 articles I've posted over the past 6 years, I feel this is by far the most important. However I am merely scratching the surface of this subject and it will be interesting to see how the story unfolds. 

I am obviously concerned for our future as I have children and five young grandchildren under the age of 10. However, I see the tide is turning and that people in positions of power seem to get the message and that's encouraging. I remain optimistic that we can rise to the challenges ahead. I am sure that as the catastrophic consequences of 'business as usual' become clearer to more and more people, they will change their lifestyles and demand action from politicians, policy makers and businesses...and maybe fund managers!

We are now entering uncharted territory - global temperatures are rising rapidly, atmospheric CO2 levels are off the chart and life as we know it is under threat as never before - and yet many are addicted to their modern lifestyles and refuse to heed the warnings. It seems we have a few years to make some fundamental changes - maybe 10 or 15 - but certainly no time to waste like the last three years bickering about Brexit.

In a recent documentary 'Climate Change : The Facts', Sir David Attenborough said

" While Earth has survived radical climactic changes and regenerated following mass extinctions, it's not the destruction of Earth that we are facing, it's the destruction of our familiar, natural world and our uniquely rich human culture."

This is a climate emergency. The UK, Scottish and Welsh governments as well as many local authorities throughout the UK have recently declared such an emergency. Rising GHG emissions do not respect the boundaries of individual countries - it's a global problem. We need a system change and a green new deal on a global scale to tackle the threats confronting us all.

The world will not end in 2030, but if we don't make some serious inroads to reducing global emissions over the coming decade, the job will be a legacy for future generations and the problems facing them will be far more intense and difficult to manage. To my way of thinking, it just makes sense to stop putting off the difficult decisions and just get on with what we know needs to be done.

Plant more trees and stop destroying rainforests; move to a largely plant based diet; leave fossil fuels in the ground and build more renewable capacity; appoint a minister for Climate Change and also put this subject on the national school curriculum. These and other measures are not exactly rocket science.

We have caused the problem and we now need to get it sorted as a matter of urgency...more and more rational people understand it's simply the right thing to do.

Do you have any thoughts on this subject? Are we already doing enough or should we be moving things along with more urgency? How will your finances be affected? Have you taken any steps to climate-proof your portfolio? Maybe you think it's all a big fuss about nothing. Leave a comment below, share your views with others.


  1. well said!
    it's good to see that you've done a bit of the thinking for us who might want to invest for the climate.

    1. Thanks GFF. I'm sure climate-friendly investing will become the norm before long!

  2. Bravo. This is a fine piece, one of your best, and really useful on a practical level too.

    Wake up people - "we're in serious trouble". Not my words but those of the UN scientists.

    1. Cheers bernie. I believe more and more people are switching on to the threats from climate and the report from the UN this week on biodiversity and the potential loss of 1 miliion of our species just underlines the trouble we are already in.

      We have the knowledge and we have the tools so we just need to stop talking and actually make the changes. Sooner rather than later would be good...

  3. Excellent article - thank you. I too have been asking for low cost SRI investments for some time. I have been gradually increasing the proportion of my portfolio in SRI investments over the years and now, with the help of an IFA who specialises in Ethical Investment (and despite the extra cost this involves), most of my portfolio is now in SRI investments (and in ones which have had a good track record over the past 5 years).

    1. Thanks SteveU. I hope your SRI investments continue to perform well. As I mentioned in the article, I have moved some of my investments into Vanguard's SRI Global - it was the only option - but I really want to avoid oil stocks and so although it is better, I could do with them going a step further and providing a fossil-free option and hence the badgering of management. I hope they can provide something soon otherwise I will look elsewhere.