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Bank of England boss reiterates warnings over 'worthless' fossil fuels

Highlights

Up to half of proven oil reserves at risk

Pension funds should warn clients on exposure

Efforts to curb fossil fuel exposure too slow

London — Bank of England governor Mark Carney has reiterated his warnings over the risks of financial exposure to fossil fuels, saying pension funds were particularly vulnerable as oil, coal and gas investments could become "worthless" over time.

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Up to 80% of global coal assets and up to half the world's proven oil reserves could become stranded assets as the world moves to curb carbon emissions and supplies of clean, renewables energy continue to replace fossil fuels, Carney told BBC Radio 4's Today program Monday.

Despite continued attractive returns from oil majors and some coal miners, pension funds should consider telling their clients that it is better to become cutting fossil fuels investments now to avoid future losses, he said.

Some progress by financial institutions to reduce their exposure to fossil fuel assets has been made over recent years but far too slowly, Carney said.

"They need to make the argument, to be clear about why is that going to be the case if a substantial proportion of those assets are going to be worthless."

Carney, who will leave the Bank of England at the end of next month to start a new role as UN special envoy for climate action and finance, has been vocal over the potential impact of climate change on the financial sector.

In 2015, Carney raised energy industry hackles after saying investors should be cautious over the potential for huge losses on the value of fossil fuel assets as a result of the impact of potential new regulations to limit CO2 emissions.

In his former role as chair of the Financial Stability Board's Task Force on Climate, Carney said climate change posed a systemic risk for the global financial system, particularly if a re-pricing of assets occurred over a rapid timeframe.

"Four to five years ago, only leading institutions had begun to think about these issues and could report on them," he told the BBC in an interview.

"Now $120 trillion worth of balance sheets of banks and asset managers are wanting this disclosure [of investments in fossil fuels]. But it is not moving fast enough."

In July, the UK's Green Finance Strategy said the government was considering mandatory climate risk disclosure for listed companies and large asset owners.

The government's strategy sets out plans to increase investment in sustainable projects and infrastructure while ensuring the UK remains on track to meets its recently-agreed 2050 net zero emissions target -- the first major economy to do so.

-- Robert Perkins, robert.perkins@spglobal.com

-- Edited by Daniel Lalor, daniel.lalor@spglobal.com