3. Regulatory and legal risks escalating
Policy and regulation are accelerating the transition, with governments committed to meet the Paris Agreement to keep temperature rises to well below 2˚C, and to address the serious health impacts of burning fossil fuels.
Regulation and litigation risk against fossil fuels is now a serious financial risk for investors. In its 2016 year-end financial report, Chevron became the first company to acknowledge the risk: “Increasing attention to climate change risks has resulted in an increased possibility of governmental investigations and, potentially, private litigation against the company”.
In contrast, policies in support of climate solutions are unstoppable.
Countries including UK, France, Norway, Netherlands, India, China have pledged to end petrol cars by 2030-2040. Key growth markets are rushing to adopt renewables. India has set a target to install renewable energy capacity of 175GW by 2022. By May 2017 it had installed renewable capacity of 57GW, double the amount of four years before. In 2016, it shelved 82GW of planned coal capacity. China too has seen phenomenal growth. In 2015, China invested $102.9bn in renewable energy and installed half of the world’s new wind power. It added 35GW of solar in 2016 alone; equal to Germany’s total capacitiy. In 2016, it spent a record $32bn on renewable projects abroad.