The 2015 ESG risk analysis accorded the highest priority to the issue of climate change.
It focused on the possible consequences for producers of fossil fuels such as coal, oil and gas, assuming that governments take measures to limit carbon emissions. The potential impact on PUBLICA’s portfolio was assessed on three levels: the institutional framework (“COP21”), the macro level (supply and demand), and the micro level (companies and CO2 sensitivities).
The results can be summarised as follows:
- Analysis of the carbon sensitivities of the energy and mining companies held by PUBLICA shows that some of the firms in both sectors have above-average sensitivities to carbon tax. However, they represent only a small proportion of the overall portfolio, at 0.1% to 0.5%.
- The supply and demand trend for the next five to ten years suggests that a collapse in oil prices is unlikely and consequently there is no immediate prospect of a substantial decline in the value of reserves.
- Coal-producing companies are less adaptable in their business models and therefore more affected by the possible taxation of carbon emissions.
On the basis of this analysis, PUBLICA’s Investment Committee decided in February 2016 to exclude coal producers from its global equity and corporate bond portfolios.