“Pension fund managers take carbon seriously; their investments will change who does well and who does badly on the stock market.”
Carbon markets have become a global way of managing carbon emissions, but as the Otago Business School is finding, factors like the role of pension or investment fund management can add to its success or failure.
Carbon trading is defined as “an exchange of credits between nations designed to reduce emissions of carbon dioxide.” The carbon trade allows countries with higher carbon emissions to purchase the right to release more carbon dioxide into the atmosphere from those countries with lower carbon emissions. This form of permit trading is a common method for countries to meet their obligations specified by the Kyoto Protocol to mitigate future climate change.
Carbon trading and climate change is fundamentally about the environment but there is growing interest from investors, academics and policymakers about the financial implications of climate change. This is particularly relevant as the value of our pensions is invariably tied to the fortune of carbon intensive companies listed on stock exchanges in New Zealand and globally.
Politicians, businesses and academics globally are discussing this hot topic, as they begin to understand the financial implications of fighting climate change.
What we're doing
Research being carried out by Accountancy and Finance Senior Lecturer Dr Ivan Diaz-Rainey is contributing to global understanding of the political economy of carbon markets operating in a post-Kyoto world.
He is looking at how the changes in policy set by government can change the way carbon markets are operate and the impact they will have on the broader economy.
Dr Diaz-Rainey noted if pension fund managers take carbon seriously, their investments would change who does well and who does badly on the stock market. This in turn will have a massive impact on which companies have access capital for investment purposes.
The research may lead to policy development, helping countries ensure carbon emission policies recognise the wider implications on the economy in the future.