As part of Ashoka’s Welcome Change series, Pip Wheaton spoke with Ashoka Fellow Mark Campanale (U.K.) about how climate change impacts financial markets, and how investors can support a sustainable future.

This is an edited and condensed version of our conversation with Mark Campanale on March 24.

Pip Wheaton: Mark, your work at Carbon Tracker Initiative has shifted the way that trillions of dollars have been invested and divested. The concept of unburnable carbon has underpinned this incredible shift. Can you tell us a little bit about that?

Mark Campanale: Climate change is a problem of the accumulation of carbon dioxide in the atmosphere. And we know where that comes from. It comes from the burning of fossil fuels – it comes from other things too, like land usage, and so on. But the buildup is primarily from burning fossil fuels, owned by governments like Saudi Arabia and corporations like Shell and Exxon. And they have these things called reserves, which they spend years accumulating, and they invest billions a year finding more.

In the late 90s and early 2000s, with my good friend and co-founder Nick Robins, we started asking simple questions: What happens if Exxon and Shell and all the other companies were to burn all their reserves? How much would that increase atmospheric CO2? And how much would the planet warm by? After years of looking, we just couldn’t find anybody who had done that research. So we pulled the analysis together ourselves.

In essence, we found that there’s enough proven reserves already in the world today to take us way past four degrees of warming – and one and a half degrees is the threshold the science tells us we shouldn’t exceed. So, this “unburnable carbon” creates what we call “stranded assets”. We describe it as a carbon bubble, a massive overhang of unusable fossil fuels, that has financial consequences for financial regulators and for investors.

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This has had a dramatic effect on the way people think about the issue.

Wheaton: So, you’re using a financial logic, rather than trying to convince people that the environment is something worth sacrificing profit for?

Campanale: Yes. It is the proven financial consequences of our research that was crucial. There was just such ignorance and cynicism among investors of coal, oil and gas companies. Regulators were not on top of their game and investors weren’t understanding the risks. So we thought, let’s change mindsets. Let’s get regulators understanding the systemic risks of climate change. And let’s get the shareholders of these companies thinking about what they could be doing better.

Wheaton: Big companies, even oil & gas companies and coal companies, are finally making public pledges about reaching net zero by 2050. Are those commitments enough?

Campanale: In today’s Guardian [March 24], there’s an article about the Rainforest Action Network report on banks, and climate change, and the financing of the fossil fuel industry. What it finds is that since Paris, $3 trillion have been lent to the coal and oil & gas industry since the Paris Agreement was signed, of which $750 billion in the last year alone. The quantum of capital that’s been lent by banks like JP Morgan Chase has gone up. It hasn’t gone down. It’s gone up. Our own research shows that fossil fuel companies have raised nearly 10 times more capital than renewable energy companies in the last decade or so through public markets in the form of IPOs. We know what the problems are, but it’s very difficult to do something about it when your living is based on continuing to do what you’ve always done. I think investors, shareholders understand this. But banks and the bond markets have not moved as fast as equity markets.

But I want to highlight two things that really work on the investor side. The first is the social movement led by Bill McKibben and 350.org. They took a headline from the unburnable carbon report, called “Do the maths” and they launched a tour with the same title that led to the fossil fuel divestment movement. The student movement has been colossal, affecting colleges all over the world. And now, endowments and pension funds have divested $14 trillion from fossil fuels since we launched the report in 2011.

The second thing that has been instrumental is participating in the creation of Climate Action 100, which brings together institutional investors. That coalition has reached a 52 trillion dollar divestment, which is beginning to sound like real money! So investor activism around climate change is ramping up. They are getting very serious with boards: as investors have the ultimate sanction of removing people; requiring tighter disclosures; even appointing different directors in the case of Exxon. It’s getting a bit tougher for companies to talk and have no action.

Wheaton: That is an exciting shift. At the same time, very recently the shareholders of Danone removed its CEO, many people say because his social and environmental agenda was too strong. So investor activism is cutting both ways still.

Campanale: It’s a stain on the whole notion of stakeholder capitalism to be frank. I think this is the innate problem at the heart of markets and capitalism, as we know it. There’s a great tension, between this drive for constant growth and profits in a world which is constrained by physical limits, practical limits. It’s not just a tension between the environment and people who own capital, but also a tension with how we treat people. Just this weekend, Goldman Sachs was in the headlines because young staff are asking for an 80-hour week cap. That’s outrageous!

We probably need a different model of stakeholder capitalism. The professional fund managers in the middle think that they’re the only ones that have a voice in the game. And we’ve got to find a way that the views of society are expressed. These voices have to influence fund managers and the companies in which they’re a shareholder.

One exciting example is the work of a large insurance pension scheme that’s using technology to give their individual members a voice. It’s now technologically possible to go beyond the fund manager down to the level of the individual beneficiaries and say, “What’s your view on executive pay? What’s your view on diversity on the board? Give us your view on climate.” We’re moving to a stage where individuals can say, “I think we should appoint more minority community representatives and women on the board. I want more climate resolutions to be supported.” It will be the ultimate democratization.

Wheaton: One of the new projects you are working on is the Fossil Fuel Non-Proliferation Treaty and the creation of a ‘Global Registry’ of planned fossil fuel production. Why is this needed?

Campanale: What we really need is a global collective agreement. A non-proliferation treaty that says countries will hand back oil and gas licenses and cancel coal permits until we get the reserves down to the equivalent in CO2 terms of well below two degrees. We also need to have a fundamental rethink. In 50 years, we’ve burned this extraordinarily precious resource, particularly oil and gas, to power things when we don’t need to any longer because it’s cheaper to build renewables now in most parts of the world than it is to build gas or coal. These same hydrocarbons can be used for complex pharmaceuticals, for innovative plastics, for all kinds of different materials. And instead, what we seem to be determined to do is to burn hundreds of 1000s of years worth in literally 50-60 years, when we could be saving this up for 100 years into the future to be used for far more useful things.

The whole idea of the treaty is to bring governments and corporations together to have an open discussion. The registry of fossil fuels will be an open society database so that everyone can see where and why licenses need to be cancelled. We’ve been having some wonderful discussions with delegations from Denmark, Germany, the Netherlands and Ireland. Even the OECD and the IEA have been intrigued and interested. So I’m quite hopeful.

Wheaton: Many people say that our current focus on growth and profit as the ultimate objectives is misguided given that our planet has finite limits. We should instead slow down and reduce growth over time. What are your thoughts on degrowth?

Campanale: I agree. And we should also add to that a proper balance sheet of the planet. So when we eat into natural capital, we should be taking that off the credit side of the balance sheet, because we’re actually destroying something, we’re not creating something. If you chop down a tree from a rain forest, that could be worth $10,000, but you’re selling it for $100 because that’s what the “market value” is you’re actually losing value, you’re not creating value.

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Follow Mark on Twitter: @CampanaleMark @carbonbubble.

This conversation is part of Welcome Change, Ashoka’s weekly series with the world’s social entrepreneurs and changemakers. To see the full conversation, watch Marks Welcome Change episode and sign up for the series.

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