* PRI forecasts oil demand to peak in 2026-28
* Says IEA forecasts underestimates needed transition
By Ron Bousso
LONDON, Sept 23 (Reuters) - Financial markets risk major
disruptions by relying on business-as-usual forecasts that
underestimate the impact of climate-change policies that are
expected to abruptly tighten next decade, a leading group of
investors has warned.
The report by the U.N.-backed Principles of Responsible
Investing (PRI), representing investors with $86 trillion of
assets under management, joins a growing chorus of warnings that
forecasts and investments by oil and gas companies are out of
sync with the pace needed to meet energy transition targets.
The International Energy Agency's central outlook, which
underpins many government and business projections, is not
aligned with targets set out in the 2015 Paris climate agreement
to limit global warming to "well below" 2 degrees Celsius by
slashing greenhouse gas emissions, the PRI warned.
Scientists view a rise of more than 1.5 degrees Celsius in
the Earth's average temperature as a tipping point where climate
impacts such as sea-level rise, natural disasters, forced
migration, failed harvests and deadly heatwaves will rapidly
start to intensify.
PRI released a new forecast which it said "aims to
fundamentally reset investors' forward-looking risk management,
strategic asset allocation and company engagement."
The study, branded the Inevitable Policy Response (IPR),
predicts "an abrupt and disruptive" government policy response
to climate change by 2025, which it expects to be a "tipping
point."
Under the IPR scenario:
- Oil demand peaks in 2026-2028 and oil in road transport
peaks in 2025, much earlier than the IEA's forecast that does
not foresee demand growth stalling before the 2040s.
- Thermal coal, the most carbon-polluting fossil fuel, will
be "virtually non-existent" by 2040.
- Wind and solar power will generate half of the world's
electricity by 2030.
- Internal combustion vehicles are phased out much faster
than most outlooks
- Forestation - needed to absorb excess carbon dioxide - is
vastly accelerated.
"We foresee an inevitable policy response by 2025 that will
be forceful, abrupt and disorderly because of the delay," Fiona
Reynolds, chief executive of the PRI, said in a statement. "This
will create considerably greater disruption than many investors
and businesses are prepared for today."
The Inevitable Policy Response forecast responds "to
concerns that financial markets are overly reliant on
business-as-usual outlooks – such as the International Energy
Agency's New Policy Scenario (NPS) – that assume limited policy
response to climate change," according to the PRI.
The IEA's forecast, PRI said, "assumes the world will glide
towards" a 2.7 degree Celsius - 3.5 degree Celsius warming above
pre-industrial levels by 2100 "without any further climate
policy action beyond what has already been announced."
This scenario was highly unlikely given "the human suffering
this would result in."
The world's top oil and gas companies have come under heavy
pressure from investors to adapt to the energy transition by
lowering their carbon emissions and investing more in
renewables.
BP Chairman Helge Lund told Reuters in June that the
London-based company would rather see a rapid, orderly phasing
out of fossil fuels than a delayed and disorganised
transition.
PRI represents 2,600 signatories including most of the
world's biggest investors such as BlackRock, Wellington,
CalSTRS, Allianz, Aviva, Amundi.
(Reporting by Ron Bousso
Editing by Leslie Adler)
