“Former U.S. Vice President Al Gore said investors in oil and gas companies who ignore the cost of emitting carbon dioxide and othergreenhouse gases are making a mistake similar to those who invested in subprime mortgages.
“The value of the subprime mortgages was based on a false assumption,” Gore said yesterday in an interview. “In almost exactly the same way, the value of all of these carbon fuel reserves is based on a similarly absurd assumption.”
Gore made the analogy as Generation Investment Management LLP, the asset manager he founded with former Goldman Sachs Group Inc. (GS) executive David Blood, published a five-point plan titled “Sustainable Capitalism” to reform the investment industry. They want the proposals to help combat climate change and poverty as well as boost profit in the long term.
Gore and Blood recommended investors identify “stranded assets” whose value would change significantly under certain scenarios, such as a price being set for carbon or for water. Second, they said investors should use environmental, social and governance data as well as financial data to value companies. Third, companies should end quarterly earnings guidance to remove pressure for short-term gains. Fourth, companies should reward managers for long-term performance, and fifth, investors should be rewarded for holding shares longer with “loyalty- driven securities,” Gore and Blood said….”
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