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Gore warns investors of ‘subprime carbon’

Al Gore advised Wall Street leaders and institutional investors Thursday to ditch businesses too reliant on carbon-intensive energy — or prepare for huge losses down the road.
/ Source: The Associated Press

Al Gore advised Wall Street leaders and institutional investors Thursday to ditch businesses too reliant on carbon-intensive energy — or prepare for huge losses down the road.

"You need to really scrub your investment portfolios, because I guarantee you — as my longtime good redneck friends in Tennessee say, I guarandamntee you — that if you really take a fine-tooth comb and go through your portfolios, many of you are going to find them chock-full of subprime carbon assets," the former vice president said.

Carbon dioxide from burning fossil fuels is the leading component of "greenhouse gases," which scientists say are playing a key role in warming the globe.

Gore's remarks before a high-profile business crowd that collectively controls some $20 trillion in capital were intended to unleash a financial ripple effect that could force the world to start putting a price on carbon emissions.

Gore, who shared the Nobel Peace Prize for his efforts to warn about climate change, compared the financial risks facing investors in carbon-using industries with the meltdown in the market for subprime mortgages given to people with blemished credit records or low incomes.

"Similarly, the assumption that you can safely invest in assets that come from business models that assume carbon is free is an assumption that is about to go splat," he said. "You have lots of assets, many of you do, in your portfolios right now that truly do deserve that epithet 'subprime.'"

The U.N. played host to nearly 500 prominent financial leaders and institutional investors who came searching for insights on shifting business currents as the world shifts to cleaner energy sources and fuels.

Fifty U.S. and European institutional investors managing $1.75 trillion in assets agreed to invest $10 billion more in energy efficiency and "clean energy" technologies over the next two years and to aim for a 20 percent reduction in energy from core real estate investment holdings over three years. California State Treasurer Bill Lockyer said his state's leading pension funds would invest more than $800 million in environmental technology with similar aims.

A report by the McKinsey Global Institute released at the U.N. conference said major investments over the next decade in boosting the output from various types of energy that consumers use could earn investors double-digit rates of return.

"As soon as people believe carbon has a price, it's going to have a price," said Vinod Khosla, a venture capitalist who was one of the co-founders of Sun Microsystems.

Peter Darbee, chairman and CEO of PG&E Corp., an energy-based company in San Francisco, said cleaner-burning utilities should be rewarded and "those that burn coal should have to pay for clean energy."

The conference, which followed three days of debate in the U.N. General Assembly on what to do about climate change, was organized by three groups that support the United Nations — the U.N. Foundation, Ceres and the U.N. Fund for International Partnerships.

Mindy Lubber, president of Ceres' investor coalition, called it the largest meeting of financial leaders to focus on climate change.

At the last such meeting in 2005, participants pledged to invest $1 billion in clean energy technologies and followed up by doing that in less than a year.

"The shift towards a greener future is still in its infancy and needs nurturing," U.N. Secretary-General Ban Ki-moon, who was in Washington, told participants Thursday through a spokesperson. "While the world looks to the U.N. to steward the negotiating process, the United Nations looks to you, as leaders in the financial sector, to lead in innovating financing and technological development."

In December, U.N.-sponsored climate talks in Bali, Indonesia, produced a "Bali Roadmap" for new negotiations intended to produce a global treaty on reducing greenhouse gases. It would replace the Kyoto Protocol, which covers just 37 industrial nations and expires in 2012.

Timothy Wirth, president of the U.N. Foundation, called the drive to adopt new energy sources "as important as the computer revolution in generating new wealth and jobs."

One longtime champion of such a shift calls it a total makeover of the $6 trillion world energy economy. Fred Krupp, president of Environmental Defense, argues in his upcoming book, "Earth: The Sequel," that the search for a technological fix to global warming will produce new industries, jobs and private fortunes.

Krupp's group has worked with General Motors Corp., DuPont Co. and other companies in calling for U.S. limits on greenhouse gases to combat global warming.

"There'll be a whole cascade of private capital flowing to remaking the energy infrastructure of our world, because it's a multitrillion-dollar business," Krupp told The Associated Press. "Increasingly, you're seeing this point of view not only in America, but with politicians in other countries as well."