On 29 September 2015, Mark Carney stood up in front of a small tuxedoed army of insurers and delivered a fin de siècle verdict on an entire asset class. In his speech to Lloyd's of London, the head of the UK's central bank calmly outlined why investors face "potentially huge" losses from climate change. The reason: if we are to stay within a safe range of global warming, only as little as a fifth of the world's proven reserves of oil, gas and coal can be burnt.
The speech was important, not because climate change science requires another voice behind it, or (as some have argued) Mr Carney overstepped his role as governor by "intervening" or issuing a "call for action". Instead, the speech's significance lies in the credence given to the hitherto maligned concept of a 'carbon budget'. This is the amount of carbon dioxide we can safely release into the atmosphere until 2050 if a global mean temperature rise is to be capped at 2 degrees Centigrade (°C). Letting the climate warm beyond this level would risk the chance of climatic feedback loops and catastrophic increases of 4°C or more.
The theoretical impact on fossil fuel companies is enormous. On their balance sheets sit proven reserves of oil, gas and coal, which if used in their entirety would generate around 2.8 trillion tonnes of CO2. The scientific consensus is that only between a third and a fifth of those reserves can be burnt to stay within 2°C of warming. "If that estimate is even approximately correct," warned Mr Carney in his address, "it would render the vast majority of reserves 'stranded' - literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics.”