Meet the man who has ignited a ‘carbon war’ in boardrooms

By Daniel Cusick | 05/11/2015 08:05 AM EDT

Jeremy Leggett remembers well the last lecture he gave as a reader at the Royal School of Mines at Imperial College in London in 1989. He quit afterward, setting off a transformation that continues to yield new frontiers for the now 61-year-old clean energy entrepreneur, climate activist, author and consultant.

Jeremy Leggett remembers well the last lecture he gave as a reader at the Royal School of Mines at Imperial College in London in 1989.

His undergraduate earth history class was packed with aspiring geologists and engineers, and Leggett, a petroleum geologist himself, was regaling them with stories of the oil bounty discovered off California’s Point Arguello in the 1980s, a tale he describes as full of "industrial espionage and hunting and all of that stuff."

But Leggett, then 35, had also been studying some of the early climate models from NASA and NOAA, as well as data generated by Britain’s Met Office and Germany’s Max Plank Institute for Meteorology. His reading had led him to quietly harbor concerns about how a world fueled by heat-trapping hydrocarbons would fare in the 21st century.


It was then and there, he recalls, that he reached an intellectual crossroads.

Jeremy Leggett
Jeremy Leggett. | Photo courtesy of the Carbon Tracker Initiative.

"I looked out at all these kids looking back at me telling this story, and I thought, ‘This is insane,’" Leggett recalled in a telephone interview from London last week. "Here I’m training people to do something that I believe is ultimately going to pose an existential threat to civilization. This has to stop now."

And so he quit, setting off a transformation that continues to yield new frontiers for the now 61-year-old clean energy entrepreneur, climate activist, author and consultant. He is also chairman of the U.K.-based Carbon Tracker Initiative, whose evaluation of the financial risks associated with fossil fuels has stimulated a wave of private-sector involvement in climate change solutions.

Leggett’s achievements — particularly as a solar power pioneer in Great Britain and founder of the nonprofit SolarAid, which has put solar lamps in the homes of millions of the world’s poorest people — will soon receive international acclaim as he accepts the Gothenburg Award for Sustainable Development. He is one of three recipients of the 2015 prize, along with two German energy efficiency leaders.

Leggett, whose workdays can be characterized as a revolving door spinning him among corporate boardrooms, U.N. conclaves, nonprofit gatherings and the occasional media interview, said he will travel to Sweden’s second largest city in November to accept the award, both "because I am honored to receive it on behalf of the many people doing this work, and because I want to make my wife happy."

But it would be a mistake to cast Leggett in the role of a modest appeaser.

Helping banks measure a ‘bubble’

His outspoken and often confrontational style of communicating on climate change has earned him both praise and scorn, especially from the global fossil fuel lobby and individuals who believe that climate warming theories are unproved or perpetuated by environmentalists trying to dismantle the world’s energy economy.

Leggett, who also worked for a spell as scientific director of climate programs for Greenpeace International, is unfazed. So long as his message about climate change, and the risk the global business and finance sectors face by ignoring the "carbon bubble," sinks in with the executives and institutions that ultimately set the economic agenda, he is happy to take the drubbing.

"Fossil fuel lobbyists have waved their fingers in my face, and I’ve seen the hate in their eyes," Leggett said. "But at the same time, many of the companies they claim to represent have internal strategic reviews going on at this very moment, and I’ve been fortunate to be inside those processes."

Leggett’s primary vehicle into the business and finance sector is Carbon Tracker, the London-based nonprofit he helped launch in 2011. The group has been credited by The Guardian for "changing the financial language of climate change," largely through its development of financial tools and analyses that align capital markets with climate risk.

A key focus for Carbon Tracker is aiding major financial institutions, such as the Bank of England, in understanding the long-term financial risks associated with deep investment in fossil fuels, and to help rebalance banks’ portfolios to reflect an emerging energy economy where low- and zero-carbon fuels are the primary drivers of growth.

Carbon Tracker has distilled its risk message to four bullet points for banks: unburnable carbon, or fossil fuels that cannot be burned under new carbon budgets; stranded assets, mostly coal, oil and gas reserves that are no longer economically viable due to both market and regulatory shifts; wasted capital spending on high-cost, high-carbon energy projects that are no longer profitable; and risk premiums for projects that are highly dependent on fossil fuels.

The sum of these risks is what Carbon Tracker refers to as the "carbon bubble," whereby banks and investors tend to overvalue companies with large fossil fuel portfolios. If the bubble bursts, as Leggett and other experts have predicted, those assets, along with the value of their corporate owners’ stocks, would lose billions in value and the resulting pain would ripple throughout the global economy.

Ex-geologist redefines drilling risks

Such ideas, once dismissed as "Chicken Little" prognostications, are now gaining credence with many of the world’s leading financial institutions, including the Bank of England, which launched a formal review of its fossil fuel investment risks early this year. Last month, the Group of 20 member nations asked the Financial Stability Board to launch a public-private investigation of risk to Group of 20 members’ financial sectors under a scenario of much tighter carbon regulation.

In the United States, the "carbon bubble" message has been more slow to take hold. But banks and private investment firms are beginning to heed the warnings, as evidenced last week by Bank of America’s announcement that it would reduce its financial exposure to coal mining firms, in part because of concerns about future carbon regulation.

Former Treasury Secretary Henry Paulson, who once led the investment giant Goldman Sachs, also has taken up the cause, writing in The New York Times last June that an economic crisis borne of climate inaction could be as harmful to the nation as the 2008 subprime mortgage crisis.

"We’re staring down a climate bubble that poses enormous risks to both our environment and economy. The warning signs are clear and growing more urgent as the risks go unchecked," Paulson wrote. "We can see the crash coming, and yet we’re sitting on our hands rather than altering course."

Stephan Dolezalek is managing partner of VantagePoint Capital Partners in Silicon Valley, with $4 billion of commercial capital vested in clean energy and information technology companies, including Leggett’s U.K.-based solar firm, Solarcentury.

Dolezalek said in an interview that that growing awareness of carbon risk in the United States can be credited to just a handful of individuals and organizations, including Leggett and Carbon Tracker. Their work, along with that of groups like the Boston-based nonprofit Ceres, have mobilized investors behind climate change in a way that traditional environmental groups have failed to do at the policy level, he said.

"Coming from a fund perspective, my view is that until you convince the financial markets of something, you’re not going to change behaviors at a meaningful scale," Dolezalek said. "Ultimately, the way to focus financial markets is by talking about risk and reward, and getting people to think differently about assets they may have held onto for a very long time."

Leggett is highly skilled at drawing risk-reward equation with respect to fossil fuels, Dolezalek said. "And the fact that he started out as a geologist in the oil business makes it that much harder to discredit what he says."

Finding ‘epic drama’ in an energy transition

Lately, Leggett has poured much of his energy into writing his fifth book, a serialized work of nonfiction chronicling the "epic drama" unfolding around efforts to achieve a binding agreement among nations to reduce greenhouse gas emissions under the U.N. Framework Convention on Climate Change.

Much of the focus of the U.N. effort, which will culminate in a meeting of leaders from 190 countries in Paris late this year, is on strategies to prevent climate warming from exceeding 2 degrees Celsius above preindustrial levels.

Carbon Tracker, in its first report in 2011, estimated that achieving such a goal would require that 80 percent of the globe’s existing fossil fuel reserves would have to remain untapped, an almost impossible scenario under existing energy policies. The findings were later translated to a much broader audience via a Rolling Stone article titled "Climate Change’s Terrifying New Math," by climate activist Bill McKibben.

Leggett’s latest narrative, titled "The Winning of the Carbon War," opens in May 2013 as international experts were sounding warnings that a climate agreement must be reached before 2020 at the same time the oil and gas fracking boom was sweeping across the United States and gaining momentum in Europe and elsewhere.

Published in monthly installments, the book will close with the 21st Conference of the Parties meeting in Paris later this year. Relying heavily on scenes and vignettes from actual events the author witnessed or participated in, Leggett said he hopes the book will reveal the inside stories behind one of the most complex and controversial environmental treaties ever devised.

While steeped in realpolitik, the book is also full of fresh players and emerging trends, many of which Leggett sees as key to the negotiations process.

He believes that the carbon war story — with its requisite "light side" and "dark side" — will eventually be decided by three things: the declining costs and rising competitiveness of renewable energy; steeper regulatory, financial and logistical hurdles facing traditional fossil fuels; and growing investor concern about the risk profiles of traditional energy companies.

At the same time, Leggett said he is encouraged by a growing sense of enthusiasm among financial analysts and other market players about the ability of renewables and other technologies, such as battery storage and microgrids, to transform the world’s energy economy.

"In a quarter-century of work on this issue, it’s amazing to me how often I find myself in conversations or giving talks without even mentioning the words ‘climate change,’" Leggett said. "Of course, we’re long past that. The discussion now is about the inevitability of the energy transition and what path we’re going to take to get there."