Norway’s influential $920bn oil fund has compiled data showing revealing the preparedness of European utilities for the ongoing renewable energy transition.

The rankings by the world’s largest sovereign wealth fund are not good news for RWE, CEZ, EnBW or Endesa but indicate better adaptation by Verbund, Iberdrola and Fortum.
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The research, used by investors with $100tn in collective assets under management, shows many of Europe’s publicly listed utilities as still carrying many fossil fuel assets, and are therefore vulnerable to continuing losses as governments step up climate change commitments following the Paris Accord.

RWE and Czech group CEZ, along with Germany’s EnBW and Spain’s Endesa, sit at the bottom of the ranking examining how ready 14 of Europe’s large utilities companies are for a transition to a low-carbon economy and a future in which natural resources such as water become increasingly scarce.

Almost 200 countries globally have agreed to limit global warming to less than 2 degrees centigrade a year as part of the 2015 Paris Agreement on climate. Rick Stathers, head of investor initiatives at the Carbon Disclosure Project, the non-profit organisation that carried out the research, told FT: “We are still a long way off having a utilities sector that will meet the goal of a 2-degree future.”

According to CDP, the utilities industry is responsible for a quarter of global carbon emissions and must reduce these by more than two-thirds by 2030 to meet the goals of the Paris Agreement. Almost half of Europe’s big utilities generate at least 20 per cent of their energy from coal, which is a significant source of carbon emissions.

There is a risk that those who still carry a significant fossil fuel inventory may be at risk of becoming stranded assets.

Ben Caldecott, director of the sustainable finance programme at the University of Oxford, said: “Investors are increasingly developing capabilities to differentiate between utilities more or less exposed to environmental risks. Utilities heavily exposed to coal are particularly at risk.”

The Austrian company Verbund, Spain’s Iberdrola and Finland’s Fortum ranked among the best prepared for a low-carbon economy in the CDP list. Verbund is aiming to generate 100 per cent of its energy through renewables by 2020 and is in the process of decommissioning remaining fossil fuel assets.

RWE suffered losses of €5.7bn in 2016 and scrapped its dividend for the second consecutive year. It is reliant on coal for more than 50 per cent of its power generation.

RWE said the company had “a clear commitment to support the national and European climate protection goals for 2050”. “RWE will also continue to make further efforts to reduce CO2 significantly.” EnBW said it was “fully committed to the Paris climate agreement and we are committed to contribute our share to its implementation”.