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Climate & Energy News roundup

written by Remo Bebié

UK set to double wind power capacity by 2030

The UK's Climate and Energy Secretary, Claire Perry, recently confirmed plans to hold biennial auctions for offshore wind subsidies. The government said that at the next auction in May 2019, up to £557 million would be made available. The plan is set to double offshore wind capacity over 10 years. RenewableUK's chief executive, Hugh McNeal, told the BBC: "This sets us on the path to deliver the tens of billions of pounds of investment that will be needed to meet our ambition of at least 30GW by 2030." (Financial Times, BBC, City A.M.). The move comes after the UK's investment in green energy dropped 56% in 2017 (Guardian).

UK's pension fund trade body PLSA wants climate removed from new investment law

The Pensions and Lifetime Savings Association (PLSA) said that explicitly including climate risk considerations in a new investment lawwould confuse trustees and described them as "neither practical nor purposeful". The comments are part of a response to a consultation by the Department for Work and Pensions (DWP), which introduced the proposed changes in June. PLSA argue that explicitly mentioning climate change suggests it would be a material factor in all cases. It expressed concerns that the regulation would shift trustees' focus away from more important ESG factors in some cases (IPE, The Actuary).

Environmental law firm ClientEarth disagree with the PLSA assessment. Lawyer Alice Garton told IPE: "Climate change must be on trustees’ agendas" and that "The recent proposals from the DWP are a crucial step in making that happen and not a moment too soon. It would be hugely irresponsible to row back on this important development" (IPE, ClientEarth Press Statement).

Sovereign Wealth funds launch framework for climate risk integration

A group of six sovereign wealth funds (SWF) representing $3 trillion in assets have launched a framework to help integrate climate risk analysis and opportunities from the low-carbon energy transition in the management of large, long-term and diversified asset pools. The framework is a result of consultations among the six founding sovereign wealth funds, and conversations with other institutional investors.

The six members of the One Planet SWF Working Group are the Abu Dhabi Investment Authority, Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment Management of Norway, the Public Investment Fund of the Kingdom of Saudi Arabia, and the Qatar Investment Authority (Pensions & Investment Europe, BusinessGreen).

Wood Mackenzie sees global oil demand peaking in 2036

Tectonic shifts in autonomous vehicles and transport electrification will see oil demand peak by 2036 according to energy consultants Wood Mackenzie. The consultants expect petrol demand to be the first component of oil demand to peak, in around 2030 (Financial Times).

Many oil majors see demand peaking later, if at all. BP said in February, that it expected peak oil in the late 2030s (Financial Times), while Exxon Mobil and Saudi Aramco think it will not peak until later (Quartz). In a statement, Environmental law firm ClientEarth argues that peak oil in 2036 presents “clear legal risks” for overoptimistic oil executives.

Meanwhile, National Grid doubled the number of electric vehicles it expects to be on UK roads by 2040 to 36 million. Fintan Slye, of National Grid, told the Telegraph that the growth of electric vehicles is one of the major trends in the system operator’s scenario planning which is used within the industry to inform decision making (Telegraph, CarbonBrief).

Climate Action 100+ adds 61 companies to "target list"

The investor engagement initiative has added 61 additional companies to its initial engagement focus list of 100 companies. Companies on the new "+" list include Peugot, Coca Cola, and Air France KLM, as well as various utilities such as Devon Energy, Dominion, Iberdrola, and National Grid.

At the same time, more than 60 additional investors have signed up to the initiative, bringing the group's membership to 289 investors with close to $30 trillion in assets under management. The announcement coincided with a report launched by the Transition Pathway Initiative, outlining the state of transition in coal mining, electricity and oil and gas. The report showed that companies had made significant progress on carbon policies and management processes but failed to adopt business strategies in line with the goals of the Paris Agreement (Financial Times, IPE).

Green French government bonds earn premium from investors

Researchers at the Association for Financial Markets in Europe (AFME) have found a "green premium" in French government debt. AFME highlighted the result in their Q1 Government Bond Data Report. They found that the green bonds, which were sold at maturities of 21 and 22 years, fetched yields comparable to conventional 16-year French bonds, indicating a premium. Alex Hunt, a quantitative analyst at AFME, told the Financial Times that "although this is a small data set it indicates that there is a green premium for the French government".

The Financial Times describes the finding as "the latest sign that a pricing differential is emerging in the growing market for environmental financial assets." (Financial Times).

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