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Climate Finance News Roundup

written by Joel Kenrick


Aviva Investors has warned more than 1,000 companies globally that they face shareholder backlash at their annual meetings next year if they fail to publicly disclose the risks posed to their business models by climate change. The UK fund house, which oversees $437bn of assets, said it will vote against the annual reports and accounts of companies that fail to embrace recommendations set out last month by the task force for climate-related disclosure' (FTfm, 20 Jul)


'Aviva is the first asset manager to publicly say it will vote against businesses that do not report in line with the climate change recommendations. The fund company’s move is the latest sign that investors are increasingly concerned about the impact of climate change on returns. ... Aviva will consider selling its shares in companies that repeatedly fail to provide information on the impact of climate change on their business models.'


In an article for ESG Magazine, Preventable Surprises Raj Thamotheram and David Murray ask why 'Some of the biggest names in the investment world backed the TCFD work with people and resources, but their management didn’t sign-on to the outcome' (The mystery of the missing CEO signatories to the TCFD report):

"A close comparison of the impressive list of companies that supported the Task Force (notably, with considerable staff time) to the stellar roster of 103 companies whose CEOs signed a letter in support of its recommendations reveals some curious discrepancies. In the financial sector, for example, missing from the CEO signatories were BlackRock, Banco Bradesco, JP Morgan and Mercer. ...

Preventable Surprises would have preferred the TCFD to go further and encourage investors to also assess how companies affect warming, not just how they are affected by it, and to this end we back AGM resolutions asking for transition plans. Our particular focus is on the energy utility sector, and in 2018 we hope to heave shareholder votes over the 50% mark, as happened this year with PPL Corporation. ...

Our hope in writing this piece is that the missing leaders hear the disappointment from their clients, staff and trusted peers loud and clear, and then correct their mistake quickly. Learning from failure needs to become a core skill for top management in this sector. Mis-managed climate change systemic risk offers the perfect opportunity." The group make a similar point in a letter to the editor in the Financial Times.


What’s the real impact of President Trump’s move to pull the U.S. out of the global accords to combat climate change? "To put it simply, very little changes", say Morgan Stanley. "Economics and improving technologies, not regulation, are the driving forces behind many of the sustainability trends in global markets today."

News from UK:

  • The Church of England Takes on Climate Change—and Generates a 17 Percent Return: In a feature story Bloomberg Markets look at 'The low-key $10 billion fund that finances missions, cathedral costs and clergy pensions was instrumental in passing Exxon shareholder resolution.' (4 Aug)
  • Top Environment Agency execs to lead £28bn LGPS partnership: Dawn Turner has been appointed chief executive officer of BPP Ltd, which will oversee the investment of £27.5bn (€31bn) pension assets of the funds, and Mark Mansley has been appointed its chief investment officer (CIO). (IPE, 19 July) The Environment Agency Pension Fund (EAPF) is 'a recognised leader in responsible investment' and posted a 19.6% investment return in 12 months to 31 March 2017. 'EAPF emphasised that its focus on low-carbon and sustainable equity strategies had not negatively affected performance. “Our best performing managers were Generation and Impax, arguably our most sustainable,” the scheme said.' (IPE, 20 July)
  • UK pension funds allocate £1.1bn to BlackRock renewables fund: The Renewable Income UK fund, which invests in wind and solar power assets in the UK, raised £475m after a “third re-opening”, BlackRock said. It said UK pension funds were showing strong demand for long-term income. (IPE, 18 July)

News from Europe:

  • Time for Europe’s financial community to join the climate fightArlene McCarthy writes "We’ve been here before. In 2008, the global financial system was brought to the brink of collapse. The causes? The incentivising of short-term behaviour, the disconnect between the interests of bankers and savers and investors, and risks building up out of sight of regulators and shareholders. There is a growing awareness that climate risk could pose the next threat to financial stability. ... The difference between now and 2008 is that there is no shortage of warnings being given, by investors, regulators and businesses as well as academics and activists." Arlene McCarthy, who is a member of the High Level Expert Group on Sustainable Finance (HLEG) and a former vice-president of the European Parliament’s Economic and Monetary Affairs Committee, says that "Europe has the expertise and the critical mass to deliver a new sustainable finance model. The recommendations in [the HLEG] report are part of the change that needs to happen. Political will and a proactive engagement by the finance community can make it a reality." (EurActiv, 25 July)
  • Dawn of new EU emissions rules could sound death knell for coal power: Over 3,000 Large Combustion Plants (LCPs) will have to comply with the new rules by 2021 and current estimates believe 82% of the EU’s coal capacity emit too much and are non-compliant. (EurActiv, 1 Aug)
  • Danish fund to track CO2, may exclude some firms from portfolio. "Denmark's biggest commercial pension fund will soon track carbon emissions by companies it invests in, and exclude those it finds breach the Paris climate accord, its CFO told Reuters. PFA, which provides pensions for 1.2 million Danes and has assets of $95 billion, is the latest investor to push the issue of climate change up its agenda.' (Reuters, 26 July)

News from around the world:

  • South Korea shifts from coal to renewables: the new Trade, Industry and Energy Minister has signaled a shift saying: "I will seek to advance the time -- when (citizens can) breathe cleaner air and live in a safer environment -- by gradually reducing nuclear and coal-fired power plants that have spawned concerns about safety and environmental (pollution), and through increasing renewable energy supplies" (Korea Herald, 19 July)
  • Sri Lanka’s electricity regulator has ruled out building new coal plants for the next two decades after finding the environmental and social costs of the fuel made it uneconomical. (Climate Home, 4 Aug). ReNew Economy call it a 'dramatic U-turn' as in its previous plan the regulator 'pitched for the construction of 11 new coal units with a combined capacity of 3200 MW by 2034.'

  • ... while what remains of Asia's coal-fired power boom 'bankrolled by foreign governments and banks'The Guardian report that Market Forces 'examined 22 deals involving 13.1 gigawatts of coal-fired power in Indonesia and found that 91% of the projects had the backing of foreign governments through export credit agencies or development banks.' (20 July)
  • China added 24GW of solar 'capacity in the first half [year] amid a push by policy makers to locate electricity production near the point where it’s used. Distributed solar-power projects -- the kind of solar found on industrial buildings, malls and schools -- accounted for almost a third of the new installations in the period.' (Bloomberg, 19 July). Helen Wong, chief executive, Greater China, at HSBC says that the world's largest floating solar power plant in Huainan, a former coal mining region in China, is one of 'many examples that illustrate the remarkable shift towards lower-carbon technologies in China and India, the world’s two most populous countries. It is part of a “new normal” in the global fight against climate change, and highlights that the centre of that fight is rapidly moving east.' (Financial Times, 31 July)
  • In Japan, world's Biggest Pension Fund Craves More After Foray Into ESG Assets: Current ESG allocation of 3% of Japan stocks too low says Hiromichi Mizuno, who helps manage $1.3 trillion in assets for Japan’s Government Pension Investment Fund as chief investment officer. (Bloomberg, 14 July)
  • Saudis Seek Bids for First Utility-Scale Plant for Wind Power: 'The government has announced plans to offer tenders for renewable energy projects to generate 700 megawatts this year.' (Bloomberg, 16 July).

  • Will the capital markets eventually stop subsidising shale producers? John Dizard argues that 'the US exploration and production industry for oil and gas has developed great technology, but it has required continuous transfusions of cheap outside money to keep going. The tide of cheap shale oil and gas will recede only when the capital markets stop wiring funds to the producers.' (The argument to be a buyer of the Saudi Aramco IPO, FTfm, 22 July)

  • Argentina, next G20 hosts, urged to continue with topic of green finance in 2018, by Ma Jun, chief economist at the People’s Bank of China (PBoC) at a meeting in Buenos Aires. (IPS, 26 July)

  • North American independent oil & gas producers trail rest of world in climate risk preparedness: a study by Sustainalytics shows that while three quarters of developed market integrated oil and gas producers have carried out a climate risk assessment, the figure is reversed for both north american independents and emerging market producers (What will the TCFD mean for Oil and Gas Producers?, 26 July)

And finally... Schroders climate progress dashboard published. The dashboard reported by the FT (and in my last Chronicle), has been published, showing that "Least progress has been made on oil and gas production, which points to a rise of over 6°C, implying major changes will be needed to hit long term targets. Use of these fossil fuels will have to fall significantly in future, ultimately to zero." The 12 indicators are below, and dashboard is on Schroders website:

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