With G20 foreign ministers meeting in Bonn, Germany, this bumper issue of The Kenrick Chronicle (after a pause in January) focuses on stories about seven events or reports I've found particularly interesting from the last two months.
- G20: GERMANY, INVESTORS PRESS US & TILLERSON ON CLIMATE
- REPUBLICAN GRANDEES PUSH CARBON TAX PLAN:
- OIL MAJORS RESULTS FALL SHORT – TOTAL ON TOP: ExxonMobil, Chevron, StatOil, BP and Shell all miss expectations.
- CARBON TRACKER REPORT AND BP ENERGY OUTLOOK SHOW DIVERGENT VIEWS OF OIL DEMAND
- DAVOS: PRESIDENT XI AND BUSINESSES REITERATE CLIMATE ACTION
- EU SUSTAINABLE FINANCE PANEL LAUNCHED
- SOME RESPONDENTS PUBLISH FSB TCFD CONSULTATION RESPONSES
And as always ending with a Round up of news from investors, companies and regulators on climate risk. Even by my standards this is a long article, but is still by necessity selective so please let me know if are stories I’ve missed. As always I welcome any comments, corrections or suggestions – feel free to forward and email me to be added to the email list.
1. G20: GERMANY, INVESTORS PRESS US & TILLERSON ON CLIMATE
Germany press Tillerson on climate: 'Germany fixed climate change as a key topic for foreign ministers from the Group of 20 nations meeting Thursday, according to an official in Berlin, setting up for a clash with Donald Trump’s lead Cabinet minister on the issue' report Bloomberg. '“You can’t fight climate change by putting up barbed wire,” Foreign Minister Sigmar Gabriel said in a briefing document released ahead of the meeting, making a barely-disguised swipe at Trump’s ambition to build a wall between the U.S. and Mexico.’ Bloomberg say the choice of Bonn as the 'venue for this week’s meeting may be no coincidence -- the city on the Rhine is the home of the UNFCCC'. (Germany Prepares for Climate Clash With Tillerson at G-20 Talks, 15 Feb, Bloomberg)
Investors call for 2020 fossil fuel subsidy phase out: 'Investors and insurers with more than $2.8 trillion in assets under management on Wednesday called on the Group of 20 economies to phase out fossil fuel subsidies by 2020 despite U.S. doubts about climate change.' Ahead of Foreign Ministers summit in Bonn 'The summit should set a clear timeline "for the full and equitable phase-out by all G20 members of all fossil fuel subsidies by 2020," the 16 signatories wrote. They included Actiam, Aegon Asset Management, Aviva Investors, KBI Global Investors, La Francaise, Legal and General and Trillium Asset Management.' (G20 urged to ditch fossil fuel subsidies by 2020, go green, 15 Feb, Reuters).
'The world’s biggest investors are joining forces to unite against Donald Trump in the fight against climate change’ reports The Independent. 'Many [of the investors] hold significant investments in fossil fuel companies but said a clear policy signal that clean energy will be backed would give them the confidence to shift their billions into renewables.’ The article also highlighted that 'Research launched earlier this week by the Global Subsidies Initiative and the Overseas Development Institute found that ending subsidies for global fossil fuel production would have the same impact as eliminating all aeroplanes from the skies.’ (Investors with $2.8 trillion in assets unite against Donald Trump’s climate change denial, 15 Feb, The Independent)
Climate Change is a military threat multiplier: Ahead of the G20 meeting and the Munich Security Conference this week, Secretary Tillerson is told in The Hill that 'climate change is what the military calls a “threat multiplier.” It makes bad situations worse and makes troubled regions downright dangerous,’ according to Sherri Goodman, a former US deputy undersecretary of defence. 'The science is clear and irrefutable — climate change is a clear and present danger to the United States. We know already that it is among the key forces displacing populations, leading to massive migrations that are straining stability and fuelling terrorism.’ … 'Ignoring or denying the realities of climate change won’t make the threat go away. Tillerson and Trump can spend the next four years trying to put out fires around the world, but they will soon find out what the U.S. military has known for decades — true security is about prevention. Only by tackling the root causes of conflict can our nation be kept safe and secure.' (Climate change is a clear and present danger to US security, 10 Feb, The Hill)
UK National Security Council: climate change is key military risk: Former UK Energy Secretary Ed Davey writes that ‘having sat on the UK National Security Council, I know that climate change was treated as a key military risk at the highest levels of the UK government.’ The G20 meeting ‘provides a perfect opportunity for countries to stand together’ on climate change… 'Any withdrawal by the US from the Paris Agreement and its shared responsibilities will be viewed poorly across the capitals of Berlin, Paris, Warsaw and London.’ (The case for collaborating on climate change, 16 Feb, Al Jazeera)
China and EU preparing early summit: 'The European Union is preparing an early summit with China in April or May in Brussels to promote free trade and international cooperation', according to Reuters. The summit is usually held in July but ‘one of the officials said Beijing had requested it to take place as early as possible.' (Exclusive: EU preparing early China summit in message to Trump – sources, 16 Feb, Reuters). Ahead of the Bonn G20 Foreign ministers meeting civil society from China and the EU say 'A united front on climate change could see Brussels and Beijing forging ahead and fill in part the political vacuum left by the Donald Trump administration. Top EU and Chinese diplomats should seize the Bonn meeting as the first of many moments to join forces. The German presidency has provided fertile ground to catalyse the chemistry. Among its busy G20 agenda, Berlin has gone the extra mile to place climate change among its priorities.' (EU and China can outflank Trump on climate change, 16 Feb, Climate Home). Also ahead of the meeting, DW interviews Chinese analyst Lina Li. 'With uncertainty over the Trump administration’s policies, China is seen as a possible new leader.’ (Climate driven migration key topic for G20 summit, says Chinese expert, 16 Feb, Deutsche Welle)
2. REPUBLICAN GRANDEES PUSH CARBON TAX PLAN
Five former GOP Treasury Secretaries & CEA chairs present carbon tax: A coalition of 'veteran Republican officials — including five who have either served as treasury secretary or as chairman of the Council of Economic Advisers’ met with White House officials last week 'proposing elimination of nearly all of the Obama administration’s climate policies in exchange for a rising carbon tax that starts at $40 per ton, and is returned in the form of a quarterly check from the Social Security Administration to every American.’ The newly formed Climate Leadership Council includes James A. Baker, Henry Paulson, George P. Shultz, Marty Feldstein and Greg Mankiw. (Senior Republican statesmen propose replacing Obama’s climate policies with a carbon tax, 8 Feb, Washington Post).
The group met at the White House with Trump’s top economic adviser Gary Cohn, Chief of Staff Reince Priebus and senior aide Kellyanne Conway (Prominent Republicans Pitch Carbon-Tax Plan to Top Trump Aides, 9 Feb, Bloomberg), while the proposals were welcomed by Mitt Romney. The group set out their case in two opinion articles: A Conservative Case for Climate Action, by Martin Feldstein, Gregory Mankiw, and Ted Halstead (8 Feb, New York Times ($)) and A Conservative Answer to Climate Change by George Shultz and James Baker (7 Feb, Wall Street Journal ($)).
'A carbon tax is quintessentially conservative, Baker’s group argues, because it would not increase the size of government but would reduce it by canceling out President Barack Obama’s climate regulatory moves. Revenue from the carbon tax would go directly to taxpayers instead of toward new government programs.’ (WashPost). 'The tax would be collected where the fossil fuels enter the economy, such as the mine, well or port; the money raised would be returned to consumers in what the group calls a “carbon dividend” amounting to an estimated $2,000 a year for the average family of four’ report the New York Times (‘A Conservative Climate Solution’: Republican Group Calls for Carbon Tax, 7 Feb)
Responding to the news on Cap-X Joe Ware writes that 'Of all the things one would expect to unite US Republicans and the Chinese Communist Party, a shared, pro-market approach to addressing climate change might be low down the list.’ (How the market is taking on climate change, 15 Feb, Cap-X)
Meanwhile U.K. Lobbies Trump Officials to Stay in Paris Climate Deal, report Bloomberg (14 Feb) saying that 'British government representatives stationed in Washington have been talking to officials in the U.S. president’s administration about climate policy, focusing on the jobs and growth that tackling pollution can bring to the U.S.’ according to an energy official.
Moody’s 'No stopping climate action regardless of Trump': 'The private sector and rest of the world will ensure global efforts to reduce carbon emissions will not be affected by a less ambitious US climate policy under Trump, according to Moody’s. This will be driven by, among other things, the private sector and market forces, where momentum will continue to drive the climate agenda says Moody's. This means the effects of the transition to a low-carbon economy will continue to have credit implications for rated entities.’ (No stopping climate action regardless of US policy, says Moody’s, 16 Feb, Environmental Finance ($)) See also Reuters (BRIEF-Moody's says future U.S. climate policy shifts would not stall global emissions reduction efforts, 16 Feb). Early in February Shell delivered a similar message according to the FT ‘Donald Trump will not derail the “unstoppable” growth in renewable energy, according to the chief executive of Royal Dutch Shell, which plans to gradually lift spending on green technology as the world reduces its dependence on fossil fuels.’ (Shell confident Trump will not derail renewable energy growth, 2 Feb, Financial Times)
3. OIL MAJORS RESULTS FALL SHORT – TOTAL ON TOP
Over last few weeks ExxonMobil, Chevron, StatOil, BP and Shell announced earning results that missed expectations, while Total raised dividends and beat earnings expectations.
ExxonMobil, Statoil miss analyst earnings expectations, book impairment charges: 'ExxonMobil has become the second large oil company to report earnings well below analysts’ expectations, following Chevron on Friday. Exxon’s earnings per share were 41 cents for the fourth quarter of 2016, with net income of $1.68bn, 40 per cent lower than expected. … The lower than expected earnings came after a $2.03bn charge for a writedown in the value of some of ExxonMobil’s assets’, reported the Financial Times. 'Like other oil companies, Exxon has cut its capital spending sharply in the past few years. Capital and exploration spending was $42.5bn in 2013 and by 2016 had fallen to less than half that amount, at $19.3bn.’ (ExxonMobil earnings 40% lower than expected, 31 Jan, FT). The Economist reports that 'In coming weeks, [Exxon] is expected to remove up to 4.6bn barrels of North American crude from its 25bn barrels of proved reserves, because they are too costly to produce profitably. That will be yet another rare occurrence. It will add to a sense that ExxonMobil is struggling to find low-cost sources of oil production to prepare it for a world of potential oversupply.' (The challenges for ExxonMobil’s new boss, 2 Feb, The Economist). StatOil also 'booked a $2.3bn impairment charge due to reduced long-term expectations for oil prices as the Norwegian energy group said global demand for crude might go into terminal decline before 2030.’ Eldar Sætre, chief executive 'acknowledged global oil demand could peak by 2030 or sooner as the transition to cleaner forms of energy — including a shift from petrol cars to electric vehicles — gathers pace.' (Statoil reports loss after cutting long-term oil price forecast, 7 Feb, FT). ExxonMobil appointed
Royal Dutch Shell: all three principal business units miss company forecasts: Shell reported 'fourth-quarter profit that missed analyst estimates after crude’s recovery drove up costs for refining while earnings from production did little more than break even.’ Bloomberg report that 'In a sign of how tough 2016 was for Big Oil, Shell said it delivered returns on the capital it employed of just 2.9 percent, only fractionally higher than the record low of 2.8 percent in 1998.' (Shell Profit Falls Short as Rising Crude Costs Sap Refining, 2 Feb, Bloomberg)
BP raise break-even oil price to $60/bbl as miss analysts’ forecasts: 'BP raised the oil price at which it can balance its books this year to $60 a barrel on Tuesday due to higher spending following a string of investments as annual earnings fell for a second consecutive year. […] The British oil and gas company, whose fourth quarter profits fell short of street expectations, had previously targeted a breakeven oil price of $50-55 a barrel. (BP lifts break-even oil price after profit miss, 7 Feb, Reuters) Chevron missed earnings as they 'posted a net income of $415 million, or 22 cents per share, after a net loss of $588 million, or 31 cents a share, a year earlier. Excluding one-time items, the company earned 21 cents per share. By that measure, analysts expected earnings of 64 cents a share.’ (Chevron profit miss hurts stock, Dow Jones index, 27 Jan, Reuters)
Total buck trend - raise dividends, beat earnings expectations: ‘The increase in Total’s dividend, at a time when other global oil majors are still straining to keep theirs stable, highlighted the group’s emergence as one of the industry’s most resilient operators during the downturn of the past two years.’ While BP and Exxon 'are beginning to raise capital expenditure as oil prices recover, Total said that it would continue trimming investment from about $18bn last year to between $16bn and $17bn in 2017. That would be down at least 26 per cent from $23bn in 2015.’ (Total proposes raising dividend for first time since 2014, 9 Feb, Financial Times). Total’s chief executive has previously said he 'wants the French oil and gas major to have a fifth of its assets invested in low carbon business within 20 years, as part of a radical reshaping of the group.’ (Total aims to be 20% low-carbon by 2035, 24 May, FT)
4. CARBON TRACKER REPORT AND BP ENERGY OUTLOOK SHOW DIVERGENT VIEWS OF OIL DEMAND
'Expect the Unexpected: The Disruptive Power of Low-carbon Technology’study launched by Carbon Tracker & Grantham Institute at Imperial College London on 1 Feb, includes an online interactive dashboard that allows readers to delve into the scenario results. The full study (pdf) was the result of a year long project and press release, technical report (pdf) including assumptions are online.
'Falling costs of electric vehicles and solar panels could halt worldwide growth in demand for oil and coal by 2020, a new report has suggested. A scenario that takes into account the latest cost reduction projections for the green technologies, and countries’ pledges to cut emissions, finds that solar power and electric vehicles are “gamechangers” that could leave fossil fuels stranded. Polluting fuels could lose 10% of market share to solar power and clean cars within a decade, the report by the Grantham Institute at Imperial College London and the Carbon Tracker Initiative found. A 10% loss of market share was enough to cause the collapse of the coal mining industry in the US, while Europe’s five major utilities lost €100bn (£85bn) between 2008 and 2013 because they did not prepare for an 8% increase in renewables, the report said.' (Electric cars and cheap solar 'could halt fossil fuel growth by 2020', 2 Feb, The Guardian / Press Association)
'Large energy companies adopting a "business as usual" attitude are underestimating the advances of low carbon technologies’ according to the report says CNBC, which 'proposes a new 'starting point' scenario that takes in cost reduction projections for electric vehicles and solar photovoltaic technology’ which could see 'solar photovoltaic technology providing 29 percent of global power generation by 2050, phasing out coal in the process; electric vehicles making up more than two thirds of the road transport market by 2050; and demand for coal and oil peaking by 2020. Furthermore, growth in electric vehicles could result in the displacement of around two million barrels of oil per day by 2025 and 25 million barrels per day by 2050. (Oil and coal demand could peak by 2020: Study, 1 Feb, CNBC).
Unpredictably rapid growth happens pretty predictably…: Vox’s David Roberts writes in an in depth analysis that 'Just about every analyst agrees that the electric vehicle market is poised for rapid growth. But how rapid? … I think history justifies optimism, the belief that the high-end projections (like [the Carbon Tracker / Grantham Institute study] are closer to the truth.’
‘…The rate of EV growth will have huge implications for oil markets, auto markets, and electric utilities. Yet it is maddeningly difficult to predict the future; forecasts for the EV market are all over the place.’ … Projections for EV growth feed into projections for oil demand. EIA, IEA, and BP expect demand for oil to continue rising into the 2040s and even beyond. On the other hand, Michael Liebreich, the head of Bloomberg New Energy Finance, expects oil demand to peak in 2025. The CFO of Royal Dutch Shell agrees — he said the company expects it to peak within five to 15 years. The World Energy Council predicts peak demand in 2030. Into this milieu comes a big new study that claims all those previous projections are hopelessly pessimistic.' (We’re probably underestimating how quickly electric vehicles will disrupt the oil market, Vox).
'The growth of battery-powered cars could be as disruptive to the oil market as the OPEC market-share war that triggered the price crash of 2014, potentially wiping hundreds of billions of dollars off the value from fossil fuel producers in the next decade.’ reported Bloomberg (Electric Cars Could Cause Big Oil This Much Damage). See also Reuters (Cheaper renewables to halt coal and oil demand growth from 2020: research) Mashable (Elon Musk and electric vehicles will win the energy battle against Trump's favourite fuels) and AFP (Surge in electric cars ‘may blindside big oil), all 2 Feb. In a separate report, rapid technological advances could spell 'an end to future growth in carbon intensive coal, oil, and iron ore consumption by 2035, according to a major new report from McKinsey Global Institute (MGI).’ (McKinsey: Smart technology could deliver peak oil, coal and iron ore before 2035, 16 Feb, BusinessGreen ($)).
BP Energy Outlook 2017
Analysis of BP’s Energy Outlook 2017 shows it 'is the sixth in a row to raise forecasts for wind and solar energy. It also cuts the outlook for coal for the fourth consecutive year and gas for the third year’ write Carbon Brief in an analysis with a series of interactive charts (see below). 'BP now expects global coal use to peak, plateau and then decline during 2025-2030’ while 'The 2017 BP Energy Outlook is also the first to downgrade expectations for oil demand growth.’ (Analysis: BP Energy Outlook sees coal demand peaking for first time, 27 Jan, Carbon Brief).
BP bracing for EV revolution, but has track record of downplaying potential: According to the Telegraph, 'BP is bracing for a revolution in electric car use that could halve the demand for oil from vehicles, helping to fan the flames of a fresh battle for market share among the world’s oil producers. The oil major has downplayed the potential of electric cars in dampening demand in the past, but admitted for the first time in its annual report on future energy trends that the effect will be amplified by a boom in car sharing and pooling options, offered by firms such as Uber.’ (BP braces for electric car revolution as oil demand growth slows, 25 Jan, Daily Telegraph).
BP Energy Outlook – Analysis or advocacy? According to Greg Muttitt of OCI writing in EnergyPost, the fundamental problem with BP’s Energy Outlook is 'its role is muddled between forecasting and advocacy. However much BP wants governments to refrain from regulating, no plausible forecast would ignore regulation as a key driver of change.’ Mr Muttitt points out that 'BP has published an Energy Outlook every year since 2011. Every year BP has predicted that renewable energy growth would slow down from an exponential to a linear phase; every year BP has been wrong.’ … 'A view is increasingly emerging that oil demand could peak within the next 10-20 years, including among Shell’s Chief Financial Officer, Wood Mackenzie and even OPEC. BP does not consider this a possibility in any of its scenarios.' (BP’s Energy Outlook: between forecasting and advocacy, Greg Muttitt, 30 Jan, EnergyPost)
5. DAVOS: PRESIDENT XI AND BUSINESSES REITERATE CLIMATE ACTION
Chinese President Xi Jinping defended Paris Agreement in Davos keynote address at the World Economic Forum, and ‘in what felt like a geopolitical shift … delivered a stern defence of the UN pact to limit greenhouse gas emissions’ wrote Ed King. (Xi warns Trump against quitting UN climate deal, 17 Jan, Climate Home). President Xi said: “We should adhere to multilateralism, honour promises and abide by rules, one should not select or bend rules as he sees fit. The Paris Agreement is a hard-won agreement… all signatories should stick to it instead of walking away – it is a responsibility we must assume for future generations.”
Bloomberg report that in contrast to Trump 'China is strengthening its commitment to the issue. Earlier this month, it pledged to invest 2.5 trillion yuan ($360 billion) in renewable energy through 2020 to reduce greenhouse gases that cause global warming.’ In his Davos speech 'Xi said China’s green development investments were already “paying off” and urged other countries to support international cooperation to solve the world’s most urgent challenges. “We should join hands and rise to the challenge,” he said. “Let us boost confidence, take actions and work together for a bright future.”’ (Xi at Davos Urges Trump to Stay in ‘Hard Won’ Paris Climate Deal, 17 Jan, Bloomberg).
In response to President Xi’s speech Baroness Cavendish, former head of the No 10 policy unit under David Cameron, tweeted ‘Xi has quoted Dickens and Red Cross while challenging Trump on climate and trade. Feels like a moment’ while The Guardian live-blog reported Li Shuo, an analyst with Greenpeace East Asia saying this marked a new stage of Chinese leadership: “Given the current volatility of global politics, President Xi Jinping’s … reference to climate change highlights a growing sense of China’s international responsibility, and the country’s evolving calculus towards taking action on the issue. …Having moved from climate laggard to a cautious leader in five short years over the first half of this decade, it’s reasonable to expect China to become a true leader by its end.”
President Xi’s speech also made waves around the world, Le Monde writing that Xi has sent Trump an implicit warning about the Paris Agreement (A Davos, le plaidoyer pour le libre-échange du president chinois, 17 Jan, Le Monde), while in India the Business Standard wrote that 'Analysts believe China’s "responsible leadership" on climate is closely aligned with global economic competitive advantage and the US is now poised to cede control of the global renewables market to China, which already has a significant lead’ (Trump's ascension could see China taking lead in green diplomacy, 17 Jan, Business Standard).
World Economic Forum agenda most sessions ever on climate change: 'devoting 15 sessions of the 2017 annual meeting to climate change, and nine more to clean energy — the most ever on the issues’ according to Jess Shankleman (Davos Elite Focus on Climate Change, Ignoring Trump’s Skepticism, 15 Jan, Bloomberg). Bloomberg write that 'For global business leaders, it’s not just a question of burnishing their green credentials, but about billions of dollars -- maybe even trillions -- in potential profits and losses.’
60 global business CEOs join Davos climate change event: 'Beyond the official program, a record 60 chief executive officers are expected to gather in a closed-door session to discuss the challenges of climate change’, Bloomberg report, quoting Ben van Beurden, the head of Royal Dutch Shell, Europe’s largest oil group as saying: "The good thing is that the Paris agreement raised the bar for everyone. Everybody feels the obligation to act.”
Xi tells UN we should ‘pursue green, low-carbon, circular and sustainable way of life and production’: After leaving Davos President Xi gave a speech to the UN in Geneva, saying that ‘We should make our world clean and beautiful by pursuing green and low-carbon development. Man coexists with nature, which means that any harm to nature will eventually come back to haunt man. We hardly notice natural resources such as air, water, soil and blue sky when we have them. But we won’t be able to survive without them. Industrialization has created material wealth never seen before, but it has also inflicted irreparable damage to the environment' and reiterating his call that 'The Paris Agreement is a milestone in the history of climate governance. We must ensure this endeavor is not derailed. All parties should work together to implement the Paris Agreement. China will continue to take steps to tackle climate change and fully honor its obligations.'(Work Together to Build a Community of Shared Future for Mankind, 19 Jan, Xinhua).
6. EU SUSTAINABLE FINANCE PANEL LAUNCHED
EU high-level expert group on sustainable finance members announced: The 20 members of the European Commission have been appointed. 'The establishment of the group was announced in September, when Commission president Jean-Claude Juncker unveiled plans to “accelerate” implementation of the Capital Markets Union project. The group’s task is to come up with recommendations for “a comprehensive EU strategy on sustainable finance as part of the Capital Markets Union”. It is to do this by the end of 2017, with an interim report to be produced in the summer.' (Alecta, APG among appointees to EC sustainable finance expert group, 23 Dec, IPE). The panel will be chaired by Christian Thimann, Group Head of Regulation, Sustainability and Insurance Foresight of AXA, and members include insurance and investor finance sector representatives from pension funds, banks, insurance, asset manager, stock exchanges and analytics as well as research and civil society representatives including Paul Fisher, now senior associate at CISL, Stan Dupre, 2 degrees Investment Initiative, Sean Kidney, Climate Bonds, Richard Mattison of Trucost, Pascal Canfin of WWF and Ingrid Holmes of E3G. (European Commission appoints members of the High-Level Expert Group on sustainable finance, 22 Dec, European Commission)
7. SOME RESPONDENTS PUBLISH FSB TCFD CONSULTATION RESPONSES
FSB TCFD Recommendations Consultation closes: After the end of the 60 day consultation on the Task Force on Climate-related Financial Disclosures initial recommendations (see my last Chronicle on Dec 14 for details of reactions and coverage), Responsible Investor analyses the responses of some of the key players finding 'it is clear that we are now well into the ‘nitty gritty’. In a survey they say 'Among the nuggets is the Principles for Responsible Investment (PRI) saying it plans to align its reporting framework with the TCFD. The CDP – saying it is more than just a “facilitator” for the TCFD and is instead the markets’ “institutional memory” – clearly wants mandatory disclosure. … The TCFD will share the results from the consultation next month and deliver an updated report to the FSB in June ahead of its presentation to the G20 Summit on July 7-8. (FSB climate disclosure task force: a review of the consultation responses, 15 Feb, RI ($))
ClientEarth: Business & investors already have legal duties on climate change: In BusinessGreen ahead of the consultation close ClientEarth’s Daniel Wiseman writes 'What the guidance from the Task Force on Climate-Related Disclosures (TCFD) doesn't make clear is that in many jurisdictions, business and investors already have legal duties to report on climate risks. … 'Businesses and investors have nowhere to hide from these trends. In many jurisdictions, companies and investors already have legal obligations to consider and disclose how they are dealing with the market effects of a changing climate - though they may not be aware of it. As the current shareholder-led lawsuit against Exxon demonstrates, failure to disclose these risks is already leading to high-profile and damaging litigation.’ … 'In its current form, the TCFD Report is somewhat misleading about these requirements. While sections of the report do acknowledge existing legal obligations, other parts suggest it is up to individual organisations to decide what and how to disclose. It is not. To avoid confusion, the final version of the TCFD report should make it clear that organisations must obtain their own legal advice about their existing disclosure requirements, along with how these might intersect with the TCFD recommendations. This is in the interest of investors who want a clear picture of the future of their investment.' (Let's be clear on climate risk - you can start by talking to the task force, 9 Feb, BusinessGreen ($))
CDP: include focus on well-below 2C world: Jane Stevensen writes for BusinessGreen that a tipping point in global corporate reporting could be imminent committing that 'At CDP we welcome the TCFD recommendations, will be adopting them in full, and encourage others to do the same.’ However she notes that 'There has been a recent increase in the number of corporate transition plans to 2C scenarios, but even so, business should be aware of the shortfalls of focusing on the 2C scenario and TCFD and others should ask for a focus on the goal of a well-below 2C world established in the Paris Agreement. (Deciding the future of corporate climate reporting, 16 Feb, BusinessGreen ($)).
Time to move beyond the echo chamber: Ben Caldecott raises a point of caution, arguing that ‘while it is very comforting to attend one of the many conferences organised on sustainable finance and meet with people you already know and hear about the progress they are making, it can provide a lopsided and entirely unrealistic impression of what is actually going on. This is exacerbated by press coverage. The quantity of references in newspapers, magazines, and other media to sustainable finance topics has increased dramatically, but a lot of this coverage is consumed by the same usual suspects and written by correspondents who write on the environment and climate change. This can further reinforce an impression of rapid change and mainstreaming, when actual real world progress has been much slower. We will not tackle the great environmental challenges without mainstreaming sustainable finance concepts and practice across the financial system.' (Ben Caldecott: Mainstreaming sustainable finance by moving out of the echo chamber, 31 Jan, RI ($))
Factsheet: a guide to the Task Force Recommendations has been published by the Climate Disclosure Standards Board. As the CDSB say 'Navigating the technicality of the over 200 pages of the report is a daunting task. This factsheet presents the answers to 20 questions we know will be crucial to understand why the work of the Task Force matters and how organizations can implement the recommendations.’ (14 Dec)
Summary of financial institution climate transparency models: Trails for climate disclosure: A regulatory Review (pdf) by the 2 degrees investing initiative summarises 'A growing interest in climate-related transparency in financial markets.’ which has led to 'a range of national and international regulatory initiatives examining different FI climate transparency models. Notable examples include France’s pioneering Article 173 reporting requirements and the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD).' The three different transparency options are summarised as 1) asset disclosure (transparency on the assets of the reporting entity, e.g. power plants for companies), 2) quantitative KPIs related to climate risk or climate alignment, and 3) qualitative data on investment and risk management strategy.
8. INVESTOR, COMPANY & REGULATOR NEWS ROUND-UP
Transition Pathway Initiative launch: The Church of England were among ‘thirteen leading international asset owners and five asset managers with over £2 trillion under management launched the Transition Pathway Initiative (TPI) [on 11 Jan] to better understand how the transition to a low-carbon economy affects their investments. The TPI will assess how individual companies are positioning themselves for the transition to a low-carbon economy through a public, transparent online tool.’ The initiative is in partnership with the Grantham Research Institute at the London School of Economics. Data has been provided by FTSE Russell. (See Thirteen Leading International Asset Owners Launch Major Initiative to Embed Climate Concerns in Investment Decisions, Church of England, and Church-backed Transition Pathway Initiative launches, names founding asset owner and fund manager members, 11 Jan, Responsible Investor ($))
Pensions Regulator challenged on pension funds over climate risk: 'The UK Pensions Regulator (TPR) and the government Department for Communities and Local Government (DCLG) are being challenged to respond to a legal briefing, which argues that the 89 local government pension schemes (LGPS), the country’s largest retirement system representing hundreds of billions of pounds in assets for council workers, must assess the potential risks of climate change on investment returns, and can’t legally sidestep the issue by claiming their asset managers or engagement service providers do so.’ RI say the challenge 'is also hugely significant because the LGPS are being rearranged into eight giant pools, some running assets of up to £40bn, and are gaining important public profile. Significantly, it could get a positive hearing with the regulator. Lesley Titcomb, TPR Chief Executive, last year said ESG “can’t be ignored”, but acknowledged pension trustees’ confusion.' (Law firm and NGOs challenge UK regulator on pension funds duty to assess climate change risk, 14 Feb, Responsible Investor ($))
The $4bn Vermont State pension fund 'wants to work with other “like-minded” investors to create a low-carbon passive investment vehicle to help it decarbonise its investments at low cost’ Vermont State Treasurer Beth Pearce set out in a letter reported by Responsible Investor (Vermont treasurer wants to work with other investors on low-carbon passive vehicle, 14 Feb, RI ($))
US Investor Stewardship Group launched: ‘major initiative unveiled for investor-corporate engagement for 2018 voting season ($17trn group of US and global institutional investors launch US stewardship code, 31 Jan, RI ($))
Call for a new International Sustainability Standards Board (ISSB): A United Nations-backed panel co-chaired by the heads of Aviva and Investec has called for the creation of a global sustainability standards body along the lines of the International Accounting Standards Board (IASB). The paper was published by the Finance Working Group of the Business and Sustainable Development Commission (BSDC) (Aviva and Investec chiefs call for global sustainability standards body, 20 Jan, RI ($))
Investment consultants Towers Watson ‘is rolling out a new sustainability framework that seeks to link sustainability analysis with investment returns. One of the pillars of its sustainability analysis, the firm says, is its industry-level research to determine how business profit pools are likely to change and how private and public capital will be allocated.‘
(Towers Watson rolling out new framework linking sustainability analysis and asset class returns, 18 Jan, RI ($))
Low-carbon ETFs grow in popularity: 'some asset managers are urging investors to think more about climate change when building their portfolios and to reduce their exposure to companies that could be left behind in a shift to a lower-carbon economy.’ … 'Supporters of low-carbon ETFs also argue that demand will grow as financial markets get better at pricing climate change risk into their portfolios.’ (Call to curtail exposure to climate change, 5 Feb, FTfm)
The University of Cambridge has become embroiled in an internal battle after executives at the UK’s richest educational institution clashed with academics over proposals to divest from fossil fuels. Last month the university’s governing body, which is made up of senior academic and administrative staff from its 31 colleges, passed a motion to divest Cambridge’s £5.8bn endowment from fossil fuels. The decision came amid investor concern that fossil fuel companies will suffer large losses as governments around the world seek to tackle global warning. But in an unprecedented break from university tradition, Cambridge’s council, its executive arm that sets policy, has said it will not follow through with the governing body’s calls for divestment within the next 12 months. (Cambridge clashes with own academics over climate change, 5 Feb, FTfm)
ExxonMobil appoint climate scientist to board: 'On February 1st the firm appointed Susan Avery, an atmospheric scientist who formerly advised the UN, to its board. Some dismissed this as a publicity stunt. But it could be a bold move to shape its thinking on climate change.’ (The challenges for ExxonMobil’s new boss, 2 Feb, The Economist)
Dong pledge phase out coal within 6 years: 'Denmark’s Dong Energy has pledged to become one of the first major European power companies to stop burning coal within six years as it ratchets up its shift away from fossil fuels towards renewables. Dong is already the world’s biggest offshore wind farm company, building more than a quarter of the capacity installed globally. … Other European power companies are also scaling back on coal and expanding into renewables, including Italy’s Enel. It has said it will not build any more new coal plants and aims to be fully decarbonised by 2050.’ (Dong aims to phase out coal-fired power generation by 2023, 2 Feb, Financial Times)
Italy Central Bank, Environment Ministry mulls sustainable incentives: 'The Bank of Italy, the country’s central bank, has welcomed a new report (pdf) from the United Nations and Italian Ministry of Environment on developing sustainable finance, as it highlights the risk of climate change to the economy and financial system. It comes as Environment Minister Gian Luca Galletti has reportedly said that the Italian government is working on a so-called Green Act that will be a framework to develop a sustainable Italy, including creating incentives for a green economy.’ (Italian central bank welcomes government’s sustainability framework, 15 Feb, Responsible Investor ($))
Dutch central bank (DNB) to host meeting of The Platform for Sustainable Finance in April. The Platform 'chaired by DNB, is a new initiative in which different stakeholders in the Dutch financial sector work together on various topics related to climate change and sustainability.’ (How the Dutch central bank is putting its weight behind sustainable finance, 16 Jan, RI ($))
Chinese investment dominates renewable energy investment at home and abroad: 'China is cementing its global dominance of renewable energy and supporting technologies, aggressively investing in them both at home and around the globe, leaving countries including the US, UK and Australia at risk of missing the growing market’ writes The Guardian. 'Analysing Chinese foreign investments over US$1bn, Ieefa found 13 in 2016, worth a combined $32bn. That represented a 60% jump over similar investments in 2015. … The big foreign investments in 2016 included two in Australia, two in Germany and two in Brazil, as well as deals in Chile, Indonesia, Egypt, Pakistan and Vietnam.’ (China cementing global dominance of renewable energy and technology, 6 Jan, Guardian). The Business Standard also cover the report from IEEFA, noting that 'The US is world’s largest renewable energy investor with $87.8 billion investment in 2016, 31% of the global total. But this seems to be changing. Chinese companies dominate the global renewable energy market - the world’s largest wind energy company and five of the top six solar firms are Chinese. China’s foreign investment in renewables in 2016 included 11 deals that were each worth more than $1 billion, with a total value of $32 billion - a 60% increase on the previous year. China on January 5 announced it will invest $361 billion in renewable power by 2020 and has invested more than the US in renewable energy each year since 2012.'
Irish Parliament votes for fossil fuel divestment: 'The Irish Parliament passed the historic legislation in a 90 to 53 vote in favour of dropping coal, oil and gas investments from the €8bn (£6.8bn) Ireland Strategic Investment Fund, part of the Republic’s National Treasury Management Agency.’ (Ireland votes in favour of law to become world's first country to fully divest from fossil fuels, 27 Jan, The Independent) Also in Press Association, Climate Home, Pensions & Investments.
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