Take Five: Greenhushing is Over
A selection of the major stories impacting ESG investors, in five easy pieces.
Global leaders were not short of information on which to base future climate action this week.
Mine’s a treble – The effectiveness of New York Climate Week in eliciting tougher policy commitments is not yet scientifically proven, but it certainly provides plenty of evidence of the need for greater ambition on the part of policymakers. The COP28 pledge to triple renewable energy investment by 2030 is off track, despite reaching record levels in 2023, according to a BloombergNEF report tactically published in time to prick the conscience of global leaders as they pass through the 79th UN General Assembly (UNGA). More than 10 terrawatts of renewable energy capacity are now expected to be operational by the end of the decade, but annual investments need to rise from US$623 billion in 2023 to an annual average of US$1 trillion – supported by faster government action to remove barriers to expansion, incentivise financing and build out grids. A report from the International Energy Agency (IEA) estimated 25 million kilometres of electricity grids will need to be added or upgraded – not to mention the 15-fold increase in battery storage capacity – to reach the 2030 target. But the effort would be worth it: meeting COP28 commitments would cut global emissions by 10 billion tonnes, taking us two thirds of the way to a Paris-aligned energy system, according to IEA Executive Director Fatih Birol. Confirmation of demand for renewables was supplied by a coalition of global corporates (who received a surprise pat on the back for their efforts to date), while the World Resources Institute said doubling energy efficiency would need to be “as much a political priority” as tripling renewables for the energy transition to succeed. Meanwhile, campaign group Oil Change International called for policymakers to go further at COP29, committing to a new climate finance target of at least US$1 trillion annually in grants and grant-equivalent finance, to support fossil-fuel phase out globally – with supporting mitigation and adaptation in the Global South. Other advice to policymakers was available. For one week in the year at least, greenhushing was over.
Arrested development – Taking time off from being harangued for the inadequacy of their climate policies, world leaders and their UNGA entourages found time to sign off on the Pact for the Future – a sprawling agreement billed as “a new beginning in multilateralism”, or at least – in the words of UN Secretary-General Antonio Guterres – an opportunity to “bring it back from the brink”. On sustainable development, climate and financing for development, much ink was spilled on reform and repurposing of the international financial architecture, covering democratisation, debt sustainability, use of metrics beyond GDP to capture “human and planetary wellbeing”, and increased climate finance. Sensing the mood of change, multilateral development banks (MDBs) pointed out that they doubled their climate finance supply between 2019 and 2023 to US$125 billion – achieving much the same increase in the volume of private finance mobilised since 2022. But a new academic study said they were still underperforming their potential. In particular, King’s Business School made the case for MDBs raising their present 11% ratio for private sector finance mobilisation and developing their risk appetite without damaging their credit ratings. And while research from system change experts Systemiq credited the International Monetary Fund with improved performance on climate finance, it had a long way to go on integrating natural capital into its debt sustainability assessments and frameworks. “It must recognise that investment in natural capital is a critical adaptation strategy – particularly for nature-rich emerging markets and developing economies that can substitute nature-based solutions for more costly physical infrastructure”, the report noted.
Recycled tactics – ExxonMobil’s role in hiding early evidence of human-induced climate change for commercial reasons is well known. On Monday, the US state of California accused the oil and gas giant of playing a similar part in the global scourge of plastic pollution. Following a two-year investigation into fossil fuel and petrochemical producers, Attorney-General Rob Bonta said the firm had sought to convince consumers that recycling could solve the pollution crisis “when they clearly knew this wasn’t possible”. ExxonMobil retorted that California’s public servants were at fault, failing to work them to “come up with more effective solutions”. Nevertheless, the firm now stands accused of violating state nuisance, natural resources, water pollution, false advertisement and unfair competition laws. Like other fossil fuel firms, ExxonMobil had hoped demand from the plastics sector would offset falling business from power utilities as they switched to renewables. But that hope took a further knock this week when ministers from 66 governments declared their commitment to achieving an “ambitious and effective treaty” at the upcoming fifth session of the negotiations in Busan, South Korea, in November.
Natural sciences – The task of establishing science-based net zero pathways for corporates still faces many challenges, but a major step was taken this week toward ensuring firms can base their future relationship with nature on science. The Science Based Targets Network (SBTN) published outcomes from its year-long corporate pilot programme, aimed at providing companies with a “clear and credible pathway” for taking action to reset their impacts and dependencies on nature. The SBTN acknowledged there were many steps ahead, while in a separate report, the World Wide Fund for Nature (WWF) highlighted lessons to be learned from the SBTN’s pilot group of companies using its five-step methodological framework. One of the key challenges identified by the WWF may sound familiar to sustainable investment teams: “A large amount of data needs to be mobilised, particularly upstream in the supply chains. In some cases, companies do not have sufficiently detailed traceability to access these data.” Fortunately, ESG Investor has a suggestion to tackle that problem.
And finally – It’s been a long time coming, but the UK is on the brink of joining the list of countries that have eliminated coal from their energy mix. As of next Monday, the iconic Ratcliffe-on-Soar power station in Nottinghamshire will close, meaning electricity generation in the UK will be coal-free from October. A recent High Court decision, which blocked the development of a deep mine at Whitehaven in Cumbria, should keep it that way. The journey may be over in the UK, but this is far from being the case globally, as noted this week in a call from the Powering Past Coal Alliance for nationally determined contributions – due in early 2025 – to include phase-out plans that will consign coal to history.
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