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Sustainable Finance Community Update

Working towards a sustainable future


An IFoA Sustainability Board initiative. Follow us on LinkedIn and Twitter for further updates and insights, and subscribe to the newsletter here.
 
13th August 2021
This week, the IPCC delivered its starkest warning yet on climate change with the release of its sixth assessment report (see news and WWAR). Photo by NOAA on Unsplash.
In the news
Five Key Takeaways From the Latest IPCC Report on Climate Change
 
This week, the United Nations Intergovernmental Panel on Climate Change delivered its latest comprehensive report on the state of global climate science. The report’s 200-plus authors distilled 14,000 individual studies to produce the release.
 
Bloomberg has produced five key takeaways from the report:
 
1. The last decade was hotter than any period in 125,000 years: All the greenhouse gases have elevated the global average temperature by about 1.1° Celsius above the late 19th century average.
 
2. Scientists can now link specific weather events to human-made climate change: This hasn’t always been the case. A recently as 20 years ago, for instance, it was virtually impossible to attribute any particular storm or temperature spike to the warming world.
 
3. Scientists have narrowed the estimated range for how temperatures respond to greenhouse-gas emissions: The Earth’s response to a theoretical doubling of preindustrial CO2 levels is now thought to be between 2.5°C to 4°C - a much smaller range than 1.5°C to 4.5°C in previous IPCC reports.  These findings rule out the possibility that unrestricted emissions will have only a mild effect on global temperatures.
 
4. The Earth rewards good behaviour: almost as soon as emissions cease, heating will cease and temperatures will stabilise in a couple of decades. But some effects - such as sea-level rise - will remain irreversible for centuries.
 
5. The IPCC’s volunteer scientists build consensus with all UN governments before releasing this report: Unanimous agreement among the nations of the world, who all must affirm that the findings are summarised accurately, is a very powerful tool.
 

Read the article here (BNN Bloomberg).
ADB, Citi, HSBC, Prudential hatch plan for Asian coal-fired closures

Financial firms including Prudential, Citi, HSBC and BlackRock are devising plans to speed the closure of Asia's coal-fired power plants in order to lower the biggest source of carbon emissions. The group plans to create public-private partnerships to buy out the plants and wind them down within 15 years, far sooner than their usual life, giving workers time to retire or find new jobs and allowing countries to shift to renewable energy sources.
 
The proposal is being developed by the Asian Development Bank (ADB) with a mechanism that entails raising low cost, blended finance to be used as a carbon reduction facility, while a separate facility will be used to fund renewable incentives.  The group aim to have a model ready for COP26 in November.
 
Read the article here (Reuters).
Plans of four G20 states are threat to global climate pledge, warn scientists

A key group of leading G20 nations is committed to climate targets that would lead to disastrous global warming, scientists have warned. They say China, Russia, Brazil and Australia all have energy policies associated with 5°C rises in atmospheric temperatures, a heating hike that would bring devastation to much of the planet.
 
The analysis, by the peer-reviewed group Paris Equity Check, raises serious worries about the prospects of key climate agreements being achieved at the COP26 summit in Glasgow in three months. The conference ‑ rated as one of the most important climate summits ever staged ‑ will attempt to hammer out policies to hold global heating to 1.5C by agreeing on a global policy for ending net emissions of greenhouse gases by 2050.
 
Read the article here (The Guardian).
What Is The Role Of Hydrogen In Biden’s Infrastructure Plan?

Clean energy independence is among the most critical components of a comprehensive US infrastructure plan, but it’s been a talking point for both parties for decades. President Joe Biden’s American Jobs Plan, announced on March 31, highlights hydrogen as part of the plan’s “climate-focused research” and “climate R&D priorities.”
 
While talks between American politicians drag on, China has made significant progress. It has included hydrogen as one of its “six industries of the future” in its 14th Five-Year Plan (2021-2025), indicating that the country will invest significantly in hydrogen innovation and development. It is estimated that the country’s hydrogen demand will account for at least 5% of China's energy system by 2030.  A report by the Hydrogen Council says that "over 30 countries have released hydrogen roadmaps" and that “no less than 228 large-scale projects have been announced along the value chain, with 85% located in Europe, Asia and Australia.” Without the passage of comprehensive legislation, progress on hydrogen will likely hit roadblocks at a time when America’s ability to compete in the emerging global hydrogen marketplace has never been more important.
 
Read the article here (Forbes).
US forest fires threaten carbon offsets as company-linked trees burn

Projects that plant or protect trees, which absorb carbon, are among the most popular forms of carbon offsets. In principle, each offset represents a tonne of carbon that has been permanently removed from the atmosphere or avoided and they are being purchased by companies to enable them to meet their net-zero goals. However, forests in the US that generate the carbon offsets bought by companies including BP and Microsoft are on fire as summer blazes rage in North America.
 
Offsetting schemes do allow for such risks using a 'buffer pool'. But, critics of the unregulated offsetting system have warned that buffer pools may be too small to compensate for the damage done by major fires which are becoming an increasing risk.
 
Read the article here (FT ‑ paywall).
We're reading
IPCC Sixth Assessment Report, Climate Change 2021

This week saw the publication of the first part of the much-anticipated Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report (AR6): Working Group 1’s findings on the physical science basis of climate change. Over 14,000 scientific publications were assessed, and through leveraging advances in climate science and modelling, a deeper understanding of past, present and future climate change has been uncovered.
 
The report presents undeniable evidence that human activity has warmed the atmosphere, ocean and land at a rate faster than has been seen in over 2,000 years. Extreme weather and climate events are taking place with increasing frequency and severity in all regions of the planet: this includes heatwaves, floods, droughts, and tropical cyclones. Further, the degree to which humans have induced these extremes has been amplified since the Fifth Assessment Report (AR5).
 
The earth will be between 1.4 and 4.4 degrees Celsius warmer than pre-industrial levels by the end of the 21st century, depending on the extent of greenhouse gas (GHG) emissions reductions. With global warming comes intensifying climate change impacts in the form of extreme weather, ecological droughts, and reductions in Arctic sea ice and snow cover. The global water cycle will both shift and intensify. Changes catalysed by GHG emissions are irreversible within centuries to millennia, and there is a narrow path to avoiding climate catastrophe which involves immediate, committed and material emissions reductions.
 
Working Groups 2 and 3 will publish their reports in early 2022, with a final synthesis report to follow next September. AR6 will give policymakers and global leaders the most up-to-date and accurate view of climate change ahead of the UN Climate Change Conference COP26 in Glasgow this November.
 

Read the report here (IPCC).

Tune in
Insights Podcast: What might we expect from COP26?

The CDC Group have published a new episode in their Insight podcast series focusing on the issue of climate change and in particular what our guests are thinking in the run up to COP26, which is taking place in November 2021. COP ‑ which stands for Conference of the Parties ‑ is a UN led global climate summit and this year’s meeting will be held in Glasgow with the UK taking presidency.
 
Guests for the episode are:
  • Dr Tara Shine, environmental scientist
  • Amal-Lee Amin, Director, Climate Change, at CDC Group
  • Hans Peter Lankes, Visiting Professor in Practice, Grantham Research Institute
  • John Elkington, author and entrepreneur
 
On demand here (CDC).
Opinion
Stakeholders incorporated: Can capitalism change if company charters stay the same?

Across the world, there is a proliferation of alternative corporate forms that require companies to balance shareholders’ financial interests with the interests of employees, customers and the environment. Known as "B Corps" or public benefit corporations (PBC) in America, "stakeholder governance models" were once the preserve of smaller, private organisations but are now being adopted by larger, publicly listed companies. Advocates argue that embedding stakeholder interests in a company’s articles of association attracts talent and business partners while preserving its mission for the long term.
 
But there are concerns about alternative structures: some investors are unfamiliar with them, they impose an additional reporting burden and uncertainty remains about how they affect directors’ fiduciary duties. The companies that have changed their charters have done so voluntarily, but there is now a debate about whether governments should mandate corporate structures that emphasise sustainable approaches.
 
Read the piece here (FT ‑ paywall).
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The weekly newsletter summarises information from different sources for the benefit of subscribers. While we take care to select articles, papers and opinions from reputable sources, we do not perform independent verification and hence these summaries should not be relied upon for any purpose. Further, the statements, opinions and conclusions that are summarised within the newsletter do not necessarily represent the views of the IFoA nor the newsletter authors and their employers.

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