Climate Transition Catalysts
In a significant boost to renewable energy, the world’s largest coal mining firm – Coal India Limited (CIL) has announced plans to pursue solar energy and continue closing smaller mines. CIL’s plans include investment in a 3,000 MW solar energy project, in a joint venture with state-run NLC India.
Wind power is also gaining momentum. Scottish windfarm – Hywind Scotland, which is the world’s first floating windfarm has broken the world record for maximum output. In further positive news, China installed windfarms totalling 100GW generating capacity in 2020, a rise of 60% compared to 2019, despite the slowdown from the Covid-19 pandemic.
Changing track to corporate sustainability goals, Coles has pledged to source all its electricity from renewable sources across its brands by 2025, following Woolworths Australia and Aldi who’ve made similar pledges.
In addition, the trend for linking executive compensation to sustainability goals shows no sign of slowing. Total SE recently announced it will partly tie executive bonuses to the company’s success in reducing GHG emissions of its customers. Mastercard has also linked incentive compensation for senior executives to the company’s sustainability goals which include carbon neutrality, financial inclusion and gender pay parity.
DHL’s latest Sustainability Roadmap follow suit by tying leadership compensation to sustainability performance. Their roadmap also includes investment commitments of €7 billion to reduce CO2 emissions, boosting alternative aviation fuels and expanding its zero-emission electric vehicle fleet.
Despite the good news, recently published research findings indicate that rapid global heating has significantly harmed agricultural yield. Productivity has decreased by 21% since 1961 when compared with a scenario without human-induced heating, highlighting the significant food security risks posed by the climate crisis. More positively, research findings from the agricultural sector indicated that including seaweed into cattle feed, could cut cattle methane emissions by 82%.
Shifting to transportation, new research has highlighted that choosing a bike over a car can reduce an average citizen’s transport emissions by 67% while Google’s latest innovation is expected to decrease transportation emissions. Google Maps will dispay environmentally friendly routes as the default option and allow users to compare estimated emissions from alternative routes.
On the financial front, a new report from London’s Imperial College Business School has highlighted that the green bond boom is leaving out the countries most vulnerable to climate change. The report indicated that there is simply too great an emphasis on developed-market standards to satisfactorily define emerging-market bond rules.
Finally, Wells Fargo has announced plans to deploy $500 billion in sustainable financing by 2030 and has set a goal of net zero GHG emissions by 2050, including Scope 3 emissions.
The EV market gains further momentum, as automobile manufacturer Ford outlines ambitious plans. The company will double its spending on electric vehicles to achieve a target of $22 billion by 2025. As more car manufacturers ramp up EV production, charging infrastructure must be scaled up at a faster pace too. Policy Exchange reported that the U.K. needs to install electric car chargers five times faster to meet its goal of banning the sale of new gasoline and diesel cars from 2030.
That’s not the only news this month from the automobile industry; Michelin has announced a plan to make all tyres entirely from renewable, recycled or sustainable materials by 2050.
In a major boost to sustainability in shipping, Maersk has taken a significant step towards decarbonisation by bidding farewell to new, fossil-fuel only ships.
Changing track to green energy, Infrastructure Australia has, for the first time, listed renewable energy zones and dispatchable energy storage as one of Australia’s high priority initiatives, replacing ageing thermal generators.
Shell’s recent announcement to get to net zero by 2050 has been cast into shadow by its announced plans to grow its gas business by more than 20% in the next few years.
With the Texas power outage crisis dominating news this month, renewable energy was blamed by certain factions for causing the greatest forced blackout in US history, despite the fact that fossil fuels (by far the leading source of electricity in the state) failed twice as much as renewable energy during the outage crisis.
The urgent need to transition to renewable energy sources is further emphasised by new research, which notes that fossil fuels caused 8.7 million deaths globally in 2018, with a third of these deaths in Eastern Asia.
There’s some positive news, however, from the financial sector with Santander pledging to support the Paris agreement goals and get to net zero carbon emissions by 2050. Furthermore, they have promised to halt provision of services to power generation clients with more than 10% revenues from thermal coal by 2030.
Close to home, Goldman Sachs has also announced plans to deploy $750 billion in sustainable financing, investing and advisory by 2030 and ramp up issuance of environmental, social, and governance bonds
Finally, there’s evidence that public opinion is swinging firmly behind policy measures to accelerate the transition to a low carbon economy with a new poll which suggests that a carbon tax would be popular with UK voters and could raise £27 billion a year by 2030.
The sustainable transport revolutions shows no sign of slowing down. Electric cars now have a record 54% market share in Norway and, in a further boost to EV manufacturers, electric car batteries with just five-minute charging times have been produced in a factory for the first time in history. In the US, GM has also announced that it will only sell zero-emission vehicles by 2035. Their goal? Carbon neutrality by 2040.
The aviation industry is moving in a similar direction. For example Boeing Co has committed to 100% sustainable aviation fuel by 2030.
Despite these impressive transition efforts, much remains to be done. The new UN Adaptation report 2020 warns that countries are adapting too slowly to the impacts of climate breakdown. The World Economic Forum’s global risks report notes that rising income inequalities triggered by the Covid-19 pandemic, has made it even more challenging to tackle the climate crisis.
On a positive note, Joe Biden is putting the US back in the driving seat of climate change leadership. An executive action to reinstate the US to the Paris climate agreement, was taken hours after being sworn in as president and the Biden administration has already rolled out a range of executive orders to tackle the climate crisis.
A new report by Greenpeace highlights the IPCC’s estimation that between 500 and 3,600 million metric tons of CO₂ could be removed annually through planting new forests by 2050. Alongside afforestation projects, carbon capture has been gaining traction as well. Qatar Petroleum has announced that it will set up facilities capable of capturing and storing 7 million tons of carbon dioxide per year by 2030. It also plans to reduce greenhouse gas emissions from its LNG plants by 25% by 2030. Carbon capture technologies remain controversial but engineers and geologists have insisted that it is vital in our approach to fulfilling climate goals.
Elsewhere, amidst increasing pressure from activist investors, Exxon has disclosed full scope of fuel emissions for the first time in history. This is highly significant and very welcome development, as Scope 3 emission make up more than 80% of most oil companies’ total emissions.
Finally, in the financial sector, sustainable debt hit a new record in 2020, with issuance at $732 billion, despite the economic challenges posed by the Covid-19 pandemic.
A related piece of good news was contained in a recent report from BloombergNEF which highlighted that investments in the transition to a low-carbon economy marked a 9% increase over 2019 with the world spending a record $501.3 billion in 2020 on renewable power, EVs and other clean technologies.
As we approach the end of the year, national commitments and sustainability pledges show no sign of slowing down; Boris Johnson recently promised to cut UK greenhouse gas emissions further and faster than other major economies over the next decade. The new target is set at a 68% reduction in annual carbon emissions compared with 1990 levels, a significant increase on the current target of 57%.
Additionally, the UK. has also promised to end subsidies for fossil fuel projects abroad. The measure includes ending financing, aid and trade promotion for new overseas projects pertaining to extracting or using crude oil, natural gas and coal.
The UK’s aim to achieve net zero emissions by 2050 will require a significant lifestyle transformation from consumers. The government’s climate advisers have pointed out that citizens will need to reduce their meat and dairy consumption by a fifth in just nine years to stay on track to meet the 2050 goal. Additionally, a range of measures on residential energy efficiency and personal transportation would be required.
With the Biden administration set to take over next month, ESG investing is projected to boom. A range of Trump-enforced environmental rollbacks are predicted to be reversed along with introduction of further responsible investing guidelines.
In further ESG news, Switzerland is set to adopt new ESG reporting rules and obligations, most likely by 2022.
A range of corporate sustainability plans and pledges have also been announced, keeping up the momentum that’s been building over the last several months.
Aviva Investors have announced plans to provide £1 billion of sustainability-linked loans for the real estate sector by 2025.
Desjardins Group has pledged to sharply cut coal investments and will not provide investments and loans for businesses that operate or develop coal plants and infrastructure.
In another important development, Volkswagen has announced its plans to link top executives’ bonuses to ESG targets, in a bid to boost their sustainability credentials.
In a significant boost to marine sustainability, 14 countries, jointly responsible for 40% of the world’s coastlines have pledged to reduce ocean pollution, end subsidies contributing to overfishing and restore diminishing fish populations.
Shifting to agricultural sustainability, the Scottish government has announced plans to invest £18 million to improve land sustainability and livestock management, through GHG-reduction equipment grants as part of a pilot scheme.
As for the sustainability related lifestyle changes alluded to earlier, a recent study highlighted that the cost of climate change caused by organic meat production is just as high as that of conventionally farmed meat. This discovery could have significant implications for agricultural policies and support a shift to the kind of sustainable, plant-based diets that are already becoming popular.
Disconcertingly, projections from the U.K. Met Office have indicated that 2021 is set to be among the hottest on record. The above plans and pledges thus, will prove to be crucial in addressing the climate crisis.