Cloudy With A... 'Chance' Of Rain

What was beginning as a slow, steady summer has quickly shifted into faster political developments, drama surrounding the running and governance of the Olympic Games, and extreme weather events, from droughts and wildfires across the E.U. to major flooding in Miami.

End-of-financial year results, political mandate shifts, the odd surprise election result, corporate pledges and fulfilments have been busying my news feeds against the backdrop of continued political upheaval.

While the world decides to take a break, I'll continue monitoring and sharing my thoughts and opinions on some of the biggest announcements in Sustainable Finance.

Finance

A study conducted by Morningstar Direct shows that the sheer number of funds labelled with ESG somewhere in their title or description has plummeted in recent years.

With the current politically challenging climate in the U.S. and a severe crackdown on greenwashing in the E.U., the attractiveness of the 'ESG label' is shifting.

Additionally, on top of this, across the U.S., funds with ESG goals or targets are falling out of favour. During the first quarter of this year, investors withdrew a record $8.8 billion from these funds, marking approximately the sixth consecutive quarter of outflows.

Global Sustainable Fund Flows: Q1 2024

Environmental

Peak China

China's latest government data release presents a gloomy outlook for the economy. However, it shows a sharp drop in the use of coal to generate electricity for the nation alongside continued downtrends in fossil fuels. The notion of peak oil or peak-fossil fuels continually seems to be bandied around; however, in this instance, with President Xi Jingping's mandate to shift energy to more sustainable alternatives, this could be the case for the nation responsible for almost a 3rd of global emissions in 2022.

Governance

Oh, Canada!

The Canadian government has passed into effect a new series of rules into law to tackle greenwashing or unsubstantiated claims about the environmental benefits of their business activities.

Under the new law's 'Deceptive Marketing Practises' component, it is now prohibited to make representations to the public about a product's environmental impact without adequate and proper testing. The law states explicitly that the burden of proof lies on the person/persons/company making the representation.

The Act includes significant penalties for breaching these new provisions, ranging from $10 million to $15 million or 3x the value of the concept or 3% of the company's annual revenue.

UK Flying Clean.. well, 2% Clean

The newly appointed Secretary of State for Transport, Louise Haigh, announced to the UK Parliament that the new Labour government intends to move forward with its SAF mandate. This mandate requires the introduction of SAF in the UK's jet fuel mix, starting at 2% next year and building to 22% by 2040.

Since the number of SAF providers is increasing and the methodology is constantly being changed and developed, following a specific mandate or set of targets is something we will have to wait and see from the new UK government.

Energy

Renewable Energy Ramp

The IEA's latest report reveals a significant trend: the world's demand for electricity is accelerating at a remarkable pace. This acceleration is primarily propelled by economic growth, global heatwaves, and the rapid adoption of electricity-dependent technologies, particularly EVs, which are significantly contributing to the surge.

The global electricity demand is currently projected to surge by around 4% by the end of 2024, a significant increase from 2.5% last year. This represents the highest annual growth since 2007, signalling potential challenges and opportunities for the energy industry.

Additionally, renewable electricity sources are set to expand rapidly this year and next. In 2025, the amount of electricity generated by renewables globally is projected to eclipse the amount generated by coal for the first time.

Electricity Mid-Year Update - IEA

Corporate

Amazon.. Ahead Of Schedule

A few weeks ago, the delivery giant announced it had achieved its goal of powering its global operations with 100% renewable energy, a commitment it's achieved seven years ahead of target - that's one heck of a fast delivery.

With billions of dollars into clean energy development, Amazon has become the largest corporate purchaser of renewable energy globally for the last 4 years.

Currently, Amazon has invested in over 240 solar and wind farms, 10 battery storage projects, 6 offshore wind projects, and nearly 300 onsite solar arrays.

Opinion

Whilst we have aggressive posturing, campaigning, and political badmouthing from new governments overriding current economic and societal standards, the pathway to achieving a more sustainable and circular form of operating globally seems to be changing in its achievability almost bi-monthly.

The carbon credits market was viewed a short while ago as a major negative factor for investors, financial institutions, and the broader marketplace; now, the most recognisable sustainable target-setting institution has said they are a factor that must be included in the broader transition, resulting in a major change in management at the highest level.

Additionally, while funds move quickly away from ESG labels and targeted financial products, companies such as Amazon are setting a fast pace in shifting away from relying on fossil fuels, and investors are loving it, seeing price bumps correlated with the news release.

Over my years of experience, I have come to believe that the world and the broader ecosphere of investors, political beliefs, and just the shared marketplace do desire to transition towards a more circular, sustainable, and safe mode of operation - so long as it doesn't compromise what already exists.

Financing it.... that's another question...

Have a great month ahead.