May 13, 2022 - ESG and Climate News

1.5C is a Coin Flip

Headlines circulating this week provided a sobering update on the global warming forecast when the World Meteorological Organization (WMO) reported that there is a 50:50 chance we will overshoot the 1.5C warming threshold in the next four years. ?

The WMO’s study gathered data from forecast centers around the world, and concluded that our probability of exceeding 1.5C by 2026 has risen significantly to 50%. There’s also a 93% probability that the next five years will be the hottest on record. Now, it’s basically a coin flip on whether or not global temperatures will average 1.5C higher than pre-industrial levels over the next four years.?

This shocking news needs some context: Most readers will recognize the 1.5C threshold as the aspiration from the 2015 Paris Climate Accord which was ratified by all countries in the world. The actual goal of the Paris Accord is to limit global temperature rise to “well below 2.0C, preferably 1.5C”– and the thresholds are based on sustained temperature over a 20-30 year period.?

While this is an ominous sign, it's not a reason to stop fighting climate change. If anything, the message is to turn up the urgency – such as the announcement this week that the US will invest $2.5B in carbon capture technology.??

And no wonder…

This grim milestone comes as no surprise as fossil fuel companies are gaining record profits with the soaring price of oil and gas driven by the war in Ukraine. Is the industry investing their outsized profits in the transition toward a low carbon economy? Nope…most of the money is going into buying back shares of their own companies. “The oil and gas industry, in addition to trying to seize this moment for all the profits it can squeeze, is trying to lock in another generation of extraction emissions,” says Lukas Ross, a program manager at Friends Of The Earth.

The windfall has resulted in expansion of fossil fuel extraction equating to 192 billion barrels over the next seven years – the equivalent of a decade of China’s current emissions. These expansions have been called “carbon bombs” – one of largest is a new boom in US fracking that could unleash 140 billion tons of carbon dioxide.

The torrent of oil and gas money resulted in a stunning policy reversal at the world’s largest asset manager, BlackRock, which warned shareholders this week that they will not be supporting many shareholders' resolutions on climate change. Their reasoning? The war in Ukraine has changed the playing field for oil and gas investment. Perhaps in an effort to offset their reversal on the ‘E’ in ESG, BlackRock increased investment in the ‘S’ by contributing $800 million to their Impact Opportunities Fund. The fund invests in businesses and projects owned, led by, or serving people of color.

The Bright Side

With less than ideal climate forecasts, here’s a dose of positivity: renewable energy is set to break growth records again in 2022 and the EU just announced a $205 billion plan to wean itself off Russian oil and gas.

The blueprint to a decarbonized world was covered well by an article in Nature, which concluded that, if countries achieve their climate action pledges, global average temperature rise will stay below 2.0C. There is more good news on the corporate side as carbon-intensive United Airlines became the first US carrier to purchase sustainable aviation fuel.?

While short-term profits may be up, oil and gas shareholders continue to demand stronger carbon reduction pledges. I covered climate activism during the annual general meetings of the banks financing the fossil fuel industry in this article.?

Keeping 2.0C Alive

Staying below 2.0C requires serious planning and follow through. As the slew of net-zero plans from countries and companies mounts, so does the skepticism about their veracity.? UN Secretary General Antonio Guterres said such claims are "a litany of broken climate promises."?

To help break this cycle, the UK launched the Transition Plan Taskforce (TPT) to develop a ‘gold standard’ for transition plans. In partnership with Glasgow Financial Alliance for Net Zero (GFANZ) and the International Sustainability Standards Board (ISSB), the new task force aims to add rigor to the transition plans required from UK financial institutions by 2023.

Following suit, this week former Bank of England governor Mark Carney said that GFANZ (which he co-chairs) will launch a number of initiatives ahead of COP27 this November, to speed up the decarbonisation of the global economy - including a net zero transition plan framework for financial institutions, which would “set out the components of a credible transition plan that supports real-world emissions reductions, with appropriate transparency and accountability.”?

On a similar note, the Financial Stability Board (FSB) published a report to help policy makers monitor, manage and mitigate system-wide financial risks arising from climate change.?The FSB has a great track record promoting consistent approaches across jurisdictions with the widely adopted Framework created by their Task Force on Financial Related Climate Disclosures (TCFD).?

The Waiting Game

Due to overwhelming interest, the Securities and Exchange Commission (SEC) announced a 30 day extension of the comment period on their proposed climate rule – the new deadline is June 17, 2022. Check out this week’s Full Disclosure with Kristina Wyatt where she discusses how to best engage with the SEC with your comments.??

We are reposting the table with the three major ESG policy consultations from last week’s edition with the new SEC deadline.

The Cost of Carbon Disclosure

As new climate mandates emerge from all corners of the world, one of the most hotly debated topics is the cost of climate disclosure. This week Ceres, Persefoni and ERM announced a new study on the current cost of climate reporting. The study concluded that average costs per company were very close to the ~$500K estimated by the SEC. Compliance costs typically fall after promulgation of a new rule due to standardization and new technologies.???

Notable news of the week:

• As Russia’s war in Ukraine continues,? G7 leaders have committed to phasing out the use of Russian oil, gas, and coal. This news comes amidst conversations of the conflict possibly accelerating the clean energy transition.
• The band Coldplay was called out for being “useful idiots for greenwashing” after announcing their partnership with Neste, a Finnish oil company, to ‘halve the emissions that come from their touring.’ According to the claims, this oil company is linked to major deforestation in the pursuit of palm oil.?
• Fast Company has announced this year’s finalists for their World Changing Ideas Awards for companies working to address the climate crisis. Congratulations to all that were recognized, including my own employer – Persefoni, with an honorable mention.
• Check out the state of play of solar and wind power broken down by country with this mapped infographic from Elements. For the first time, wind and solar made up a little over a tenth of global electricity supply.?
• ERM and Climate International have released a report outlining a standard for private equity firms that are accounting and reporting on their greenhouse gas emissions. This effort is supported by the UN PRI and endorsed by CDP and Ceres.?

Notable Podcasts:

• In the most recent Planet A podcast, hosted by Danish Minister of Climate, Energy, and Utilities Dan J?rgensen, Dan explored what ice can tell us about climate change with esteemed glaciologist and expert on the Greenland ice shelf Jason Box.
• Ted Talks Daily featured Nonette Royo this past week as she discussed why Indigenous forest guardianship is crucial to climate action. Royo, a human rights lawyer, leads initiatives to protect Indigenous communities as they seek to secure and defend 50 million hectares of forests over the next five years.?
• In this week's BBC Radio 4’s Costing the Earth podcast, presenter Tom Heap travels around Britain asking experts how they would advise people to make their personal finances work harder against climate change.

Notable Events

• This year’s Climate Leadership Conference is taking place in Washington, D.C. on May 24-26. The conference convenes leaders from business, government, academia, and the non-profit community to connect on energy and climate opportunities – you can register here.
• I will deliver the keynote address for the Institute for Supply Management (ISM) on May 23, 2022 – you can register here. Here is a preview of the session with ISM’s CEO Tom Derry on LinkedIn Live.
• I will participate in a few panels and events at the World Economic Forum annual meeting to be held in Davos, Switzerland from May 22-26 - send a DM to coordinate on Davos events.??