Shifting Gears

Stricter regulations have begun to add regarding sustainability disclosures, with standards cropping up from the US to the Far East, setting the basis for firms on how and when to report on their sustainability data.

With nations like Singapore and significant financial entities weighing the longer-term prospects of Sustainability against gains, some in the market are projecting a substantial shift in investor mindsets. In contrast, others believe it's just a thematic bubble being moved around...

As for me, I don't believe we're there quite yet.

Environmental

Morgan Stanley Backdown

The bank has begun to recognise that in a world that isn't aligned with the Paris Agreement, its clients and itself may be unable to meet net-zero-alignment targets - citing a misalignment of government policies, technological adoption and consumption habits.

The bank has introduced climate target ranges (1.5 - 1.7 degrees) for its financed emissions reduction goals to account for this.

There is quite a stark reality going through markets, especially those exposed to climate/sustainability regulation, that there is a severe lack of funding and that many sectors are far behind where they need to be to meet the Paris Agreement goals.

Morgan Stanley is the first to recognise this. However, it definitely won't be the last...

Governance

Canada Joins the Party

The government announced the first expansion of the incoming requirements for climate-related disclosures, including that of private companies. Additionally, there are plans to introduce compulsory climate-related reporting for large, federally incorporated companies.

Initially coming from standards linked towards ISSB, the government is bringing amendments to the Canada Business Corporations Act, requiring these new disclosures. It will launch and investigate a regulatory process to determine the substance of the disclosure requirements and the finalisation of the size of companies.

It should be noted that medium-sized businesses are not yet subject to this new requirement, although considerations are being made to massage this. Our friends in the U.S. are frequently looking to adopt a more Euro-centric style of non-financial reporting; however, with amendments and appeals being filed weekly, the tangibility of anything new will, at a minimum, take time to come to fruition.

Honk Kong Targeting Net Zero

The central banking institution launched its Sustainable Finance Action Agenda, setting out a series of finance sector-focused targets and planned actions to support green and sustainable financing needs to support the low-carbon transition.

Within these priorities outlined by the Hong Kong Market Authority, the new agenda includes directives for banks to reach net zero financed emissions by 2050 and to disclose climate risks and opportunities.

Investment

UK Government Pushing Carbon Capture

With the announcement of almost ￡22 billion over the next 25 years for developing two new carbon capture projects, which the government also purported, the funding is expected to attract ￡8 billion in private investment into the local communities and create 4,000 jobs.

Macquarie's ￡20bn Infrastructure Investment

The Asset Management firm has announced an investment encompassing energy transition-focused areas, like EV charging, renewable energy, and broader infrastructure. Through its own portfolio company, Roadchef, acquiring the firm in 2022, Macquarie has stated it would help the company accelerate the rollout of fast-charging infrastructure for EVs.

This includes a package of 5GW of new offshore wind developments, new solar panels and battery energy storage projects.

Similar to the UK government's injection, these infrastructure projects aim to assist the UK with its energy transition. There are also significant investments into revitalising and injections into the midlands.

Octopus Energy Joining

The British renewable energy firm has committed to constructing solar farms that account for around 80,000 homes across areas such as the Midlands and the North of the U.K. Farms, which are set to be operational between 2025 and 2026.

Saddled with subsidies and government support, the company will now support 16 onshore and three offshore wind farms, 138 solar farms and three battery projects.

Energy

EU Decarbonizing Through Pricing

The Commission announced that 85 decarbonisation technology-focused projects will receive 4.8 billion Euros in grants, using funds raised by its EU Emissions Trading Systems.

This system effectively puts a price on carbon emissions for GHG-intensive sectors. Its expected revenue generation is approximately 40 billion Euros from 2020-2030. It aims to create financial incentives for companies and public authorities to invest in advanced net zero and low carbon technologies.

UK Government Trying To Generate

With commentators combing through the UK's 2024 Autumn Budget, the government appears to continue bolstering the country-wide sustainable energy effort. The priorities here are infrastructure investment, green technologies and sustainability initiatives across the sector.

The IEA recently forecasted the need for a tripling global expenditure on clean energy, which the UK budget has aligned to. A boost of ￡120mn has been allocated to the Green Industries Growth Accelerator fund, aiming to support the development of supply chains for new technologies: offshore wind and carbon capture.

Additional commitments of ￡8.3 bn in market intervention for GB Energy will help to accelerate renewable infrastructure and energy security and reduce household bills. With the government's commitment to implementing a faster connection process and electrical gride by 2025, Labour has pushed forward with a sustainability drive.

Corporate

Google going Nuclear

The tech giant has agreed with nuclear technology company Kairos Power to deploy a small fleet of nuclear power projects to provide 500 MW of carbon-free energy, helping the organisation achieve its climate and clean energy goals.

With their data centre footprint emission levels rapidly growing and Google's ambitions to reach net zero across its operations and value chain - so far, the company has reported that its emissions have increased by 13% in 2023 and are up 48% since 2019 as growing data centre electricity consumption has outpaced the organisations' ability to bring carbon-free energy projects online.

Opinion

With a positive environmental push from the new UK government and mass infrastructure projects across the whole of the UK, there is a clear and tangible shift, at least nationwide, to address the growing sustainability infrastructure and energy-costing issues by pumping large amounts of public and private finance into the UK economy and regionally into the mid-lands. However, we have had large-scale promises from governments previously. We're not likely to see any tangible outcomes for at least 2 years, so we'll have to wait and see.

On the other side of the coin, the plethora of firms pulling back from their sustainability commitments and softening targets will only continue to rise. The current methods of operating more sustainably are currently too costly for organisations and individual households. This will continue to be expected until further subsidisation or economies of scale drive prices down.

Have a great month ahead