The Sustainable Investor - our weekly summary of the key news stories, developments, and reports that are impacting investing in sustainability, the wider climate related transitions, and a greener/fairer?society. The important word in this sentence is investing - it’s perfectly possible to use our capital to support sustainability, and still earn a fair financial return.
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. There is a lot more detail, analysis and thinking in the longer version, which lives on Substack, so have a look and let us know what you think. You may have noticed we are moving around a bit on publication days. This week we are trying Friday afternoon, it's all part of the plan to see which days get the most readers.
This week's topics - could enhanced geothermal be a big thing; insurance as an enabler of climate adaptation; forest, land and agriculture emissions standards; Queensland bets big on pumped storage hydro; and Torres Islands case opens up new human rights legal thread
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This week’s blog has a bit of a long-term electricity storage angle. In our top story, we highlight research that suggests that using technology from the O&G industry could massively expand geothermal, for both electricity generation and for longer term storage, but it involves the fracking word. We then look at work suggesting that a good plan for insurers would be to work with their customers to reduce climate risk, rather than just putting premiums up. Next, we switch to looking at SBTi standards for forestry, agriculture and land management, before considering the implications of the recent plan for Queensland to use pumped storage hydro to back up renewables, as they look to switch out of thier currently coal-based electricity generation system. We finish with coverage of the Torres Islanders’ win in the legal case involving climate damage and their right to enjoy culture and family life, opening up yet another avenue for legal challenge on human rights.
- This week's top story
examines a possible solution to one of the big mid-term challenges around low carbon electricity generation. That challenge is storage. Li Ion batteries and flow batteries are making progress, but outside of pumped hydro, we really lack viable longer term storage options that can work at scale. One possible solution is enhanced geothermal. We all know that geothermal is a great source for electricity generation. But, and sadly this is a big but, to be cost effective the location needs three attributes to all be present. Obviously, we need hot rocks. Over 360 degrees F (182 degrees C) is best. And we also need permeable rocks and a fluid.?Lots of locations have hot rocks, but in the absence of the two other factors, the economics of base load geothermal seldom stack up. Until now. The analysis in this research indicates that by using rock fracturing technologies (creating the permeability) and careful mapping of the reservoir geology, not only can the number of locations where geothermal makes sense be increased, but it can also become a cheap energy storage “machine”. The not so good news. You and I know rock fracturing as fracking - the technology that is widely used in the US gas industry, but that has a bad press in many countries. It will be really interesting to see if fracking (we clearly need a rebranding) for geothermal produces the same objections as its use in oil and gas production. I hope not.
- Next up we revisit the topic of insurance
, it's been a lot on our minds recently. Why, because if financial institutions start factoring climate risk into their decisions this will inevitably increase the cost of capital for high emitters. And in some cases, mean projects cannot go ahead. The article focuses on the?role of insurance companies as investors?and on the insurance equivalence of divestment -?not underwriting environmentally unfriendly activities such as coal mining
, the Adani Carmichael mine in north-eastern Australia being the highest profile.?On the flip side, the energy crisis precipitated by the Russian invasion of Ukraine has driven anti-ESG sentiment in certain quarters,?bringing into?conflict fiduciary duty with sustainability objectives. But it's not just about not insuring, the article argues that by being more proactive, insurance companies can encourage more positive behaviors and support climate change adaptation.
- We then flag the new Science Based targets initiative (SBTi) guidance
on land use intensive sectors such as forestry, agriculture etc. Agriculture, forestry and other land use represents about?22 percent of global GHG emissions
.?These have been “largely ignored to date” according to the co-lead of the SBTi FLAG project, Christa Anderson who is also a director at WWF. The FLAG industries are important as they can improve the emissions efficiency of activities as well as enhancing their carbon sink abilities (i.e. ability to sequester carbon). How land is used therefore is very important, this is a topic we are going to cover more over time.
- Then we shift back to electricity storage, covering the big announcement from the Queensland Government
to go big on pumped storage hydro. This is to back up their shift away from coal to renewables and as part of this they want to build two giant projects. The first, the Borumba scheme, to be completed by 2030, would deliver 2 GW of 24 hour storage, enough for 2 million homes (yes, I know it's an odd way to measure storage, but it's how they explain it to the wider public). The second (Pioneer-Burdekin) will be even bigger, at 5GW of 24 hour storage. And, to give the projects context, Queensland has around?two million households
. We like pumped storage hydro, but we accept its expensive. The cost of the giant Snowy Mountain scheme
, which includes a new 2,000MW power station to provide up to 350,000 megawatt-hours of pumped hydro energy storage capacity,?is now likely to exceed AUS$10 billion
. And it’s running late, very late.?But then the apparently much more popular alternative, nuclear, suffers from similar challenges, and you still have to add on the cost of disposing of the waste.
- We finish with coverage from our human rights specialist, Kristina Touzenis, of the Torres Islanders case against the Australian Government,
which was heard by the September 2022 session of the UN Human Rights Committee. They found that?Australia violated the rights of Torres Strait Islanders' to enjoy culture and family life.?We think this case, especially when taken in the context of other examples, is part of trend that could make the direct impact of human rights breaches on future value generation much more visible. Some of this could be via compensation, but perhaps more importantly, countries could be “forced” to take action against companies, either banning some operations altogether or at a minimum, imposing limitations on their operation. It is a landmark decision because the right to enjoy culture and family life has up until now not been used to hold entities accountable for environmental impact.?
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