Top ESG Markers - October 2020

I was delighted with the feedback and comments on my first ESG Markers blog! September 2020 was a big month in pivotal announcements and milestones in Environment, Social and Governance (ESG), so the challenge was laid out to see what October had in store. Unfortunately, another record was broken in September 2020, being declared as the hottest month yet globally!

October has also been a huge month, from the stories below – everything from solar power being declared the new electricity fuel leader by the International Energy Agency to BlackRock voting on closing coal fired power plants earlier than planned in Australia.

Again, if I happen to miss some key markers in a particular month. Just drop me some comments, and I will pick them up next month! 

*‘ESG Markers’ – like biomarkers that tell us how healthy our body may be, ESG Markers showing us the big movements in the field of ESG in Oceania and globally. 

So, here are my Top 10 for October 2020, again not in any particular order.

Ice melts accelerate

Latest research is indicating that Greenland’s ice is melting faster than anytime in the past 12,000 years (that, to put it in perspective, is pre-modern humans!), raising sea levels and changing ocean currents. Sea levels may rise by up to 0.1m by the end of the century with the Greenland melt alone. Artic sea ice melt is also gathering pace with this year’s summer sea ice minimum being the second lowest in 40 years. 

Satellite records between 1979 and 2019 show sea ice in the Arctic summer declined at about 13% per decade, and this year reached its lowest July levels on record, suggesting an ice free Arctic by 2050!

Every UK home to be powered by wind energy within a decade

UK is aiming to build back greener from Covid-19. A 160m Euro budget was announced this month to upgrade ports and facilities for building turbines, creating 2,000 new jobs and supporting 60,000 more, raising its target for offshore wind power capacity by 2030 from 30 gigawatts to 40 gigawatts. Mr Johnson's speech comes after he made a pledge at a UN biodiversity summit in New York to protect 30% of UK land for nature as a "boost for biodiversity". This announcement was part of a 10 point plan for a green industrial revolution.

Green hydrogen, the new kid on the block

Green hydrogen is likely to further shake up the future of energy production, use and export in Australia.   In a paper published this month, the authors show how different factors affect the cost of producing green hydrogen by electrolysis using a dedicated solar system and using no additional power from the grid, allowing for green hydrogen to be produced in remote locations not necessarily close to the grid. Researchers from UNSW Sydney have simulated several models which show how close to parity green hydrogen is compared to fossil fuels. Indeed, Germany has recently identified as a potential export partner for green hydrogen, to meet their net zero goals.

Ireland mandates carbon neutrality by 2050

The Climate Action Bill announced this month means that Ireland is now legally bound to achieve carbon neutrality by 2050. This requires an average of greenhouse gas reduction of 7% per year, and increases the transition risk for industries in Ireland and those trading with Ireland with the carbon price in Ireland estimated to be around $125/tonne by 2030.

Earth may temporarily hit 1.5 degrees in 2024!

A recent report titled United in Science by the World Meteorological Organisation warns that the risk of Earth passing 1.5 degrees by 2024 is growing casting serious doubt on being able to stabilise temperature rise to 1.5 degrees by 2050, the aim of the Paris Agreement. 

The global average surface temperature from 2016 to 2020 will be among the warmest of any equivalent period on record, and about 0.24℃ warmer than the previous five years. Sea levels rose 4.8 millimetres annually over the past five years, compared to 4.1 millimetres annually for the five years before that.

Another recent report by the United Nations suggests climate change is largely responsible for a doubling in the number of natural disasters since 2000, with the Earth becoming uninhabitable for millions of humans. Asia was the worst-hit continent and China the worst-affected country, followed by the US. Overall, more than 4 billion people were affected. For every one degree rise in temperature, over 1 billion peoples’ liveability will be severely affected with their lands becoming uninhabitable.

Climate League 2030 launched

Sixteen institutional investors have founded and launched a new Climate League that aims to catalyse Australia to cut 2030 emissions to 45% below 2005 levels. Its members include the Queensland Investment Corporation, the Victorian Funds Management Corporation, Aware Super, Cbus, IFM Investors, Aberdeen Standard Investments, Australian Super, Australian Ethical, HESTA, Impact Investment Group, Lendlease Funds Management, Local Government Super, New Forests, Pendal Group, Pollination and UniSuper – in total managing assets worth more than $850 billion. Interestingly, while the Federal Govt has resisted setting short term targets (other than the Paris commitment), this initiative will start to move the private sector towards a 2030 target.

European Climate Law Progress

The plenary session of the European Parliament has confirmed this week that it is willing to support an ambitious 60% emission reduction target for 2030 as part of the European Climate Law. The decision was made by a narrow margin in European Parliament and negotiations with the Member States will now take place.

This would cause the most emissions-intensive fuel – coal – increasingly uncompetitive, as the Commission expects the renewables share in EU electricity production to at least double from today’s levels of 32 per cent to around 65 per cent or more, and coal to drop to 2% from 14.6% currently.

Increased Storage Plans for ACT & NSW

This week, ACT Labor proposed a network of large batteries in the territory that will have a total capacity of 250 megawatts, which will be 60% larger than the world's current largest battery, which is in South Australia, and may well be amongst largest by the time it's completed by 2025. A $100 million budget has been proposed.

Over in NSW, the proposed 600 MW Oven Mountain pumped hydro project is being fast tracked by the state government. The $1 bn project, which is part of the New England renewable energy zone will see up to 8 GW of new renewables capacity added to the region. One question remains though – which is the timeline of 8 years versus how much cheaper largescale batteries may be by then.

BlackRock flexes its muscles on climate change in Australian AGMs

BlackRock voted in favour of a shareholder resolution filed by the Australian Centre for Corporate Responsibility (ACCR) to bring forward the closures of its Loy Yang A power plant in Victoria and its Bayswater station in New South Wales with a strategy to limit global warming to 1.5 degrees. AGL is Australia's largest energy generator and heaviest carbon emitter, accounting for 8 per cent of national emissions. The motion only gained 20.4 percent support, but shows that large global institutional investors are starting to put their shoulder to the wheel on moving the dial when it comes to climate change and climate risk.

Solar declared electricity leader & coal in structural decline

The International Energy Agency’s (IEA) annual energy outlook report has declared solar energy the new leader in electricity fuel. The report found that solar energy is already cheaper than power generated by new coal and gas developments in most countries and is providing, "some of the lowest-cost electricity ever seen". All of IEA’s scenarios found that thermal coal is now in structural decline. Interestingly, Australian Governments have relied on previous forecasts by the IEA (Australia is one of IEA’s most active members) to sight that thermal coal use will continue to grow. The IEA commented that solar energy is on track to set new records for deployment every year after 2022. The report also suggests that peak oil will hit in the coming decade, and while gas demand will continue to grow for now, it will start declining by 2040. Some commentators have noted that IEA’s predictions for the growth in solar are still conservative, and the deployment rates will be even higher, especially with the cost of batteries continuing to fall, and green hydrogen continues to grow. The IEA also has a new scenario for climate modelling and forecasting, which is Net Zero by 2050 - NZE2050.

Meanwhile, Australia’s three largest thermal coal and gas export destinations have all declared net zero targets within five weeks. South Korea’s President Moon announced in late October that his country is targeting net-zero emissions by 2050. This follows Japan’s announcement last week of net-zero emission by 2050, and China’s announcement of net-zero emissions by 2060 earlier in the month. This is likely to be the biggest structural change to exports in modern Australian economic history.

Finally, Carbon Tracker published a report highlighting that between 2014 and the end of 2019, Exxon’s return to shareholders was negative 10% due to overinvestment in capital intensive, high carbon projects, especially oil sands.