Sustainability Newsletter #28
#Figure of the month - +40°C above seasonal normal
Arctic and Antarctic: an unprecedented and simultaneous heatwave hits the poles
+40°C above seasonal norms. While temperatures are expected to fall in the Antarctic as the southern summer draws to a close, the region is experiencing a historic heat wave that experts say is almost "impossible". In contrast, the Arctic at the North Pole is also experiencing an abnormal rise in mercury as the area warms two to three times faster than the rest of the globe due to climate change.
It is the coldest region on Earth, with temperatures averaging -55°C during the year. At the moment, however, Antarctica is experiencing an unprecedented heat wave. The Concordia research base, located on Dome C of the Antarctic plateau, at an altitude of more than 3,000 meters, recorded a record "heat" of -11.5°C on 18 March, "an absolute record for all months combined, beating the -13.7°C of 17 December 2016", tweeted Étienne Kapikian, a forecaster at Météo-France.
Even if it is not possible at the precise moment an event occurs to attribute it to climate change, one of the clearest signs of global warming is the multiplication and intensification of heat waves. The poles are warming even faster than the global average, which has already risen by about +1.1°C since pre-industrial times. This heat wave in East Antarctica comes as the Antarctic ice pack reached its smallest area on record since satellite measurements began in 1979, at less than two million km2, according to the US National Snow and Ice Data Center.
Trends and Initiatives
The SEC unveils proposed climate disclosure rules
The U.S. Securities and Exchange Commission (SEC) announced in March the release of its long-awaited proposals for climate disclosures for U.S. public companies. The proposals would for the first time require U.S. companies to provide information on climate risks facing their businesses, and plans to address those risks, along with metrics detailing the companies’ climate footprint including Scope 1, 2 and in some cases Scope 3 greenhouse gas (GHG) emissions.
Disclosure requirements for companies under the proposed rules would include information about the oversight and governance of climate-related risks by the company’s board and management, how identified climate related risks impact strategy, business model and outlook, and the process used by the company to identify, assess and manage these risks.
For companies that have adopted a transition plan, the rules would require a description of the plan, including the metrics and targets used to identify and manage physical and transition risks, and for companies that use scenario analysis to assess resilience to climate-related risks, required disclosures would include information on the scenarios used including the parameters, assumptions, analytical choices and projected financial impacts from the scenarios. The rules also would require information about company’s use of an internal carbon price, including information about the price and how it is set.
Italy enshrines environmental protection in its constitution
In a historic vote in early February, Italy incorporated environmental protection into its Constitution. "The Republic protects the environment, biodiversity and ecosystems" in order to "protect future generations", is now written into the Italian Constitution. The text stipulates in particular that "any private economic initiative must not harm health or the environment". Animal protection has also been included.
"I think this is a memorable day," said Roberto Cingolani, Italy's minister for ecological transition, in a statement. "Finally, environmental protection has become a fundamental principle of the Republic, which future legislation and past legislation must be inspired by," reacted the Italian president of WWF, Donatella Bianchi. The NGO is thus calling for the Parliament to adapt existing legislation on environmental issues.
As the main beneficiary of the European recovery plan, Rome will have to use these resources to decarbonize its economy, which means phasing out coal by 2025, developing renewable energy and renovating buildings. Italy is the third most affected country in Europe by climate change, with 21,600 deaths and €90 billion in costs over the past 40 years. Last summer, almost 49 degrees were recorded in Sicily, a record in Europe.
Biden Wants Record $11 Billion in Climate Aid to Poor Nations
President Joe Biden is asking Congress to dedicate $11 billion in taxpayer dollars to help other nations deploy clean energy and withstand the growing consequences of climate change -- more than 10 times the amount lawmakers doled out to the effort in fiscal 2022.
If Congress goes along, the spending would mark a massive shift for the U.S., following years of unfulfilled promises of climate funding for developing and vulnerable nations. The financial support is seen as critical to advancing climate diplomacy, helping poor countries avoid greenhouse gas emissions and bolstering the resiliency of vulnerable nations on the front lines of global warming. It also is key to Biden’s effort to prove to the world the U.S. has returned as a global leader in the fight against climate change.
Overall, Biden is seeking some $50 billion for programs to address climate change, including $18 billion to build the U.S. government’s resilience to a warming world, $3.3 billion in funding for clean energy projects and at least $20 million for a new Civilian Climate Corps envisioned to put Americans to work preventing wildfires, restoring wetlands and making homes more energy efficient. To help pay for the moves, Biden is asking Congress to eliminate some $43.6 billion worth of tax incentives cherished by the oil and gas industry, including deductions for intangible drilling costs and low-production wells.$
It’s unclear whether lawmakers will go along with Biden’s spending request. Congress fell well short of the mark earlier this month when passing the final fiscal 2022 budget, which had some $1.5 billion less than Biden’s initial requested spending. The $1 billion total was which only had about $387 million more international climate spending than during the Trump administration, according to Joe Thwaites, an associate in the World Resources Institute’s Sustainable Finance Center.
The conflict in Ukraine is expected to have an impact on ESG investments
While the invasion of Ukraine is expected to have a lasting impact on investments, there could also be wide-ranging repercussions in the ESG context in the form of investment restrictions and an accelerated energy transition, particularly for Europe.
Beyond government-imposed sanctions, we are already seeing companies with Russian assets making swift decisions. For example, BP has announced that it is withdrawing its stake in Rosneft and Shell has announced that it is withdrawing from joint ventures with Gazprom and other related entities. Norges Bank Investment Management, the company that manages Norway's $1300 billion sovereign wealth fund, also acted quickly. It announced on 27 February that it was freezing all its investments in Russia. Norges Bank is a leading player in the ESG field, and this move is an important indicator for the rest of the market.
While the recent spike in oil and gas costs may be short-lived, the fear of security of supply will not. This price shock and fear of Russia's security of supply has potentially facilitated the progress of the EU Green Deal. It is worth noting that the EU countries that have been most hostile to the adoption of the deal include some of the countries most exposed to Russia.
Society and Planet
No country met WHO air quality standards in 2021, survey shows
Not a single country managed to meet the World Health Organization's (WHO) air quality standard in 2021, a survey of pollution data in 6,475 cities showed in March, and smog even rebounded in some regions after a COVID-related dip. The WHO recommends that average annual readings of small and hazardous airborne particles known as PM2.5 should be no more than 5 micrograms per cubic meter after changing its guidelines last year, saying that even low concentrations caused significant health risks. But only 3.4% of the surveyed cities met the standard in 2021, according to data compiled by IQAir, a Swiss pollution technology company that monitors air quality. As many as 93 cities saw PM2.5 levels at 10 times the recommended level.
"There are a lot of countries that are making big strides in reduction," said Christi Schroeder, air quality science manager with IQAir. "China started with some very big numbers and they are continuing to decrease over time. But there are also places in the world where it is getting significantly worse." India's overall pollution levels worsened in 2021 and New Delhi remained the world's most polluted capital, the data showed. Bangladesh was the most polluted country, also unchanged from the previous year, while Chad ranked second after the African country's data was included for the first time. China, which has been waging war on pollution since 2014, fell to 22nd in the PM2.5 rankings in 2021, down from 14th place a year earlier, with average readings improving slightly over the year to 32.6 micrograms, IQAir said.
The point of no return for the melting permafrost is "imminent".
It is a particularly vulnerable ecosystem and key to combating climate change. The permafrost peatlands of Europe and western Siberia are real carbon sinks. Thanks to a soil covered with ice throughout the year, they can sequester almost 40 billion tons of carbon, twice the amount stored in all European forests. However, a new study led by the University of Leeds and published in the journal Nature Climate Change, estimates that the climate tipping point may be reached earlier than experts thought. "Projections indicate that, even with the greatest efforts to reduce global carbon emissions and thus limit global warming, by 2040 northern European climates will no longer be cold and dry enough to sustain peat permafrost," the researchers say. This is a particularly frightening conclusion, since the organic matter will start to decompose as the permafrost melts and will thus release greenhouse gases such as carbon dioxide and methane.
Less well known than CO2, methane has 82 times the warming power of CO2 over twenty years. It is now responsible for a quarter of global greenhouse gas emissions. Another study published in the journal National Snow and Ice Data Center also revealed in 2018 that the permafrost hid twice as much mercury as the rest of the Earth. As the ice thaws, some of this metal could end up in the oceans and contaminate the entire food chain. "Our modelling shows that these fragile ecosystems are on the precipice and that even moderate mitigation leads to the widespread loss of peat permafrost adapted climates by the end of the century," says Richard Fewster, lead author of the study and a PhD at Leeds School of Geography. "But that doesn't mean we should throw in the towel. The rate and extent of loss of suitable climates could be limited, or even partially reversed, by strong climate change mitigation policies.
BP Tips the Gender Balance in Male-Dominated World of Oil
- Company : BP PLC
- Sector : Energy
- Clover rating : 4/10
In March, Anja-Isabel Dotzenrath and Leigh-Ann Russell joined Chief Executive Officer Bernard Looney’s leadership team, tipping the gender balance to six women and five men. BP is now setting its sights on the next rungs of management, aiming to achieve gender parity among its 120 most senior leadership roles by 2025 and have women occupying 40% of roles in the next layer down.
That would be a significant achievement for an industry in which women are under-represented at virtually every level. None of the world’s oil supermajors had ever had a woman at its helm. A glance across the smaller exploration and production firms listed in London finds only two female CEOs. To understand the lack of diversity at the top of the industry, Dotzenrath and Russell say you need to start with education, particularly the lack women taking subjects that naturally lead into the sector. “I studied engineering at Aberdeen University,” said Russell, who after 16 years at BP will now head innovation and engineering. “I think there were three women in my class.”
To help improve diversity, Russell has been doing outreach. “Going into universities, going into schools becomes a really important thing,” she said. “I get asked questions like: Can you be a mum and be an engineer? Well I’m a single mum.” In the oil and gas industry, women take up just a quarter of entry-level positions, according to research by Boston Consulting Group. For BP, that figure was about 40% in 2020.
Investor group targets Berkshire Hathaway for improved climate disclosure
- Company : BERKSHIRE HATHAWAY INC
- Sector : Banks and financials
- Clover rating : 0/10
Climate-focused investor engagement initiative Climate Action 100+ highlighted several of its members’ key shareholder proposals heading into the 2022 proxy season, in a bid to help build support to vote for climate-related resolutions at the targeted companies. Among the flagged resolutions is a proposal filed at Berkshire Hathaway requesting the company provide disclosure on climate-related risk aligned with TCFD recommendations.
Climate Action 100+ is an initiative, with over 615 investors representing more than $65 trillion in assets that targets the world’s largest corporate greenhouse gas emitters to promote taking necessary action on climate change and align their business strategies with net zero in order to help limit average global temperature rise to 1.5 degrees Celsius.
The Berkshire Hathaway resolution, seeking TCFD-aligned reports on physical and transitional climate-related risks and opportunities, is being refiled from last year’s meeting, where it received support from a significant majority of non-insider, despite a strong company recommendation for shareholders to vote against it. The resolution was filed by Brunel Pension Partnership Limited represented by EOS at Federated Hermes, Caisse de Dépôt et Placement du Québec, California Public Employees’ Retirement System, and State of New Jersey Common Pension Fund. According to the initiative, Berkshire Hathaway was the only North American company that did not achieve any of the Climate Action 100+ Net Zero Company Benchmark assessment criteria in 2021.
France's Sanofi offers 1.5 billion euro bond linked to access to medicine
- Company : SANOFI SA
- Sector : Pharma & Biotech
- Clover rating : 6/10
French healthcare group Sanofi said it had priced a first sustainability-linked bond issue that will be indexed on access to medicines, and worth 1.5 billion euros ($1.7 billion). The company said the costs of financing would be linked to achieving concrete targets in terms of a cumulative number of patients being provided with essential medicines over the next five years.
The notes are set to be issued in two tranches of 850 million euros and 650 million euros respectively. "We continue to make progress in our environmental, social and governance activities that are an essential part of our strategy and embedded into our business," said Sanofi chief financial officer Jean-Baptiste de Chatillon.
Boardrooms with more women deliver more on climate, says Arabesque
Companies with more women on their boards are more likely to be on track to meet global climate goals, analysis by investment research and asset manager Arabesque showed in March. The study, the first to address the topic, found the most diverse 20% of the world's 1,000 biggest companies were more aligned with a goal of capping global warming at 1.5C (2.7 Fahrenheit) above the pre-industrial average by 2050.
Arabesque said it gave each company a diversity score by looking at data like board diversity and diversity targets, and a temperature score after checking if the company's climate plans were on course to support the goal. Barbara Krumsiek, Arabesque board member and former chief executive at asset manager Calvert Investments, said the data showed a strong correlation and backed up academic studies on the issue. "So far all the data I'm seeing reinforce the original premise that diversity and environmental performance are linked," Krumsiek said.
Conversely, 37% of the firms in the least-diverse 20% of companies were headed towards a worst-case 2.7C trajectory or above, and most did not disclose any meaningful data, the research showed. "For investors, lack of disclosure should be a red flag," Krumsiek said.
NASA’s climate spiral
In March, NASA published what it calls a "climate spiral", which makes it possible to understand at a glance the rise in temperature levels from the 1880s to the present day. It shows that the Earth has been getting warmer since the pre-industrial era. While the warming was contained until the 1980s, it has exploded since the 2000s. In total, over the last century and a half, the global temperature has risen by 1.1°C.
These analyses echo the latest report by the IPCC, the Intergovernmental Panel on Climate Change. The researchers estimate that in just two decades, the Earth should warm up by 1.5°C, whereas the Paris Agreement states that we should not exceed 1.5°C or even 2°C by the end of the century. Yet already today, climate impacts are more widespread and severe than expected with "only" 1.1°C of warming.
"If temperatures rise above 2°C, climate-resilient development will become impossible in some parts of the world," the report says. "The scientific evidence is unequivocal: climate change is a threat to human well-being and the health of the planet. Any further delay in concerted global action will be a missed opportunity to ensure a livable future," confirmed Hans-Otto Pörtner, the co-chair of IPCC Working Group II.
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