Sustainability Newsletter #37

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#Figure of the month - 30% of Earth's land and water 

Key biodiversity takeaways from COP15 in Montreal

The agreement reached at COP15 in Montreal to protect 30% of Earth’s land and water by the end of this decade also has the potential to shake up the regulatory landscape for the investment industry. But implementing it won’t be easy. The landmark deal, signed after four years of talks and a two-week UN-sponsored conference in Canada, has been hailed by organizers as a Paris Agreement for biodiversity, in reference to the 2015 accord that kicked off a global movement for climate action. The Kunming-Montreal Global Biodiversity Framework has been praised by the governments that wrote and signed it, as well as by the private sector, environmental organizations and activists.

Among the top issues was whether biodiversity disclosure should be “mandatory” for business. While that word didn’t make it into the final document, negotiators agreed countries should “ensure” compliance, including with requirements that their companies are transparent with regulators, investors and the public on their biodiversity footprint. It’s a key step that should encourage the finance industry to disclose their reliance and impacts on natural resources, which had previously been treated as something they could take for granted. It’s also a global acknowledgment that the private sector can be a powerful force for change.

Developing countries rich in biodiversity are chewing through it to increase their short-term livelihoods, aligned with local and global market signals. Finance is the key to fix that. The goal is to mobilize $200 billion per year by 2030 in domestic and international biodiversity-related funding from public and private sources. Of that, developed countries have pledged annual financing of $25 billion by 2025 and $30 billion by 2030 that will flow, at least in part, to developing nations through a new fund under the Global Environment Facility.

Indigenous peoples make up about 5% of the population and their existence — and survival — is deeply intertwined with nature, as they live within 80% of biodiversity hotspots. The final agreement recognizes the rights of indigenous communities and their role in preserving the environments in which they live.

Sources : Novethic, Bloomberg


Trends and Initiatives

Coffee, cocoa, soya, palm oil... Deforestation products to be banned in the EU

"It's the coffee we drink in the morning, the chocolate we eat, the coal we use in our barbecues, the paper in our books. It's radical," said Pascal Canfin, chairman of the European Parliament's Environment Committee. In the early hours of Tuesday 6 December, the European Union sealed a historic agreement to end the import of products resulting from deforestation on the continent. Cocoa, coffee, soya, palm oil, wood, beef and also rubber are concerned, as well as several associated materials (leather, furniture, printed paper, charcoal, tires, cosmetics, etc.).

The import of these products into the EU will be prohibited if they are derived from deforested land after December 2020. Importing companies, responsible for their supply chain, will have to prove traceability through crop geolocation data, which can be linked to satellite photos. Importers will also have to "verify compliance with the human rights legislation of the country of production".

Strict enforcement rules have been adopted: at least 9% of volumes imported from countries with a high risk of deforestation, such as Brazil, will have to be checked, and fines, calculated on the basis of environmental damage, may be as high as 4% of annual turnover in the EU.

Sources : Novethic, Reuters


Canada to require 100% of new cars sold to be zero emission vehicles by 2035

All new passenger cars, SUVs and pick-up trucks sold in Canada will be required to be zero emission vehicles (ZEV) by 2035, according to new proposed regulations announced in December by Minister of Environment and Climate Change, Steven Guilbeault.

The announcement follows the release earlier this year by the Government of Canada of its 2030 Emissions Reduction Plan, outlining its strategy to achieve its interim climate goals to cut GHG emissions by 40% – 45% by 2030. The strategy included plans to ZEV sales mandates for light vehicles, alongside other transport electrification moves including funding for charging stations and infrastructure and for EV incentives. According to a government estimate, the new mandate will result in cumulative greenhouse gas emissions reductions of 430 million tonnes between 2026 and 2050.

Additional initiatives announced by Canada at accelerating the transition to ZEVs included investments in an additional 50,000 EV charging stations to reach 87,000 federally funded chargers by 2027, and the renewal of a program providing consumers and businesses up to $5,000 and $10,000, respectively, towards the cost of buying or leasing a ZEV.

Sources : ESG Today


Sustainable Finance

Cyber-attacks set to become ‘uninsurable’, says Zurich chief

Insurance executives have been increasingly vocal in recent years about systemic risks, such as pandemics and climate change that test the sector’s ability to provide coverage. For the second year in a row, natural catastrophe-related claims are expected to top $100bn. But Mario Greco, chief executive at insurer Zurich, told the Financial Times that cyber was the risk to watch. “What will become uninsurable is going to be cyber,” he said. “What if someone takes control of vital parts of our infrastructure, the consequences of that?”

Recent attacks that have disrupted hospitals, shut down pipelines and targeted government departments have all fed concern about this expanding risk among industry executives. Focusing on the privacy risk to individuals was missing the bigger picture, Greco added: “First off, there must be a perception that this is not just data… this is about civilization. These people can severely disrupt our lives.”

Greco said there was a limit to how much the private sector can absorb, in terms of underwriting all the losses coming from cyber-attacks. He called on governments to “set up private-public schemes to handle systemic cyber risks that can’t be quantified, similar to those that exist in some jurisdictions for earthquakes or terror attacks”.

Sources : Agefi, Financial Times


EU strikes deal on world-first carbon border tariff

After night long negotiations, the European Union struck a political deal in December to impose a carbon dioxide emissions tariff on imports of polluting goods such as steel and cement, a world-first scheme aiming to support European industries as they decarbonize. Negotiators from EU countries and the European Parliament reached a deal on the law to impose CO2 emissions costs on imports of iron and steel, cement, fertilizers, aluminium and electricity.

Companies importing those goods into the EU will be required to buy certificates to cover their embedded CO2 emissions. The scheme is designed to apply the same CO2 cost to overseas firms and domestic EU industries - the latter of which are already required to buy permits from the EU carbon market when they pollute.

Currently, the EU gives domestic industry free CO2 permits to shield them from foreign competition, but plans to phase out those free permits when the carbon border tariff is phased in, to comply with World Trade Organisation rules. How quickly that phase-in happens will be decided in the carbon market talks.

Sources : Reuters, Carbon Brief, Bloomberg


Society and Planet

U.S. lab hits fusion milestone raising hopes for clean power

In December, U.S. scientists revealed a breakthrough on fusion energy that could one day help curb climate change if companies can scale up the technology to a commercial level in the coming decades.

Kimberly Budil, the director of Lawrence Livermore National Lab in California, told reporters at an Energy Department event that science and technology hurdles mean commercialization is probably not five or six decades away, but sooner. "With concerted effort and investment, a few decades of research on the underlying technologies could put us in a position to build a power plant," Budil said.

Nuclear scientists outside the lab said the achievement will be a major stepping stone, but there is much more science to be done before fusion becomes commercially viable. The electricity industry cautiously welcomed the step, though emphasized that in order to carry out the energy transition, fusion should not slow down efforts on building out other alternatives like solar and wind power, battery storage and nuclear fission.

Sources : Reuters, WSJ, Bloomberg


Company news

HSBC announces it will no longer finance new oil and gas fields


Sector : Diversified Banking & Financials

Clover rating : 1/10

Over the last six months, ShareAction has been engaging with HSBC on the contents of its new energy policy. These productive engagements contributed to HSBC committing not to finance new oil and gas fields and new metallurgical coal mines, to introduce strict requirements for new clients relating to oil and gas exploration, and to set an absolute thermal coal lending target of 70 per cent reduction by 2030, among other things. However, other elements of the bank’s new energy policy need improving.

ShareAction is campaigning for HSBC and other banks to phase out fossil fuels, create credible action plans to get to net zero and increase investment in low-carbon alternatives.

Responding to HSBC’s announcement , the UK’s biggest high street bank and one of the world’s biggest financers of fossil fuels, will no longer finance new oil and gas fields, Jeanne Martin, Head of the Banking Programme at responsible investment NGO ShareAction, said:

“HSBC’s announcement sends a strong signal to fossil fuel giants and governments that banks’ appetite for financing new oil and gas fields is diminishing. It sets a new minimum level of ambition for all banks committed to net zero.”

Sources : BankTrack,  Reuters


Iberdrola partners with Abel for $1.17 bln Australia hydrogen project


Sector : Utilities

Clover rating : 7/10

The Australian unit of Spanish utility Iberdrola and local developer Abel Energy have agreed to invest 1.1 billion euros ($1.17 billion) to build a green hydrogen and methanol production plant at Bell Bay on the island of Tasmania. Iberdrola said the facility, known as the Bell Bay Powerfuels Project, also has the Australian government’s backing.

The scale of the plant, at 200,000 tonnes per year of green methanol for stage one, rising later to 300,000 tonnes per year, will make it one of the largest such projects in the world, Iberdrola said in a statement.

Iberdrola is pushing to remain one of the leaders in global renewable power as utilities face a challenging transition from fossil fuels, accelerated by the need to cut energy dependence on Russia.

Sources : Reuters, ESG Today


Child workers found throughout Hyundai-Kia supply chain in Alabama


Sector : Automobiles

Clover rating : 3/10

At least four major suppliers of Hyundai Motor Co and sister Kia Corp have employed child labor at Alabama factories in recent years, a Reuters investigation found, and state and federal agencies are probing whether kids have worked at as many as a half dozen additional manufacturers throughout the automakers’ supply chain in the southern U.S. state.

Hyundai, in a statement, told Reuters it “does not condone or tolerate violations of labor law” and requires that “our suppliers and business partners strictly adhere to the law.” Kia, for its part, said it “strongly condemns any practice of child labor and does not tolerate any unlawful or unethical workplace practices internally or within our business partners and suppliers.” Hyundai and Kia, South Korea’s two largest automakers, are sister companies controlled by parent Hyundai Motor Group. Both companies told Reuters they are reviewing hiring practices used by their suppliers.

The use of third-party staffing agencies is a common practice among manufacturers and other labor-intensive sectors throughout the United States. The tactic has long been criticized by labor activists because it gives factory owners and other employers the ability to outsource responsibility for the screening, hiring and regulatory compliance of their workforces.

The U.S. Labor Department in a court filing said SL Alabama, one of the suppliers, had “repeatedly violated” the law “by employing oppressive child labor.” It fined the company about $30,000. Alabama’s Department of Labor fined SL and one of its staffing agencies a total of about $36,000.

Source : Reuters



Nasa mission will give unprecedented view of Earth’s surface water

A Nasa-led international satellite mission was set for blastoff from southern California in December as part of a major earth science project to conduct a comprehensive survey of the world’s oceans, lakes and rivers for the first time.

Dubbed Swot, short for “surface water and ocean topography”, the advanced radar satellite is designed to give scientists an unprecedented view of the life-giving fluid covering 70% of the planet, shedding new light on the mechanics and consequences of climate change.

Nearly 20 years in development, Swot incorporates advanced microwave radar technology that scientists say will collect height-surface measurements of oceans, lakes, reservoirs and rivers in high-definition detail over 90% of the globe.

Sources : The Guardian, Reuters



Turkey's installed solar power capacity

Turkish companies go solar at record pace to cut energy costs

A record number of Turkish companies are installing solar systems to avoid soaring electricity costs caused by a collapse in the currency and a spike in global energy prices. More than 300 companies applied in the past two weeks alone for approval to install solar panels, Mustafa Yilmaz, head of Turkey’s energy market regulator, told the state-run Anadolu Agency.

“Companies made $110 billion-worth of investment applications for renewable energy production,” he was quoted as saying.  Turkey allows businesses to produce electricity from renewable alternatives for their own use but earlier this month simplified a process that also enables them to sell their surplus power to the grid. That incentive has given the market a new boost.

Turkey’s biggest mobile operator, Turkcell, plans to satisfy 65% of its energy needs using renewable sources in the coming years, said Erkin Kilinc, general manager of its energy unit Enerjicell.

Source : Bloomberg


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