Week 36: A nightmare it is

In this issue: ▸ Global fossil fuel subsidies doubles ▸ Big Oil's real agenda on climate change ▸ Corporate sector is still on a 2.7°C pathway ▸ New report: ESG in Japan

Dear all,

Nightmares always come in pairs. They leave a deep trail in the subconscious part of us. A few days after, we can gently, in order not to experience it again, try to understand what really happened. Sometimes we do not remember the details, and sometimes we don’t want to. It is easier that way. Yet, that unpleasant feeling lingers. Bits and pieces of our fears processed deep within the temporal lobe. Like a release mechanism.

What we are witnessing is a perfect nightmare. As realistic as it gets. Looking at the state of things in the different parts of the world you start wondering if nightmares have become staple goods, or if we simply can’t take in more information.

Global fossil fuel subsidies doubles

In July last year, EU commissioners set out a range of green policies to put the continent on a path to becoming climate neutral by 2050. “The fossil fuel economy has reached its limits,” said Ursula von der Leyen, the commission president.

Little more than a year later, those commissioners are now overseeing tens of billions of euros of spending on fossil fuel infrastructure and supplies, amid severe cuts to gas supplies from Russia and record high prices.

Data analysed by the energy think-tank Ember Climate for the Financial Times suggest that European governments will spend at least €50bn this winter on new and expanded fossil fuel infrastructure and supplies, including gas shipped in from overseas and coal to fuel previously mothballed power plants.

At the same time several countries, including Germany and the Netherlands, have permitted the restart of operations at coal power stations that had either gone into disuse or were due to close, allowing the burning of an additional 13mn tonnes of coal costing about €4.5bn.

EPH, the Czech-based energy company that has fired up mothballed coal plants such as Mehrum in Germany, says it was “pleased” to have its plants back up and running to help solve “Germany’s difficult energy situation”.

Between May and July, Brussels also announced LNG deals with the US, Qatar, Azerbaijan, Egypt and Israel to increase supplies.

You can read more in the article from Financial Times here.

I am not sure if people really get this. Once that infrastructure is deployed and demands have been created, it will be very, very hard to switch it off.

As mentioned, nightmares come in pairs, and global fossil fuel subsidies almost doubled over the course of 2021, a new report has shown. OECD and IEA data shows that 51 countries worldwide spent a combined USD 697.2 billion on subsidies for fossil fuels in 2021, up from USD 362.4 billion in 2020. 

We are not doubling up on investments in renewables, no, we are digging an even deeper hole.

I recommend B.B. King and his famous track “Chains and Things”.

We are playing a losing game…

Big Oil's real agenda on climate change

The mood is dark. Only the blues seems fitting, so we continue with another B.B. King song:

When my heart starts beating like a hammer
And my eyes get full of tears
Oh, when
When my heart starts beating like a hammer

The spending by five of the biggest oil and gas companies on measures to lower carbon emissions is at odds with the proliferation of green claims in their public statements, according to new research.

Sixty percent of more than 3,000 public messages from BP, Shell, Chevron, ExxonMobil and TotalEnergies published during 2021 contained green claims, the independent think-tank InfluenceMap found. But they were expected to allocate a little more than 10 percent of their capital expenditure to low-carbon investments this year. The companies, except BP, were forecast to increase their oil and gas production between 2021 and 2026, according to estimates from third-party data provider Asset Resolution.

Green claims included communications on reducing emissions, moving to a cleaner energy mix and promoting fossil fuels as climate solutions. For example, discussions about “carbon neutral” liquefied natural gas.

There was a “systemic misalignment between the companies’ business models and how these are being represented to the public”, InfluenceMap said. The five companies were “spending huge amounts of time and money talking up their ‘green’ credentials, while their business investments and lobbying activities tell a very different story.

The five companies’ financial disclosures indicated that they planned to allocate an average of just 12 percent of their capital expenditure to low-carbon activities in 2022.

Read more here. A nightmare it is. 

Corporate sector is still on a 2.7°C pathway

I have to admit this. I love blues. And the next one I will recommend is also a B.B. King: “How Blue Can You Get”. Well…

As it turns out, no G7 country’s corporate sector is aligned with the Paris agreement’s 1.5°C goal. New CDP analysis shows that the GHG emissions reduction targets publicly disclosed by companies in G7 economies are still only ambitious enough to align with a 2.7°C decarbonization pathway.

The analysis shows a clear and consistent outperformance by European companies over North American and Asian peers across all industries. Based on Scope 1 and 2 emissions, companies headquartered in North America are collectively on a path to a 2.5°C rise in temperature, while companies headquartered in Asia are on a path to 3°C. Both are significantly higher than Europe’s 2.4°C. Europe has ‘cooled’ the temperature of the European economy 0.3°C since 2021.

But the blues is more than this. More than nightmares. B.B. King once said: “The blues was like that problem child that you may have had in the family. You was a little bit ashamed to let anybody see that child, you loved it. You just didn’t know how other people would take it.”

New report: ESG in Japan

The next song is, of course, “When Love Comes to Town”…

My colleagues in Japan and I have produced a white paper that explains ESG opportunities and risks in Japan, especially in relation to listed mid-cap companies.

We believe – and it’s working very well so far – in our NextGen ESG fund in Tokyo, that mid-caps hold a great deal of leverage. We believe that our NextGen ESG Japan strategy has the capacity to unlock that leverage and create long-standing sustainable performance. A very real thing. 

If you want to read more about state of ESG in Japan and download the report, you can find it here:

And if you want to read more about the NextGen strategy we apply, here’s the link.

Let’s end this week, not with BB King, but by visiting the “old continent”, in the form of William Blake’s “Garden of Love”.

The Garden of Love

I went to the Garden of Love,
And saw what I never had seen:
A Chapel was built in the midst,
Where I used to play on the green.

And the gates of this Chapel were shut,
And 'Thou shalt not' writ over the door;
So I turn'd to the Garden of Love,
That so many sweet flowers bore. 

And I saw it was filled with graves,
And tomb-stones where flowers should be:
And Priests in black gowns, were walking their rounds,
And binding with briars, my joys & desires.

And, as William L. Watkinson said, “it is better to light a candle than to curse the darkness.”

Have a great light-a-candle week! 

Kind regards,
Sasja