Week 44: Climate emergency on a broken bench

In this issue: ▸ The “death warrant” ▸ Net zero carbon emissions pledges under scrutiny ▸ Tech giants’ supply chains are “extremely polluting” ▸ ECB put banks under climate pressure ▸ And much more...

Dear all, 

COPXX. Can you hear the music? Drums and trumpets, a cacophony of sounds rising high above the sky. A farewell march for the broken promises and failed commitments. A funeral march it is.

Climate Emergency sits on the broken bench outside central banks, parliaments, shopping malls and business centres. Sitting on piles of paper with shiny print supporting the broken bench it sits on. Wondering how come Growth always gets admittance to all of these fancy meetings and nice parlours, tasty buffets and fine wines, and how come Climate Emergency always gets… nothing. Except piles of paper with shiny print on.

Sitting there and thinking, rags and broken ribs, bloody bruises and burning wounds, Climate Emergency steers out onto the street for hours, days, month and years. Now and then someone passing will toss a coin or two, or throw in yet another paper pile, saying something like “we are in this together” or “we pledge to be carbon-neutral by 2050.” But most of them just get on with their business, not even noticing it.

Days and weeks pass, months and years. Climate Emergency still sits on the same broken bench outside central banks, parliaments, shopping malls and business centres on piles of paper with shiny print wondering how come Growth never sits on the same bench.

The “death warrant” of small, low-lying countries

To accept that the world’s average temperature might rise by more than 1.5°C, declared the foreign minister of the Marshall Islands in 2015, would be to sign the “death warrant” of small, low-lying countries such as his.

To widespread surprise, the grandees who met in Paris that year, at a climate conference like the one starting in Egypt today, accepted his argument. They enshrined the goal of limiting global warming to about 1.5°C in the Paris agreement, which sought to co-ordinate national efforts to curb emissions of greenhouse gases.

No one remembered to tell the firing squad, however. The same countries that piously signed the Paris agreement have not cut their emissions enough to meet its targets; in fact global emissions are still growing. The world is already about 1.2°C hotter than it was in pre-industrial times. Given the lasting impact of greenhouse gases already emitted, and the impossibility of stopping emissions overnight, there is no way Earth can now avoid a temperature rise of more than 1.5°C.

The consequences of the world’s failure to curb emissions are catastrophic, and not just for coral atolls in the Pacific. Climate-related disasters are proliferating, from Pakistan, much of which was inundated by this summer’s unusually intense monsoon, to Florida, which in September endured its deadliest hurricane since 1935. Even less lethal distortions of the weather, such as this summer’s extraordinary heatwave in Europe, do enormous economic damage, impeding transport, wrecking infrastructure and sapping productivity. So the governments of developing countries, especially middle-income ones, will have to work with the rich world to mobilise private investment.

On the part of developing countries, that will involve big improvements to the investment climate and an acceptance that they will have to cede some control over energy policy. On the part of donors, it will involve focusing spending on schemes that “crowd in” private capital, such as indemnifying investors against political and regulatory risks, taking equity stakes in private projects and agreeing to absorb the first tranche of losses if things go wrong. They will have to do things they dislike, such as helping the poorest countries shut coal plants.

But without give on both sides, the world will bake. Bake. We are simply not radical enough. 

Read more here.

Net zero carbon emissions pledges under scrutiny

As business and government leaders fly into Sharm el-Sheikh for the COP27 climate summit, companies are under scrutiny for net zero carbon emissions pledges from last year’s COP26.

Almost all of the companies that have made net zero promises will fail to achieve their goals unless they double the rate of cuts, according to a report published by consultancy Accenture. Only 8 per cent of companies are on track to achieve their net zero targets for scope 1 and 2 emissions by 2050, the report shows.

Even if companies double their rate of progress towards emissions targets, 59 per cent will fail to meet a 2050 deadline.

Another report, this one from MSCI, heaped further gloom on net zero pledges. In an analysis published earlier this week, MSCI said companies have about four years left in their carbon budgets to keep global warming to 1.5C this century. Instead, companies are on track to cause global temperatures to rise 2.9C.

Essentially, companies have to set and implement carbon-cutting plans five years at a time, MSCI said. Goals for 2050 are meaningless if companies cannot get emissions down now.

Ten companies are responsible for 5.5 per cent of all corporate scope 1 emissions: Saudi Aramco, Coal India and ExxonMobil are the top three emitters.

Tech giants’ supply chains are “extremely polluting”

Now onto the big ESG stock darlings… Tech giants, such as Apple and Google, have been leaders in corporate climate action, transitioning their offices and data centres to 100 per cent renewable energy in recent years.

Yet, if we shift our focus to scope 3 – the emissions from their supply chains – a different picture emerges. Consumer electronic brand suppliers that manufacture components of cell phones and computers in Asia primarily use electricity generated from coal and other fossil fuels, according to a report recently published by Greenpeace East Asia and environmental advocacy group, Stand.earth.

Tech giants’ supply chains are “extremely polluting”, Xueying Wu, Beijing-based campaigner for Greenpeace East Asia, told Moral Money. Among 14 suppliers analysed, only four achieved a renewable energy usage rate above 10 per cent. The median renewable usage rate was only 5 per cent.

It is especially “alarming”, Wu said, that emissions from key semiconductor manufacturers, such as TSMC and SK Hynix, have seen double-digit increases since 2019. Meanwhile, renewable energy usage rates in 2021 stood at just 9 per cent and 4 per cent respectively. Out of 10 big tech companies analysed in the report, only Apple has issued a 100 per cent renewable energy target for its supply chain…

Read more here.

ECB put banks under climate pressure

The European Central Bank warned the eurozone’s largest banks this week that it would impose higher capital requirements on those that failed to act on climate and environmental risk.

It laid out core expectations for the next two years – for example, that banks should link executive pay to climate action and stop financing clients that derive more than a quarter of their energy from coal. But, perhaps more surprisingly, its recommendations also focused on reducing nature-related risks to banks’ balance sheets – such as deforestation, sea level rise, droughts, lack of sunshine and even the possibility of invasive species and loss of fauna and flora. 

This is a big sign that central banks are getting on board with a growing focus on biodiversity challenges across much of the business and policy worlds. And it seems that the Banque de France – one of the most powerful national central banks in the Eurozone system – is playing an important role on this front.

Read more here.

Let’s hope the people at COP27 know this about Africa…

By 2030, an estimated 479 million Africans (28.1% of the population) will be living in extreme poverty. According to the Institute for Security Studies (ISS), Africa has the largest share of extreme poverty rates globally, with 23 of the world’s poorest 28 countries, with extreme poverty rates above 30%.

The ISS also indicates that the higher initial poverty levels coupled with low asset ownership and restricted access to public services also make it difficult for households to take advantage of growth.

Africa will account for more than half (54%) of the 2.4 billion global population growth in the coming decades. The United Nations predicts that between 2015 and 2050, Africa will add 1.3 billion people, more than doubling its current population of 1.2 billion. This translates into smaller per capita income increases.

The overwhelming majority of Africans today have access to mobile phone services, but less than two-thirds have access to piped water. Access to basic services remains a major challenge for people living in Africa. The climate and biodiversity crisis, land and soil degradation, unstable natural resources use, waste, pollution and stress on water resources are all affecting people, their health, security, livelihoods, well-being and ultimately their ability to develop. 85% of people’s livelihoods are reliant on natural resources.

Africa is the region the most affected by climate shocks. According to the State of Climate in 2021, in just 2020 and 2021, 131 extreme-weather, climate change-related disasters were recorded on the continent. Climate change, therefore, poses substantial risks to African economies and threatens the lives and livelihoods of millions of people.

It is not only the physical impacts of climate change but also the economic consequences of changes in required resources and global value chains because of decarbonisation that will further impact African economies and cause higher levels of poverty. Inflation, rising costs of living, lack of electrification, and access to finance and technology are key economic systemic factors impacting the ability of most people in Africa to develop and grow.

Corruption, lack of ethical leadership, lack of inclusive development, environmental justice, loss of agency, trust deficit, and lack of good governance, are also contributing to the inability of most people to take part inclusively and productively in the economy. Bad governance, corruption, and high-income inequality also lead to increased levels of poverty.

Developing countries will require up to $340bn every year by 2030 to adapt to climate change, but the world is far off track in meeting this need and is increasingly vulnerable to the effects of rising seas and extreme weather, the UN has said.

Asia-Pacific investors aim to up sustainability

Asia-Pacific investors are expected to accelerate the integration of sustainable investing allocations into their portfolios over the next five years, but allocation drivers are changing, and so are the ways investors want to access sustainability themes, according to a recent survey.

As well, investment advisers in the region are changing their ESG focus from the traditional one that favours the environment to one that increasingly prioritises social issues, led by accumulating evidence on the financial materiality of these factors.

Read more here.

Japan makes squid farming breakthrough

Scientists in Japan say they have developed a groundbreaking method of farming squid that could solve shortages of the seafood staple, amid warnings from environmental groups that aquaculture is incompatible with the animal’s welfare. Researchers at the Okinawa Institute of Science and Technology (OIST) say their system produced a reliable supply of squid and has the potential to be commercialised.

Squid is widely consumed in Japan, where it is an essential part of the diet and is often eaten raw as sushi or sashimi. But stocks in the country’s waters have been declining for decades. The annual squid catch in Japan peaked in 1989 at 733,594 tons; by 2018, it had plummeted to 83,593 tons. To fill the gap, the country now imports huge quantities of processed squid from South America. Smaller catches in Japan have been blamed on rising sea temperatures caused by global heating – which inhibits the creatures’ ability to spawn and grow – as well as inadequate regulation and overfishing.

Scientists have spent decades attempting to farm squid – a method long considered particularly challenging due to the animal’s behaviour – but have had little success, according to OIST. The creatures are known to be aggressive and sensitive to water flow, and have particular food preferences and a complex lifecycle.

Read more here.

How sustainable are EU’s Top ESG Funds?

Europe’s greenest fund category may not be as sustainable as its classification suggests, according to a report published on Thursday.

An analysis conducted by Clarity AI, a sustainability technology platform whose clients include BlackRock Inc., Aviva Plc and Deloitte, indicates that close to 20% of so-called Article 9 funds – the EU’s top ESG category – have more than 10% of their investments in companies “with violations of” the United Nations Global Compact principles, or the OECD’s guidelines for multinational enterprises. It found that 40% have more than 5% exposure.

The climate carnage

Finally, have you thought about all the climate carnage we’ve faced this year? This video makes for nice and cosy Sunday evening with popcorn! 

Have a great not-sitting-on-the-bench week! 

Kind regards,
Sasja