In his monthly analysis of sustainability news, Oliver Balch reports on the decision of the UK Court of Appeal shooting down a third runway at Heathrow, Mark Carney’s green finance powwow and reasons to be cheerful about corporate climate action
The thesis that environmental groups should inform, cajole and coax society into taking action on climate rather than terrify them with apocalyptic scenarios is being put to the test in the courts, where dire predictions about the impact of climate change are holding sway.
Take the proposed third runway at Heathrow, which Friends of the Earth described as “outdated climate-wrecking” (64% of the informed British public are against the idea, the campaign group claims) and which the UK Court of Appeal ruled against last week on the basis that it was inconsistent with the UK’s signing of the Paris Agreement.
Or consider the ruling in the Netherlands a few months back, where a court agreed to a long-running case brought by 900 environmental claimants for the government to cut its greenhouse gas emissions by 25% by the end of 2020 (among the campaigners’ arguments was that rising sea levels represented a “very real threat” to the low-lying nation).
In a new report, global conservation charity WWF has gone straight for the jugular: keep degrading the planet as we are, it warns in, and the cost to the global economy will be an eye-watering $479bn per year. By 2050, total losses will have hit $9.87tn. Global price hikes are expected for key commodities such as timber (+8%), oil seeds (+4% ) and fruit and vegetables (+3%), hitting the world’s poorest countries the hardest. Switch now to a “global conservation” scenario, in which biodiversity is protected and ecosystem services kept healthy, and the global economy could see an annual net gain of $490bn.
Giving support to WWF’s findings is an accounting professor at the University of California, who recently predicted that extreme weather risks in the US could “disrupt the entire economic system” and bring about a recession “the likes of which we’ve never seen before”. The warning follows earlier research by the same professor revealing a drop in equity markets in the immediate aftermath of extremely hot weather events (with the most exposed stocks seeing their value fall by up to 2%).
Worrying as this may sound, it is not a patch on the conclusion of two evolutionary biologists at the University of Arizona, whose newly published paper suggests 30% of plant and animal species that are vulnerable to climate change could become extinct by 2070 if temperature rises continue. Looking at 538 different species, the pair find that 44% of these species have already disappeared completely from certain local habitats.
Carney pushes climate risk agenda for finance
Bank of England governor Mark Carney, who is due to step down on 15 March and focus on his new role as key adviser to the UK government on green finance in the run-up to COP26, is using his last few weeks in post to amplify his message.
Last week, at London’s Guildhall, he launched the COP26 private finance agenda, which aims for “every professional financial decision to take climate change into account”, warning that climate risk management must be transformed if net-zero targets stand a chance of being hit.
In an echo of the same sentiment, European Central Bank chief Christine Lagarde also criticised the largest EU banks and insurers for failing to provide “full disclosure” on climate risks. The comments follow remarks by Carney to the Guardian back in December about climate laggards going bankrupt as investors increasingly blackballed them.
Word is clearly getting through. Corporations with a market capitalisation of nearly $12tn have now pledged to meet recommendations set out by the Task Force on Climate-related Financial Disclosures (TCFD). Established in 2016 and chaired by current Democratic Party leadership contender Michael Bloomberg, the TCFD recently announced it had passed the thousand-mark of major private-sector supporters (1,027 to be exact). Nearly half (473) of this list of supporters are financial firms, with assets under their control of some $138.8tr.
A steady stream of big-hitting investors also appear to be heeding Carney’s advice to re-orientate their investment strategies towards companies with climate-aligned strategies. In the steps of investment management colossus BlackRock, US bank JP Morgan has gone public with a commitment to restrict financing for coal and Arctic drilling projects. It has also pledge to help “facilitate” $200bn in investment into projects that support the UN Sustainable Development Goals. Similarly, UK bank Lloyds has set out an ambition to reduce the carbon emissions it finances by more than 50 by 2030.
Giving power to their elbow is new research into the stellar performance of the largest environmental, social and governance mutual funds in the US. The findings, published by market data firm Bloomberg, show that seven of the nine sustainable investment funds analysed have consistently trumped their market benchmarks over the past five years.
Financiers need to remain attentive, however. Recent research by accounting firm Mazars into the climate disclosures of FTSE 350 companies reveals “huge levels” of unexplained volatility in carbon emissions. This volatility appears to be unrelated to business operations and thus cast doubt on carbon efficiency as a measure of long-term firm performance. Investors also need to be wary of “SDG-washing” in non-financial disclosures, warns the Responsible Mining Foundation. Its Responsible Mining Index 2020 finds that site-level data is still missing and that companies are “selective” in their reporting of risks and typically omit any mention of negative impacts.
Tide begins to turn as corporates step up climate action
Year-on-year global carbon emissions have not increased for the first time in more than a decade, according to new data from the International Energy Agency (IEA). The achievement comes despite a 2.9 per cent increase in global gross domestic product.
However, emissions for 2019 have merely flatlined. At 33 gigatonnes (GT), they remain the highest ever recorded. Milder weather, plus slower growth in emerging economies such as China, are partly responsible. But the IEA also credits the switch in many advanced economics towards renewables – primarily solar and wind – in electricity production.
Electricity-related emissions in Europe dropped by 5 per cent (160m tonnes) in 2019, for instance, thanks to a decrease in fossil-fuel dependency. Surprisingly, perhaps, the US also registered a net drop in emissions, at 140m tonnes (equivalent to 2.9 per cent). The world’s largest economy remains its largest emitter as well (at 4.8 GT per year), but its footprint is now almost 1 GT less than its peak in 2000. In total, advanced economies saw emissions drop by more than 370m tonnes (or 3.2 per cent), 85 per cent of which was due to reductions in the power sector. Electricity from coal-fired power plants dropped 15 per cent in advanced economies, while the percentage of the total energy mix that now comes from renewables in these markets stands at 28 per cent.
Policymakers and experts are quick to note that climate change is far from being in abeyance. Yet the findings will give an impetus to mitigation efforts, which, if a recent analysis from the Energy and Climate Intelligence Unit (ECIU) is to be believed, are stepping up. Almost half (49 per cent) of global GDP is now covered by actualised or pending commitments to reduce net emissions to zero by 2050, as per the Paris Agreement. Again, the declaration comes with a pinch of salt. As the ECIU’s 2020 Scorecard reveals, only seven countries have signed off a net-zero pledge in law (a list that includes the UK, France and Sweden) and only two (Suriname and Bhutan) have got anywhere close to achieving it. That said, the trajectory is promising. This time last year, a mere 16 per cent of global GDP was covered by such commitments – either in law or simply under discussion.
Governments’ growing willingness to go public with net-zero goals is matched by a similar appetite in the private sector. Recent weeks, for instance, have seen the UK aviation industry publish a net-zero plan. Members of the US Sustainable Aviation coalition, which include airport operators and airplane manufacturers as well as airlines, are banking on emissions trading schemes and similar “market-based measures” (predicted to save 25.8m tonnes per year) to contribute most to hitting its target. A close second is the phased upgrade of the UK fleet to more efficient planes (saving 23.5m tonnes), followed by the introduction of sustainable fuels (14.4m tonnes). Notably, the coalition’s calculations make zero allowance for fewer flights. Indeed, it maintains that a net-zero future remains viable even if passenger numbers increase by 70 per cent by 2050, as anticipated.
Meanwhile, the list of individual companies coming out with net-zero pledges is increasing all the time. Sky is among the most recent. In a bold step, the UK broadcaster has said it will achieve net neutrality by 2030, two decades ahead of the 2050 date anticipated by the Paris Agreement. The target includes the carbon footprint of its 11,000 suppliers. The broadcaster’s immediate emissions have been net-zero since 2006, via a combination of investments in renewable energy and reforestation projects. According to the business-backed We Mean Business coalition, which runs the Science Based Targets initiative, other companies to have recently set carbon neutral targets include: US carrier Delta Air Lines (backed by a 10-year, $1bn investment plan); mining giant Rio Tinto (also with a $1bn commitment, this time over five years); and European power utility ENGIE.
Companies with existing science-based targets commitments, on the other hand, are beginning to report significant progress. Danish brewer Carlsberg, for instance, which has already pledged to make all its breweries carbon-zero by 2030, reports a 30 per cent reduction in relative carbon emissions compared to with 2015 (almost half of which was achieved in the last 12 months). In its latest sustainability report, the brewer reveals that 56 per cent of its electricity now comes from renewable sources, while its coal usage has been cut by 89 per cent since 2015. French food giant Danone, meanwhile, an early pioneer in science-based target setting, says the carbon-intensity of its products has dropped by 24.8 per cent in the last four years. The company announced it will invest €2bn over the next three years to accelerate “climate action”. Mexican cement firm Cemex, on the other hand, has increased its 2030 emissions reduction target from 30 per cent to 35 per cent as part of its ongoing net-zero goals by 2050.
According to a new report from the transparency organisation CDP, European businesses invested €124bn in carbon reduction measures in 2019. These investments, which include electric vehicle fleets (€43bn) and renewable energy projects (€16bn), are predicted to deliver 2.4 GT of lifetime emissions savings, more than the annual emissions of the UK, Germany, France, Italy and Poland combined. Even so, CDP maintains European corporations need to go further. If they are to achieve net-zero by 2050, 25 per cent of their total capital expenditure need to be dedicated to low-carbon technologies and other solutions, up from 12 per cent at present. The findings are based on data from 882 companies (representing 76 per cent of European market capitalisation) that responded to a recent CDP survey.
Heathrow airport Friends of the Earth WWF COP26 Mark Carney Christine Lagarde ethical finance TCFD Responsible Mining Index IEA GHG emissions Science Based Targets Initiative