ESG & Sustainability Insights

Climate and sustainable finance news: May 2021

8 minute read time

Developments in the green energy sector and beyond

Global

43 banks launch net-zero alliance

Leading banks have launched a new, global alliance in the fight against climate change.

Convened by the UN, the Net-Zero Banking Alliance sees 43 banks including NatWest Group unite to align lending and investment portfolios with net-zero emissions by 2050.

Co-launched by the Prince of Wales’ Sustainable Markets Initiative Financial Services Taskforce, the new initiative will be setting an intermediate target for “2030 or sooner, using robust, science-based guidelines”. The banking alliance will aim to support and speed up decarbonisation implementation strategies, as well as offering frameworks and guidelines to operate.

Leaders reaffirm 2030 climate goals

World leaders logged in to US president Joe Biden’s Leaders Summit on Climate and reaffirmed their commitment to tackling climate change.

Biden has pledged that the US will cut carbon emissions by 50% to 52% below 2005 levels by the end of the decade, while British prime minister Boris Johnson said: “If we actually want to stop climate change, then this must be the year in which we get serious about doing so.”

China announced it will start phasing down coal use from 2026. President Xi Jinping said: “We will strictly limit the increase in coal consumption over the 14th five-year plan period (2021 – 2025) and phase it down in the 15th five-year plan period (2026 – 2030).”

Sharma confirms COP26 will be in person

Alok Sharma, president of the COP26 climate change conference, has said there is “no desire” to postpone the face-to-face event. Sharma said: “Climate change hasn’t taken time off and climate change hasn’t abated. In fact, last year was the hottest year on record, the last decade was the hottest decade on record, and I do not sense any desire on the part of countries to delay any further.”

Swiss Re warning: climate change to reduce global GDP by 18%

Insurer Swiss Re has stress-tested 48 major economies in an attempt to model the impact of climate change over the next 30 years, and found the world is on course to be trillions of dollars poorer. The research included evaluating each country’s expected economic impact from climate risks, ranking each country on its vulnerability to extreme dry and wet weather conditions, and looking at its capacity to cope with the effects of climate change.

Without the right action being taken across the planet, they concluded, global temperatures could rise by more than 3ºC and the world economy shrink by 18% in the next 30 years.

Moody’s expects credit squeeze on carbon-heavy firms

A new study by Moody’s suggests carbon-intensive businesses pose increased credit risks for lenders. The rating agency’s briefing paper details how “the recent proliferation of net-zero targets among governments and the financial sector, coupled with the increasing focus on disclosure around the risks of climate change,” is expected to raise credit risk.

As more financial institutions align themselves to net-zero policies this year, momentum builds for capital to shift away from greenhouse gas emitting activities.

Millions of new jobs in wind industry

The future of the wind industry seems to be blowing in the right direction, as it is expected the sector will create 3.3m new jobs globally over the next five years.

Industry body the Global Wind Energy Council (GWEC) predicts the workforce is due rapid expansion, as offshore and onshore projects expand around the world. Analysis from GWEC predicts an increase in roles across installation, manufacturing, project planning and development, operation and maintenance, and decommissioning.

Europe

Disappointment over EU’s 55% carbon cut

The EU has finally decided on a 55% reduction in carbon emissions by 2030. The new agreement was reached in Brussels ahead of President Biden’s Leaders Summit on Climate, but environmental campaigners have described it as a “farce”.

EU member states and parliament announced a deal in principle on emissions reductions, as well as the establishment of a new independent body to monitor its implementation. The plan proposes a reduction of at least 55% in net greenhouse gas emissions over the next decade compared with 1990 levels, and zero net emissions by 2050. The target of 55% is 15 percentage points higher than the bloc’s previous target, but environmental groups claim it isn’t enough to meet the demands of the Paris Agreement.

US to join EU in mandatory climate risk disclosures?

After putting the US back on the world stage in the fight against climate change, the Biden administration is expected to unite with the EU on climate risk disclosure.

According to US media, US special presidential envoy for climate John Kerry said the US would probably “join with Europe” on the issue, which would mean companies being required to disclose information on climate risk.

Kerry was speaking at a webinar hosted by sustainable investor network Ceres. He suggested the climate movement was at a tipping point, and warned of serious costs if we didn’t “do this right”. The webinar highlighted that asset managers representing 40% of global assets under management were now committed to net-zero goals.

UK

UK sets new law to cut emissions by 78%

The UK government has announced it will set its new climate target, aiming to cut emissions by 78% by 2035, into law.

The sixth Carbon Budget will limit the amount of greenhouse gases emitted over a five-year period from 2033 to 2037, which will put the UK more than three quarters of the way to reaching net zero by 2050. The commitment builds on UK efforts to reduce emissions in 2030 by at least 68% compared to 1990 levels, through the UK’s Nationally Determined Contribution.

Sovereign wealth funds look at green investments

Some of the world’s biggest sovereign wealth and pension funds have been approached by the UK about investing in green energy projects.

The minister for investment, Lord Gerry Grimstone, has reportedly spoken with investors – such as Singapore’s Temasek and GIC, and Australian and Canadian public pension schemes – about opportunities in the UK’s renewable sector, including ‘gigafactories’ and offshore wind farms.

Lord Grimstone said the government was seeking to offer investors stakes in a range of initiatives, including offshore wind farms and carbon capture.

UK Business Group Alliance for Net Zero launches

The UK Business Group Alliance for Net Zero has launched, ahead of COP26 in November. The alliance of business groups and organisations is aiming to increase ambition within business to achieve a net-zero UK by 2050 at the latest, and will look to work with the UK government and other stakeholders.

The UK is the first country to have more than 100 businesses now signed up to the UN’s Race to Zero, which mobilises organisations around the goal of net zero by 2050. These businesses represent an estimated market cap value of £760bn, and include Kingfisher, Johnson Matthey, Drax and Compass Group UK & Ireland.

Third of FTSE 100 commit to net zero

Research has revealed almost one in three of the UK’s biggest businesses have committed to government goals around climate change, aiming to be net zero by 2050.

A study by the Department for Business, Energy & Industrial Strategy (BEIS) shows 30 of the UK’s FTSE 100 companies have signed up to the Race to Zero campaign from the UN, the biggest global alliance committed to the 2050 deadline.

Pledges have doubled over five months, and those signed up include AstraZeneca, BT, Rolls-Royce and Unilever.

Public supports green tax reforms

Six in 10 people support the concept of ‘green taxes’, according to a survey by the Green Alliance.

The majority of respondents were in favour of greening the VAT system and implementing specific types of green taxes, such as carbon taxes on producers or consumers, and new taxes on high-impact materials.

The survey suggests 80% believe the government should be responsible for dealing with environmental issues, and 62% want higher government spending to address them.

Landlords to face mandatory energy reporting measures

Major property owners and those occupying substantial spaces could be forced to publish their energy data.

The suggestion is part of a new government proposal, one of many measures on the table in the UK’s drive to reach net zero by 2050.

BEIS has launched a consultation into the idea of mandatory ratings for energy use of buildings covering more than 1,000 square metres.

The scheme would see businesses providing metered energy use data, floor area information and operational hours of the building.

EPC grades A and B for 84% of new homes

The number of new homes achieving top energy ratings is on the rise in England.

Government data released in April reveals the proportion of homes that received an energy efficiency rating of grade A or B in Q4 2020 was 84% in England and 87% in Wales. This is an increase on the previous quarter for England, when 79% of new homes were given an energy efficiency rating of A or B.

By Louise Hulland