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Latest developments in the sustainability space.
September 12, 2022
New IEA Report: Worldwide introduction of zero carbon building codes feasible by 2030.
A key benchmark for the building stock to meet net-zero emissions goals is the implementation of mandatory zero-carbon-ready codes by 2030. Just 5% of new buildings were zero-carbon-ready in 2020, and an array of advanced technologies, regulations, and policies are needed to reach the 100% target by 2030. Building energy codes currently provide the most effective way to improve energy performance, and are particularly critical as buildings typically remain in operation for many decades, if not centuries.
May 24, 2022
What you don't measure, you can't manage.
To facilitate proactive GHG management, Normative, a Swedish carbon accounting software provider, has launched a carbon calculator in collaboration with Google.org, the philanthropic wing of Alphabet. It will be available cost-free to businesses that commit to net-zero. Details: https://normative.io/insight/co2-industry-insights/
March 15, 2022
Carbon Border Adjustment Mechanism (CBAM) passes EU Council – Key questions remain.
The EU's quest for a fully functional and effective ETS has long been hampered by generous issuance of free allowances to the most carbon intensive sectors. As a consequence, the promise of ETS advocates that the market would assure efficient allocation of scarce resources to least cost GHG abatement opportunities could not fully materialize.
Among the CBAM's main objectives are elimination of (ETS) market distortions and prevention of so-called "carbon leakage". However, while approving the Mechanism, the EU Council did not address key prerequisites for a level playing field, because they are to be dealt with in different legislations in the EU's highly fragmented law-making processes.
In order to achieve the desired outcomes, elimination of free allowances and introduction of carbon tariffs that correspond with the ETS carbon prices need to go hand in hand. This may sound more simple than it actually is. Industry lobbyist are working hard to keep the allocation system for free allowances alive. In absence of future disadvantages in the domestic market, the concerned industries stress that without free allowances they would be handicapped in export markets where carbon pricing does not exist.
Broader concerns are the carbon price volatility in the ETS, and comparability of the carbon pricing systems in countries from which goods /commodities are being imported.
Given the heavily fluctuating ETS prices, and the profoundly differing ways how carbon pricing systems can be designed and implemented, it remains to be seen to what extend the European CBAM will be able to keep the burden of importers and domestic producers roughly on par.
Needless to say, many of the questions raised by the emerging ETS - CBAM set-up would be non-existent if the EU had opted for a progressive, net-zero linked carbon taxation system instead of cap and trade. Given the fact that superior resource allocation efficiency has never been proven, we find it regrettable that a taxation system has never been considered a possible straightforward alternative to the complicated and bug-ridden ETS. The only real need for a compliance-market that we can see is for carbon removals/negative emissions. Companies, unable to meet their EU 55 obligations by means of emission avoidance, should be allowed to purchase credible carbon removal certificates instead of being subjected to punitive taxes above and beyond regular carbon taxation.
For further reading regarding CBAM please click here.
February 24, 2022
The EU Commission has approved proposed rules on Corporate Sustainability Due Diligence.
The EU directive aims to foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ operations and corporate governance. The new rules are not perfect, but a compromise that we consider a substantial step in the right direction. Most importantly, if also approved by European Parliament and member states, the rules will oblige companies to adopt a plan to ensure that their business model and strategy are compatible with the Paris Agreement, and to define emission reduction targets if climate change is considered a principal risk for the company.
In addition, when companies set variable management remuneration, this must be linked to transition and emission reduction objectives. It will substantially enhance corporate transparency and create a more level playing field for corporations operating in Europe.
February 22, 2022
FT warns: Further ESG misselling scandals are on the horizon
Although the Paris Agreement is legally binding for nations only, there are indications that it is being interpreted as the standard that companies, especially multinationals, also must adhere to. In a recent landmark ruling, a court in The Hague referred to the Paris Agreement when ruling that Shell had to make greater cuts to its emissions targets than it had planned.
The FT argues that alignment of corporate ESG strategies to the Paris "less than 2 degrees climate change goal" is the emerging sustainability benchmark for corporate ESG strategies. Corporations and funds that present themselves as sustainable and climate friendly but miss the Paris alignment mark are vulnerable to greenwashing claims and related misselling complaints. Such legal proceedings could have substantial repercussions for the entire ESG market.
Climate think-tank InfluenceMap found that three out of four funds marketed as “Paris-aligned are not in line with the Paris goals. Their research used the widely accepted Pacta (Paris Agreement Capital Transition Assessment) methodology to assess the alignment of 593 ESG equity funds.
February 16, 2022
Substantial Progress Towards Universal ESG Accounting Standards
ESG accounting is a mess. Competing initiatives mean there is no uniform set of standards for measuring a company’s progress on sustainability. The good news is that the International Sustainability Standards Board (ISSB), promises to do for sustainability reporting what the International Accounting Standards Board (IASB) does for financial reporting — develop generally accepted standards for companies to report their performance to investors. Though still fledgling, the ISSB’s ideal outcome would be if it becomes a global standard that integrates the work of all previous standards. Ideally, the SEC and EU would use its standards. Companies should give the ISSB their full support to make these standards the best they can be.
Further reading: https://hbr.org/2022/02/we-need-universal-esg-accounting-standardP
February 10, 2022
Carbon market limitations exposed
The costs of abating a unit of GHG differ hugely from sector to sector. Markets enable efficient resource allocation. I.e., they direct the bulk of the funding to least-cost solutions. Net-zero carbon commitments, however, call for equal attention to all relevant sectors. For the next 10 years, market instruments should still be able to play a meaningful role. In parallel, different policy instruments need to be brought in to effectively support widespread net-zero pledges.
Further information: https://www.smartermarkets.media/demystifying-the-carbon-markets-episode-2-mark-lewis-head-of-climate-research-andurand-capital-llp/
January 30, 2022
Recycling - An Often Overlooked Means to reduce GHG emissions
New European waste management study confirms GHG emissions about equivalent to those of Spain could be avoided if full recycling potential would be exhausted.
December 10, 2021
The future of ESG Data.
‘ESG Book’ - a central source for accessible corporate sustainability information has been launched successfully.
Available for free for all companies, investors, standard-setters and other stakeholders, the ESG book aims to create environmental, social and governance (ESG) data as a public good.
ESG Book makes sustainability data more widely available and comparable for all stakeholders, enables companies to be custodians of their own data through a digital platform, provides framework-neutral ESG information in real-time, and promotes transparency.
It is a response to a lack of disclosure, limited accessibility and inconsistency of ESG data, which is preventing more capital from being allocated towards low-carbon and sustainable business activities – despite many commitments to responsible investment and achieving net-zero emissions.
The ESG Book initiative is supported by a global alliance of leading international organizations, financial institutions, investors, and businesses. It includes Deutsche Bank, the International Finance Corporation, HSBC, UNCTAD, the Global Reporting Initiative, Swiss Re, Glass Lewis, HKEX, Cardano Development, and the Principles for Responsible Investment, among many others.
Further information: https://www.esgbook.com/