GLOBAL MEGATRENDS
CLIMATE ACTION 100+
A global alliance of 575+ institutional investors with $54 trillion in assets who have turned into “activist” shareholders and are pressuring the boards of the biggest corporate polluters to decarbonise their high-carbon business models by investing in clean energy technologies.
They believe polluters should be held accountable for aspects of global warming as they grappling with over $900 billion in “stranded” fossil fuel assets and mounting climate-related portfolio risks – sea level rise, droughts, heat waves, wildfires, food and water scarcity.
Natural capital at risk globally or the environmental and social costs of business is now at $7.3 trillion and is expected to increase over a backdrop of increasing natural resource vulnerability fuelled by population growth and rapid industrialisation.
The companies which act now to decouple their growth from natural capital costs will be the companies of the future.
DISRUPTIVE TECHNOLOGIES
Are changing the face of the global economy and how it works – what industries are next to change and how will the entire global economic ecosystem be affected?
We believe that risk is not the reward. The rewards are driving technological or process innovations that create vibrant new markets that reduce environmental and social impacts. We see sustainable development as an enabler and believe that lifestyles of a clean environment and health will usher in a new way of life and a new generation of wealth as savvy investors and consumers “awaken” to environmental and social impacts.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
The TCFD was set up in 2017 by the Financial Stability Board – Mark Carney, Governor Bank of England – and former New York Mayor Michael Bloomberg.
It recommends that companies report, including in financial filings, how climate change could affect their sales and strategy and disclose emissions from their own operations and, when relevant to a company’s financial performance, emissions in their supply chain and from the use of their products.
Institutional investors with over $90 trillion in assets have indicated support for its recommendations. Large corporations, regulators and investors are increasingly putting muscle behind the TCFD. Nearly 60% of the world’s 100 largest public companies support the TCFD. The European Union has incorporated TCFD recommendations into its guidelines to help companies meet the bloc’s reporting requirements and the U.K. said in November it plans to make disclosures aligned with the TCFD mandatory by 2025.
June 7, 2021: The finance ministers of the G-7, which comprises Canada, France, Germany, Italy, Japan, the U.K. and the U.S., called for making disclosure of climate-related financial risks compulsory for companies – moving a step closer to the goal of establishing global standards for disclosing corporate environmental data, which investors increasingly want. They said companies should disclose based on a framework developed by the TCFD. (Learn more)
GLOBAL CARBON TAX
51 countries have implemented carbon pricing schemes, and 88 countries have stated their intent to implement as part of their national climate policies. It is estimated that achieving the goals of the Paris Agreement requires a carbon price of US$40-$80/tCO2 by 2020, rising to US$50-$100/tCO2 by 2030. Sweden which has the highest carbon price at US$139/tCO2 is a success story.
“Carbon prices vary widely across existing schemes. Success stories such as that of Sweden – which currently has the highest carbon price in the world at US$139/tCO2 – demonstrate that it is indeed possible to make carbon pricing work: While the Swedish economy grew by 60% since the introduction of the Swedish carbon tax in 1991, carbon emissions decreased by 25%.”
BIG OIL CAVE IN TO ACTIVIST SHAREHOLDERS
Exxon & Shell cave in to shareholder and regulatory pressures.
Big Oil has suffered a climate backlash after a court ordered Shell to aggressively slash carbon emissions and ExxonMobil behemoth shareholders (BlackRock, Vanguard, State Street and the nation’s three biggest pension funds, including CalSTRS) backed a small activist investor (0.02%) that said the supermajor faced “existential risk” because of its focus on fossil fuels.
“This will be seen in retrospect as the day when everything changed for Big Oil.” Analysts said the Shell ruling could set a precedent for similar cases against the world’s biggest polluters, which may now face related lawsuits and be forced to overhaul their business models.
“Legally, economically and societally the ruling is significant. All companies in the energy industry and all heavy emitters will be put on notice and will have to accelerate their decarbonisation plans.” — Thomas Wetzer, Oxford university
In 2019, after intense pressure from institutional shareholders, who criticized Shell for lacking binding carbon emissions targets, the oil and gas giant said that it will set targets every year and link such targets to the pay of senior executives. BP, Total, and Norway’s state oil company have already set short-term targets.
Since then, Shell declared an ambition to double the amount it spends on green energy to $4bn (£3.2bn) a year, in a sign of how the Anglo-Dutch company is looking to speed up its move to a future beyond oil and gas.
Shell investor Legal and General, said: “It is a very strong message from the world’s second-largest oil company. As investors, we will go to other companies about what they can do…”
BIG MINERS CALL FOR A CARBON PRICE
Woodside Petroleum has joined mining giants BHP and Rio Tinto in calling for a price on carbon to help with emissions reduction targets and the transition to renewable energy.
Its CEO said: “Investors are increasingly concerned about the company’s sustainability measures, and the issue should be dealt with through an appropriate global approach. We need to ensure the most effective energy gets into the system. We don’t want to have perversive outcomes where lowest-cost energy suppliers are competing against renewables, and we end up in a situation where we’ve invested a lot in renewables see no benefit from a carbon point of view.”