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BY: CHRIS BARRETT  – CARBON STRATEGY GROUP

The pace of change continues as sovereign states and large corporates take decisive action in the battle against climate change.

The fight for leadership in the battle against global warming is continuing as Boris Johnson announced a 10-point plan for delivering net zero by 2050 by setting tough actions for delivery by 2030. These are:

The Ten Point Plan: ‘a game changer’
1. Quadruple offshore wind capacity by 2030
2. Develop 5GW of low carbon hydrogen capacity by 2030
3. Advance nuclear as a clean energy source
4. Accelerate the transition to electric vehicles
5. Invest in zero emission public transport, cycling and walking
6. Invest in zero emission planes and ships
7. Make homes, schools and hospitals more energy efficient
8. Become a world leader in carbon capture technology
9. Protect and restore our natural environment
10. Drive the innovation and finance needed to reach these energy ambitions

This alongside the existing policies we have in place makes the UK the 4th most attractive country for investing in renewable projects.

We have also seen calls from G7 nations to end funding for overseas coal generation and the USA has ordered US federal agencies and financial regulators to develop climate risk strategies in recognition of the threat the climate crisis poses to the economy. Also, it is not just sovereign states that are stepping forward. Over the past few weeks there have been a rush of announcements from financial organisations who are all keen to establish their position as leaders in the battle against climate change. For example:

HSBC – have appointed a Climate Change Technology team to expand investment in climate change technologies.

Bank of England – has unveiled plans to set emissions targets for corporate bond holdings, which will align corporate bond purchase schemes with the UK’s net zero target.

Elon Musk – Meanwhile high-profile announcements by the likes of Elon Musk continue to capture the public imagination as high carbon emitting industries come under increasing scrutiny by investors.

Adding further pressure has been the recent legal and shareholder pressure on global fossil fuel extractors. Shell, Exxon and Chevron were separately ordered by institutions to cut polluting emissions faster and deeper. In a landmark ruling a Dutch district court ordered Shell to cut its CO2e emissions, including downstream among its customers, by 45% on its 2019 figures, and before 2030. Previously Shell had only announced net zero targets for 2050 and only covering Scope 1 and 2 emissions.

On top of this, The Energyst publication reports that UK investment bosses managing trillions of assets worldwide are urging G7 governments to resist climate change, by committing to clearer disclosure of companies’ climate-related risks. The key driver for them is to fend off the danger of assets becoming stranded, or even worthless. For example, oil fields plummeting in value, or property stranded in cities threatened by rising sea levels.

They argue that transparent, globally agreed principles for valuing climate-linked peril must underpin compulsory reporting of such risks, if asset managers are to help companies switch to more sustainable ways of business, and take informed investment decisions on behalf of savers.

They say the G7 must embrace:

  • Support for the Sustainability Standards Board of global accounting watchdog the IFRS
  • National financial regulators committing to mandatory economy-wide reporting on international Task Force on Climate-related Financial Disclosures (TCFD).
  • International common standards agreed and implemented by national regulators on green debt issued by governments.

It is vital such risks are reported clearly and consistently, the Association argues, if asset managers are to help companies switch to more sustainable ways of business, and take informed investment decisions on behalf of savers. It is becoming evident that businesses are beginning to look at climate change from a profit risk perspective and not simply looking at government mandates as threats and costs.

Auditel is seeing increased attention being given to sustainability driven by directives such as Environmental, Social and Corporate Governance (ESG), the Global Real Estate Sustainability Benchmark (GRESB), The Sustainability Accounting Standards Board (SASB), and TCFD (The Task Force on Climate Related Disclosures).

Traditionally, it was considered that profit maximisation is the key driver for business. Arguably to some, a driver which has pushed the plane to the edge of potential disaster. Increasingly, businesses are beginning to look at climate change as a threat to profit and are therefore taking action to combat it as part of their sustainable long term planning. i.e. profit maximisation encompasses the maximisation of sustainable, repeatable profits over a long period. This requires a stable climate.

In conclusion, it is becoming increasingly clear that businesses cannot ignore the need to take steps to get their house in order regarding sustainability, as the requirement to do so is cascaded down through the regulatory, supply chain and financial infrastructure.

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