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With Climate Week in full swing, FT coverage has been shaking up the conversation on this side of the Atlantic.
Yesterday’s report that some US banks are threatening to leave the Glasgow Financial Alliance for Net Zero prompted a public response from its co-leader Mark Carney, who also weighed in on the UN Race to Zero’s removal of guidance to companies that “went too far” (see more about this below).
In Washington yesterday, Congressman Sean Casten highlighted Chris Flood’s article about Federated Hermes’ withdrawal from the State Financial Officers Foundation — a Republican group that has lobbied against President Joe Biden’s climate change efforts.
Meanwhile, Stuart Kirk’s controversial speech at our Moral Money conference this spring continues to drive debate here, this time at an event that I attended hosted by Standard & Poor’s.
Nikita Singhal, co-head of sustainable investment at Lazard Asset Management, was asked to respond to Kirk’s thesis. While she said investors were still working to understand the extent of climate risks, she resisted the argument that these threats were not taken seriously in the market. “You are starting to see these risks priced into companies today,” she said. “We cannot stick our heads in the sand.”
For today’s newsletter, Simon interviewed Al Gore about where he finds hope in the fight against global warming. And I look at the rising pressure on the Glasgow Financial Alliance for Net Zero, plus news about a free disclosure tool Gfanz is cooking to shed light on corporate carbon emissions. (Patrick Temple-West)
UNGA in brief
World Bank president David Malpass is facing calls to resign after he declined to say whether he accepts the scientific consensus on climate change when asked by the New York Times at Climate Week in New York City, Financial Eye reported.
Joe Biden’s speech to the General Assembly included a scathing condemnation of Vladimir Putin’s war in Ukraine, but also a conspicuous focus on climate change. Biden urged world leaders not to “walk away” from climate diplomacy, adding that “no one seems to doubt” the seriousness of the climate crisis after weather disasters in the past year.
Oscar the Grouch appeared with Michael Financial Eye on Wednesday to help the data-company billionaire publicise recycling initiatives. “What’s all this about a waste-free world,” the world’s most famous grouch complained. “I want to build a waste-full world!” (Here’s the video — the Grouch appears at about 1:23:00).
Al Gore: Attitudes on climate action have ‘crossed a threshold’
During last year’s COP26 conference in Glasgow, I attended a dinner where Al Gore delivered an impassioned speech on the need for climate action. The former US vice-president, now a green investor, seemed exasperated by the lack of global momentum, as he urged corporate executives to wake up to the urgency of the challenge.
But when my colleague Harriet Agnew and I spoke to Gore this month, with COP27 in Egypt looming, he was keen to emphasise the accelerating pace of climate action. This year, Gore said, global attitudes towards the climate crisis had “crossed a threshold”.
That shift in mindset, he said, was driven in large part by a devastating string of extreme weather events, from floods in Pakistan to drought in the western US. And it had come despite the Russian invasion of Ukraine, which had sparked worries about a setback to the energy transition as European nations scrambled to shore up fossil fuel supplies.
As we wrote in this news story, Gore warned European nations against agreeing long-term deals with oil and gas companies as businesses sought to take advantage of the energy crisis. He slammed some fossil fuel groups for using “legacy networks of influence” to secure favourable political treatment, and accused them of emulating the tobacco industry’s old strategy of “putting out false information on an industrial scale”.
But he expressed confidence that European governments were alive to these efforts to manipulate their policy choices. Globally, he said, the political tide was turning in favour of climate action, following Scott Morrison’s ejection as Australian prime minister earlier this year, and with hopes that Jair Bolsonaro could follow him after Brazil’s presidential election in October.
As for the US, Gore called the recent Inflation Reduction Act — which contained large-scale support for green investment — “truly a historic event”. And whatever the outcome of November’s congressional elections, or the general election in 2024, a return to Trump-style climate obstructionism seemed “much less likely now than some people might have considered it even a year ago”.
This was an interesting remark, given what appears to be a surging tide of anti-ESG rhetoric from Republican politicians across much of the country. Asked to comment on this trend, Gore focused on the “misguided” efforts of figures like Florida governor Ron DeSantis to push their state’s fund managers not to consider ESG factors in their investment decisions. “I think it’s unlikely that courts will allow politically motivated officials to order asset managers to ignore clearly relevant factors,” he said.
Still, the challenges remain severe, especially in developing nations that are struggling to access capital to deal with climate challenges — a point stressed in an interesting new report from Gore’s Generation Investment Management. Addressing this would require hard work from governments and private-sector financial companies, Gore said — and from multilateral institutions like the World Bank, which he has previously urged to up its game.
“The interest rate paid in Nigeria [for renewable energy investments] is seven times higher than the interest rate paid in the OECD countries,” Gore pointed out.
And while some recent work from the scientific community — notably this alarming study on climate “tipping points” — had underscored the disastrous implications of continued inaction, Gore wanted to highlight the mounting body of work that pointed to the huge benefits that could ensue from serious action at COP27 and beyond.
“The latest IPCC report tells us that if and when we reach true net zero, temperatures will stop going up globally, with a lag time of as little as three to five years,” he said. “That’s a source of tremendous hope.” (Simon Mundy)
As US banks get Gfanz angst, data project forges ahead
Less than a year since it debuted with fanfare during COP26, the Glasgow Financial Alliance for Net Zero is facing some very serious challenges.
Earlier on Wednesday, Kenza and other colleagues reported that JPMorgan, Morgan Stanley and Bank of America had threatened to leave the alliance.
The banks have been grumbling about legal risks around complying with new rules announced in June by the UN Race to Zero, which sets the standards for Gfanz members. But there’s also no denying that the attention Republicans have won with their anti-ESG rhetoric is a topic of discussion among big lenders. The attention Republicans have won by bashing corporate sustainability has come to haunt the big lenders.
“There are a lot of banks looking at this and saying there will be a Republican Congress next year, so we’re going to have to be accountable for that,” said one person involved in the discussions.
Speaking at a Financial Eye event yesterday, Mark Carney, a Gfanz architect, was asked about the FT’s reporting. He said banks “have made unprecedented commitments” to cut carbon emissions and now need guidance about how to get there.
As we wrote in yesterday’s Moral Money, Race to Zero has now published a revised interpretation guide, removing some of the most contentious language, including an explicit stipulation that “no new coal projects” should be supported by members. It continues to require members to pursue targets aligned with science-based scenarios in which global warming is limited to 1.5°C.
Carney said that the change reflected concerns about competition law. Some legal experts said that the previous wording could fall foul of antitrust rules that restrict co-ordinated action among competing businesses.
“What they can’t have is legally binding strictures — a thing called antitrust — that binds in some of those jurisdictions,” Carney said. “There was some guidance, if you will, or strictures that were put out by [Gfanz’s] Race to Zero earlier this summer, which went too far. Clarifications have been issued.
“And so the system keeps working,” he said.
Despite the emerging unrest among members, Gfanz is forging ahead with an unprecedented data project to shed light on corporate carbon emissions.
Yesterday, Gfanz announced that it wanted to launch a public emissions disclosure portal that would give people worldwide an open-access tool to analyse and sort corporate emissions. The goal is to make reporting easier to access with the goal of moving companies to clean up their operations.
For example, the EU’s corporate sustainability reporting directive (CSRD) would be among the disclosures fuelling this new data portal. It would plan to also incorporate emissions figures from for-profit players such as MSCI, Morningstar, Moody’s and S&P — an interesting element, given that these companies are enjoying surging revenue from sales of emissions data and other climate offerings.
Public comments on the proposed portal are due by October 20. And Gfanz hopes to have a pilot up and running by summer 2023. (Patrick Temple-West)
For his New York Times podcast, Ezra Klein has an interesting in-depth discussion with Princeton academic Jesse Jenkins on a multi-trillion-dollar question: “How big is the task of decarbonising the US economy?”
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Source: Financial Times