NEWSLETTER | October 9, 2020
In this weeks newsletter -
Prince William launches Earthshot Prize
Efforts by the private sector to standardize ESG Reporting
California executive order for zero-emission passenger cars by 2035
Pressure from financial industry on companies and governments to reduce carbon emissions
Church of England Pension Board sells all remaining Exxon stock
EU Green Deal opens €1 billion call for project proposals
Civic AI toolkit for Climate Change
Podcast Recommendation - Public Policy and Climate
Prince William launches Earthshot Prize
Inspired by President John F. Kennedy’s “Moonshot” challenge which spurred the United States to put a man on the moon, Prince William has created a prize to tackle the biggest environmental problems of our time. Each year, from 2021 - 2030 a £1 million prize will be awarded for each of the five ‘Earthshot’ categories. (1) Protect and Restore Nature, (2) Clean our Air, (3) Revive our Oceans, (4) Build a waste-free world, and (5) Fix our Climate. Individuals, teams or collaborations of organizations, governments, banks, cities or countries are all eligible as long as they are making substantial contribution to achieving the Earthshots with evidence-based solutions. Nominations for the 2021 prize open on November 1, and will be solicited from over 100 nominating partners worldwide. The funding for the prize will come from a network of foundations including the Aga Khan Development Network, Bloomberg Philanthropies, and the Jack Ma Foundation.
“We have to have a decade of change, a decade of repairing the planet so we can hand it on to the next generation and future generations.” | Prince William
Sir David Attenborough interviews Prince William about the Earthshot Prize
Report Released in Effort to Standardize ESG Reporting for Investors and Stakeholders
In September, the World Economic Forum in collaboration with Brian Moynihan of Bank of America and the Big 4 Accounting firms - Deloitte, EY, KPMG and PwC released a white paper on “Measuring Stakeholder Capitalism Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.” The report is the conclusion of a six month effort to better align and standardize ESG reporting. This effort joins the already crowded ESG standards market with main players such as the Task Force on Climate-related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB), MSCI ESG ratings, GRI ratings and the Carbon Disclosure Project (CDP). But the creators argue that their intent is to simplify the standards ratings for wider implementation and understanding of the issue for investors. Wider application and use of metrics should be welcomed. However, as harmonization happens over the next few years, we must be wary so that it does not become another arbitrary metric score to simply please shareholders. That would entirely miss the point for developing the metrics in the first place.
Discussion of this topic in the Economist this week
Passenger Cars sold in California to be all Zero-Emission Vehicles by 2035
Governor Gavin Newsom put forth the executive direct order for the state in late September 2020. Transportation is more than 50% of California’s GHG emissions and will be a key part of California’s clean, innovation economy. This target is expected to achieve a 35% reduction in GHG emissions and an 80% improvement in oxides of nitrogen emissions from cars statewide. Medium and Heavy-duty vehicles will be required to be 100% zero-emission by 2045 where feasible. The order requires the state agencies to accelerate infrastructure development in the state. It will not prevent Californians from owning gas-powered cars or selling them on the used car market.
Financial Industry exerts pressure for carbon emission reduction
Following the clarion call to action by CEO Larry Fink in his 2020 Letter to CEOs Blackrock [BLK] has faced criticisms that its efforts amount to nothing more than greenwashing. However, with over $7 trillion in assets under management this was always going to be a delicate balance between the traditional fiduciary responsibilities to shareholders and the growing pressure of investors to integrate ESG considerations in their portfolio management. And this balance will take time to develop.
This week there were a few notable actions by the company. The first was the launch of a climate balanced Government Bond ETF for EMEA countries. This bond will allow for investors to consider climate risk from government bonds, which make up around 17% of a client’s portfolio on average. FTSE Russell estimates that portfolios built with this climate index will have 7% lower GHG emissions than a traditional one and is 26% better aligned to a 2 degree C pathway. The financial success will need to be monitored against the benchmark, however providing the option for ESG focused investors is a good step for more climate indexed financial products.
More information on the ETF - iShares € Govt Bond Climate UCITS ETF
In addition to providing climate focused financial products, the financial industry can exert influence through shareholder meetings to pressure companies to make strategic decisions aligned with emission reduction and sustainability. On October 7, Blackrock did just that by pressuring AGL Energy Ltd. [AGL], Australia’s largest power provider in its Annual Board Meeting. Their position acknowledged the company’s assessment of climate risk and previous investment in renewables. The inclusion of carbon transition performance into remuneration policy is also a positive addition to encourage executives to continue efforts at emission reduction. The main vote was regarding the closure date of two coal-fired plants, which Blackrock supported the proposal as it “believe the company, and its shareholders, would benefit from a continued focus on long-term strategic planning covering several decades” it was noted that in accordance with AGL’s 1.5-degree scenario analysis it is possible to close the coal-fired plant 12 years earlier than the current scheduled closure.
Church of England Pension Board sells all of its holdings of Exxon Mobil
The Church of England Pensions board (with assets under management of £2.8 billion) completed its divestment this week and sold all of its holdings in Exxon Mobil [XOM] as the company failed to set goals to reduce emissions produced by customers. Specifically, Exxon Mobil does not disclose its Scope 3 emissions, so it does not set targets to reduce them. This action falls into the pension fund’s commitment to ethical and responsible investing. In order to align with the United Nations climate goals, the Church of England Pensions Board had worked with FTSE Russell and TPI at LSE Grantham Research Institute to create the FTSE TPI Climate Transition Index launched in January 2020. This underweights or excludes companies which do not align with the UN Climate goals. The board has invested £600 million in the index this year.
FTSE TPI Climate Transition Index
Case Study on the Church of England Pension Fund Divestment
“Our beneficiaries need to retire into a world that isn’t impacted by the extremes of climate change. We need to manage their funds in a way that ensures we continue to deliver a return whilst mitigating climate risk and supporting the transition to a low-carbon economy. This will ultimately shape the world that our future beneficiaries retire into.” | Adam Matthews, Director (Ethics and Engagement), Investment Team, The Church of England Pensions Board
The news comes this week as another milestone hits Exxon Mobil. The renewable energy company NextEra Energy, Inc [NEE] has surpassed the energy giant in total market value. NextEra was valued at $145 billion, surpassing Exxon Mobil at a valuation of $142 billion. This is an indication of the growing interest by investors and consumers for renewable energy.
Funding Opportunity for Social Impact Entrepreneurs
Horizon 2020 Framework / European Green Deal launched a €1 Billion call for research and innovation proposals on September 17, 2020. Proposals should reflect one of eight thematic areas of the key work streams of the European Green Deal -
Increasing climate ambition
Clean, affordable and secure energy
Industry for a clean and circular economy
Energy and resource efficient buildings
Sustainable and smart mobility
Farm to fork
Biodiversity and ecosystems
Zero-pollution, toxic-free environments
Deadline for submissions is January 26, 2021. Projects selected are expected to start in autumn 2021.
“The €1 billion European Green Deal call is the last and biggest call under Horizon 2020. With innovation at its heart, this investment will accelerate a just and sustainable transition to a climate-neutral Europe by 2050. As we do not want anyone left behind in this systemic transformation, we call for specific actions to engage with citizens in novel ways and improve societal relevance and impact.” | Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth
Horizon 2020 European Green Deal Factsheet
Funding and Tender Opportunities Portal
European Green Deal information
NESTA releases Civic AI Toolkit for tackling Climate Change
The National Endowment for Science, Technology and Arts (NESTA) recently released a civic AI toolkit to serve as a blueprint for people looking to develop products aimed to help communities use data and AI to understand climate change and take action.
AI is a powerful tool which can help synthesize massive datasets and direct locally appropriate actions for individuals and communities to take. With the time scale of climate change, it can be hard for individuals to understand how small everyday actions can make a difference. This blueprint can help bring these actions into context by providing personal feedback to encourage sustained action, measure the impact of daily and collective actions, and then helping people to align their actions with their beliefs and values specific to climate action.
Toolkit can be downloaded here
Recommended Podcast -
How an Environmental Policy is Made? | The Ezra Klein Show
Ezra Klein interviewing Dr. Leah Stokes - Political Scientist at UCSB. Author of Short Circuiting Policy
Interesting conversation about the US legislative process and future climate legislation. Discusses how that future US federal climate policy will be broad and overlap with industries throughout the country and will only be the first step to real action to reduce emissions. The actual implementation of these laws will be difficult and if we’re not careful, the original intention and objective can be lost in the “Fog of Enaction”. Vigilance and action at the state and local level will be required to back up any climate legislation which is passed in the coming years.
“If you think investing in fighting climate change is expensive, wait until you have to invest to deal with the impacts of it.” | Dr. Leah Stokes