Weekly News | 16th to 31st July 2023

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week. 

World | International Sustainability Standards Board takes the helm in corporate climate disclosures monitoring 

• The International Sustainability Standards Board (ISSB) will take over monitoring corporate climate disclosures from the Task Force on Climate-related Financial Disclosures (TCFD) starting next year, as announced by the Financial Stability Board (FSB) on July 13. 
• The ISSB recently published its first sustainability and climate-specific disclosure standards, which were praised by the FSB as a significant achievement. The FSB urged the International Organization of Securities Commissions to endorse these standards to facilitate their adoption across different jurisdictions. 
• The FSB’s future steps include working on interoperability to prevent double reporting and developing a global framework to ensure the reliability of disclosures. They also aim to build metrics that measure forward-looking climate risk. 

Read more about this story: ESG Insider Newsletter, IR Magazine 

Codo’s comment: TCFD currently stands as the most widely recognized and required reporting standard within the sustainability space. By having the ISSB take over the monitoring of TCFD they will be able to transition the existing TCFD reporting more seamlessly towards ISSB reporting. This is a critical step for the ISSB reporting standards to achieve their oft-promised mandate to become the universal baseline for sustainability reporting. Those who currently report to TCFD should take this as a strong indication of a shift towards phasing out TCFD in favor of ISSB. 

World | Xie Zhenhua and John Kerry concluding their meeting around climate  

• US climate envoy John Kerry met with China’s special envoy on climate change, Xie Zhenhua, to resume climate dialogue. 
• Discussions focused on addressing methane emissions and China’s coal consumption.
• Jake Sullivan, US national security adviser, urged China to fulfill its responsibilities under the Paris Climate Agreement. 
• Xinjiang’s Sanbao township records a temperature of 52.2C, surpassing historical records, with the extreme heat expected to persist. 
• China’s national carbon market’s carbon price is predicted to double to 130 yuan per tonne by 2030. 
• Advancing energy reform in rural areas in China requires coordination among diverse stakeholders. 
• Spending on clean and dirty energy remains intertwined due to an outdated market structure in China. 

Read more about this story: Carbon Brief, Reuters, Bloomberg 

Codo’s comment: China is the World’s greatest carbon polluter. Though they have long made promises to halt new coal fired power plant development, they have yet to fulfill those promises. At the same time as they contribute more than any other country to climate change, China also has been and will continue to experience the most severe effects of adverse climate and biodiversity loss. Oftentimes when China is called into question over its failure to effectively address emissions, the ruling party, the Chinese Communist Party (CCP), will highlight the United States’ greater carbon contribution to the carbon budget. As such, these multi-lateral conversations are perfectly poised for both the modern mass emitter and the historical mass emitter to address their climate responsibilities through meaningful action. Actionable strategies, however, are hampered by sour political relations and unlikely to be seen as a result of these meetings. 

World | EU’s most stringent ESG rule sets it on a collision course with the US. 

• The US is cautious of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), seeking to defend US sovereignty and expressing concerns about certain requirements not directly related to the EU. 
• The EU parliament is confident the US will embrace global accountability of ESG legislation once lobbyists’ distractions are resolved, despite US skepticism and concern over the extraterritorial scope. 
• The EU’s comprehensive ESG rules are set to reinvent capitalism and steer money into greener activities, contrasting with the United States’ Republican party’s efforts to limit or outright ban ESG reporting and investment in the US. 

Read more about this story: Bloomberg Green, Fortune 

Codo’s comment: The EU and the US have been competing for the role of Global Green Leader since the US released the Inflation Reduction Act and the Bipartisan Infrastructure Law, both of which serve to incentivize domestic spending on green energy and infrastructure. The EU, long the recognized leader in green initiatives, has since accelerated their role out of more and more stringent ESG regulations. This global “green arms race” is a win for the environment. While the US’ political situation has led to some strife over the ESG branding and requirements, external pressure from EU supply chain regulations coupled with the Biden Administration’s diligence in addressing climate change issues through non-ESG specified avenues will likely result in American corporations conforming to international ESG regulation, even if domestic politics lags. In response, the American SEC regulatory body is expected to move in a similar, though less extreme, fashion as the EU. 

Europe | Opposition arises over Europe’s new COP28 climate pledge regarding emissions cuts. 

• Six EU nations resist updated climate pledge showing over-delivery on emissions cuts ahead of COP28. 
• European Commission aims to submit a revised pledge indicating a 57% emissions cut by 2030, but some countries find it too ambitious. 
• The EU’s climate chief Frans Timmermans says the bloc will overachieve its goals with green deal proposals in place. 
• Ahead of COP28, countries are urged to update their climate pledges, but some feel current progress is insufficient to address the climate crisis. 

Read more about this story: Bloomberg Green, Reuters 

Codo’s comment:  This article is about the conflict between European countries who wish to emphasize the EU’s international standing as a leader in addressing climate change. Outside of certain EU countries, it is highly unlikely that other countries will be able to credibly update their goals to be more ambitious. The opposite is instead true. However, even for the EU, the credibility aspect of climate pledge updates is critical. Not all EU countries are progressing at the same rate. It would likely be difficult to gain unilateral consensus given this standing. Climate pledges are not nearly as important as climate action. 2030 is only 7 years away. Regardless of whether the EU updates their reduction goals or not, they should maintain or increase the ambitions of their actions to ensure overachievement at the time the commitments come due. 

Asia Pacific | South Korea seeks missing individuals as downpour death toll reaches 41. 

• South Korea’s military dispatches over 10,000 troops to aid in rescue operations amid torrential rains, resulting in 41 deaths, 9 missing, and 35 injured. 
• President Yoon Suk-yeol orders mobilization of resources to assist survivors, victims, and recovery efforts, planning to designate rain-stricken areas as special disaster zones. 
• Defense Ministry sends 11,000 soldiers and equipment to support government efforts in finding missing individuals and restoring damages. 

Read more about this story: The Guardian, The Diplomat  

Codo’s comment: South Korea joins the extensive list of countries experiencing predicted shifts in weather patterns due to climate change. Each of these severe weather events leads to human, economic and social tolls that take time and resources to recover from. As climate change progresses, the events will only become more frequent and more intense resulting in less time and spare resources to devote towards recovery. Climate scientists have warned of these results for decades. We now need to come to terms with their reality and immediately pivot to avoid the worsening consequences yet to manifest. 

World | Extreme heat scorches Europe 

• Blisteringly high temperatures continue in southern Europe, with a second extreme heat wave named “Charon” following “Cerberus”. Especially, Italy, Spain, and Greece face unrelenting heat and wildfires. 
• Heat wave predicted to worsen, with temperatures above 40 degrees Celsius in Italy 
• Extreme heat felt globally, WHO urges action on climate crisis. Extreme weather events to become more frequent and intense due to human-caused climate crisis 
• The extreme summer in the northern hemisphere in 2023 highlights the slow progress in curbing emissions. 
• Global temperatures hit record high of 17 degrees Celsius, just above the previous record of 16.9C in August 2016, emphasizing the dangers of increasing greenhouse gas emissions from fossil fuels. 

Read more about this story: CNN, The Japan Times 

Codo’s comment: Extreme heat is just another form of severe weather event caused or exacerbated by climate change. As discussed above, we are just starting to feel the effects of our failure to mitigate climate change. If we do not drastically change now, not only will these events grow more severe and more frequent, the other climate change induced consequences (sea water inundation, famine, spread of disease, climate refugees, etc) will also invariably come to pass.