Weekly News | 11th to 17th October 2022

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 | New WBA transport benchmark calls for investment in ESG governance and sustainable alternatives 

• WBA and CDP partnered to assess the actions toward decarbonization of 90 major transport companies including Japan Airlines, Maersk and FedEx using the ACT methodology, disclosing alarming results on the state of the green transition in this sector.  
• Amongst those companies, only 7% are committed to phasing out their use of fossil fuels as 90% of the transport sector energy directly derives from oil-derived products. Moreover, investments in alternative fuels and cleaner vehicles R&D only account for 0.3% of the total transport revenues. 
• Scope-3 emissions also linger as none of the benchmarked companies had set measurable targets for customer engagement in low-carbon alternatives, and less than 50% showed publicly available statements in the health and safety of their workers, let alone greener jobs. 
• Read more about this story: Word Benchmarking Alliance 1 & 2  

Comment from Codo: Japanese companies tend to perform better in this benchmark than in other sectoral climate benchmarks from WBA. Railway company JR Central ranks at the 8^th position out of the 90 companies. In the air transport, Japan Airlines and ANA are respectively 1^st and 3^rd, with better scores than American and most European airlines.  

World | Demand for ESG investments outstrips supply, PwC finds 

• In the following years, PwC forecasts the ESG-driven market to significantly grow from 12.4% in active strategies and 17% in passive ones between 2021 and 2026.  
• However, roughly 35 to 40% of managers struggle to provide clean examples of ESG-oriented sell or buy decisions, highlighting the lack of clear strategies though most asset management companies publicly advertise ESG policies.   
• In the first half of 2022, the European sustainable funds marked positive inflows while conventional funds suffered outflows. According to this figure, ESG investment proves to be synonymous with higher ROI, possibly encouraging firms to go over compliance costs and invest in the market.  
• Read more about this story: Financial Times, PwC   

World | What if global companies transferred ownership to nonprofits?  

• In uncertain times characterized by market volatility, rising inequality and ecological risks, Yvon Chouinard, the owner of Patagonia, overtly donated all his voting and non-voting stocks to the Patagonia Purpose Trust and the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis. 
• Due to legal reasons, the US proved timid regarding the birth of ‘shareholders foundations’, in another way much more common in Europe, and especially Denmark (Carlsberg, Novo Nordisk, etc.). In recently published research, Harvard Business Review and the consultancy firm Prophil reveal the advantages of such forms of ownership: stability during crises, constant investment, substantial philanthropic budget, and strong legacy granting both resilience and performance. 
• As shareholder foundations become adopted by more American firms, this philanthropic turn in business ownership could boost the transition to a sustainable economy. 
• Read more about this story: Harvard Business Review, Prophil  

France | All state civil servants to be educated to climate change 

• Last week, France launched its ‘training plan for the civil service on ecological issues’, a 5-year program through which the 5.6 million of state civil servants will receive basic education on the three crises environment faces today on climate, biodiversity and natural resources. 
• The training, of about twenty hours in total, will be split into three parts: ‘acculturation’ to ecological issues based on scientific data from the IPCC and IPBES; ‘practical workshops’ run by the Climate Fresk and 2tonnes associations; and a ’structuring’ part in which they will meet actors facing the stakes of climate change before undergoing coaching sessions to set this movement in motion through their actions at work. 
• Read more about this story: Les Echos, 2tonnes on Linkedin, Reporterre  

Comment from Codo: With this announcement, France positions itself as a leader on professional education to climate change and biodiversity collapse. The targeted audience represent more than 20% of the active French population. Since 2015 and the adoption of the Paris Agreement, France has been the birthplace of several initiatives aiming at raising awareness and educating to the climate crisis, including the Climate Fresk, that Codo Advisory plans to start offering to Japanese clients before the end of 2022.   

Japan | Japan pledges to fill Asia’s $40tn energy funding gap in place of China 

• Asia accounts for roughly half of global carbon emissions and fosters the world’s youngest generation of coal power plants, and while China started reducing overseas loans over infrastructure projects, MUFJ bank recently released guidelines for investors to fund sustainable projects and technologies to shift Asian countries away from fossil fuels.  
• However, Japan is known to be slower than its Occidental and Asian peers in transitioning towards greener energy due to a lack of realistic plans to address the net zero challenge.  
• According to the Financial Times, the Japanese government’s approach to lead standard-setting in the East could potentially help to turn the tables by attracting international transition financing that would benefit both the region and Japan by eluding western countries’ lack of understanding regarding differences in economic development in Asia.  
• Read more about this story: Financial Times  

Comment from Codo: In 2022 so far and despite the global energy crisis that some observers considered it could trigger a return to nuclear and fossil, renewable electricity generation kept increasing in the world, as highlighted by the Renewable Energy Institute, the leading Japanese think-tank on energy transition. Compared to the first half of 2021, renewable sources gained 12%, while fossil and nuclear respectively lost 1% and 2%.