Weekly News | 12th to 18th July 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 | U.S. and IEA urge Asian countries to diversify energy supply chains

• The U.S. and the International Energy Agency urged Asian countries to diversify their energy and crucial mineral supply chains so that they are not reliant on countries such as China and Russia.
• China currently contributes to 80% of the worldwide supply chain for solar technology, with a 95% share expected by 2025. According to the IEA, relying on a single country for any single technology or fuel should be avoided, and Indo-Pacific countries should focus more on the transition away from fossil fuels.
• Read more about this story: Reuters, Energyworld.com

World | About 16% of asset managers claim to have ‘completed’ ESG integration

• According to the latest Square Mile research, asset managers have been aggressively investing in ESG integration across their businesses, with over 40% aiming to have achieved this by 2025.
• The investment consulting and research firm surveyed responses from 59 fund groups. 15.5% have declared they have completed their journey toward integrating responsible investment, with this figure expected to triple by the end of 2025.
• Read more about this story: Bloomberg, Greenpeace

Europe | Developers aim for absolute zero carbon with green offices

• A small group of developers is boosting the stakes in the green arms race for office space by committing to do away with carbon offsetting as a fallback method. Edge, a Dutch developer, is the latest to pledge to achieving net zero on new constructions by at least 2050.
• As businesses reassess their office needs in the aftermath of the pandemic, which brought in a wave of flexible working, sustainability has emerged as a critical battleground for landlords.
• The company, which is partly controlled by a fund run by Macquarie Group’s asset management unit, joins a tiny group of companies that have made the pledge, including Australia’s Lendlease Corp. and Copenhagen-based Nordic Real Estate Partners A/S.
• Read more about this story: Bloomberg

Comment from Codo: Using carbon offsets to reach net-zero at company level is increasingly criticized, as it basically relies on transferring pollution to another company. This does not add up when you consider the actual goal: net zero for the entire planet. Pressure will therefore grow to limit carbon offsets to activities that are almost impossible to decarbonize at the source. In other sectors, the value of solutions that do not use carbon offsets, such as this initiative from real estate developers, will increase.

Europe | Spanish Enagas to invest €4.7 billion in decarbonization by 2030

• Spanish gas grid operator Enagas plans to invest €4.74 billion by 2030 in programs to achieve energy supply security and decarbonization. The company intends to invest almost €2.8 billion in initiatives such as gas infrastructure, renewable hydrogen, and biomethane production under its 2030 strategic plan.
• According to a group of 31 European transmission system operators, between 60% and 75% of Europe’s natural gas infrastructure could be repurposed for hydrogen.
• Enagas aims for Spain to provide 2 million tons of hydrogen per year to Europe by 2030, accounting for 20% of the estimated hydrogen production in the continent.
• Read more about this story: Euronews, Reuters

Comment from Codo: In front of the challenge of a future low-carbon world, legacy energy companies that developed on fossil fuels have a critical decision to make: keep their old model alive as long as possible, or invest massively in a transition plan towards a new model, aligned with a decarbonized economy. Several major European players chose the second path, and are now global leaders of clean energy. On the other side, firms trying to resist the change are taking the risk to ultimately disappear, as they will not be adapted to the new world.

China | Fast-fashion giant Shein tries to fix bad ESG image before public offering

• In a world where ESG issues become increasingly important to investors and major fashion sustainability indexes are under scrutiny for greenwashing (see our previous weekly news), the fast-fashion giant’s advocacy of disposable fashion may be the greatest threat to its ongoing growth.
• Shein told current investors as part of its latest funding round that it hopes to have an initial public offering in the U.S. as soon as 2024, according to Bloomberg. To justify its exorbitant valuation, the retailer is rushing to strip away its image as an ESG villain.
• Most recently, Greenpeace chastised Shein for making a $15 million donation to the Or Foundation in June, a charity that assists textile waste workers in Ghana, labeling this as a “greenwashing gimmick.”
• Read more about this story: ESG Clarity

Japan | ‘Quad’ nations agree to promote hydrogen, ammonia fuel tech

• The ‘Quad’ nations of Japan, the U.S., Australia, and India agreed to promote the transition to clean power generation to improve their countries’ energy security and advance zero-emission technologies in the future.
• As the country pledged to reduce the share of fossil fuels, the Japanese government sees the use of hydrogen and ammonia as critical to the transition to zero-emission thermal power, along with other technologies for reducing greenhouse gas emissions such as carbon capture, utilization, and storage.
• Read more about this story: The Japan Times, Nikkei Asia

Comment from Codo: Japan’s reliance on hydrogen, ammonia and CCUS to reach carbon neutrality is increasingly seen as a risky bet. In a study published in February, think tank TransitionZero demonstrated that under the current plan, the carbon storage capacity of Japan would be exhausted in less than 10 years. The study also showed that hydrogen and ammonia, which availability will be limited, should be used only in sectors where other solutions are not available.

Japan | European players to give up on Japan’s offshore wind following new rules

• After having identified Japan as a promising market following the enhancement of its offshore wind goals in 2019/2020, major European companies from the sector such as Vestas and Siemens Gamesa are now distancing themselves from projects.
• The change of stance follows the announcement of new rules that would limit the size of projects, making it more difficult for foreign companies to find profitability.
• Read more about this story: Nikkei Asia

Comment from Codo: With these new rules, the government of Japan aims at making projects more accessible to mid-size companies. However, the result may be that it will drive European companies away. As offshore wind remains a challenging sector, one can wonder if Japan will be able to develop successful projects without the support of the European expertise, currently the most advanced in the world. Beyond the topic of offshore wind, the overarching question illustrated here is Japan’s willingness to open itself to foreign methods, tools and technologies when it comes to decarbonization.