Weekly News | 18th to 31st 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 | UN warns of “catastrophic” 2.6°C global warming by the end of the century  

• According to the latest assessment by the UN, even if governments meet their current commitments, greenhouse gas emissions are estimated to lead to a global warming to a 2.6°C scenario by 2100.   
• Countries agreed at the COP26 climate summit a year ago to increase their pledges. But with COP27 looming, only a couple of dozen have done so and the new pledges would shave just 1% off emissions in 2030. To keep the 1.5°C target alive, global emissions must fall by 50% by that date. 
• A recent study from the IISD recalls that new oil and gas fields are ‘incompatible’ with the 1.5°C target, thus prompting many countries to stop new fossil fuel infrastructure development immediately to avoid disastrous consequences. 
• Read more about this story: Le Monde, Libération, UNEP 

Comment from Codo: This warning from the UN sets the tone for the upcoming COP27, that many observers already fear it will not deliver what the world needs to keep global warming under the limits set by the Paris Agreement. The 2.6°C estimate from the UN echoes the study released by CDP in September, that was focusing on firms in G7 countries and showed that companies were collectively aligned with trajectories leading to a global warming level between 2.2°C for European companies and 3.1°C for companies in Canada. Japan and the US are at the same level of 2.8°C.

World | COP27 climate summit to test resolution of world battling global warming 

• Representatives from 200 countries will gather Nov. 6-18 in Egypt to debate details around how to slow climate change and help those already feeling its impact at a time when major economies are distracted by urgent crises including war in Europe and sweeping consumer inflation. 
• With GHG emissions on track to increase 10.6% by 2030, and global concern about climate change shrinking to 48.7% in 2021, COP27 is the occasion for all countries, and especially major developing economies like China and India, to update their emission-cutting plans since last year’s U.N. Climate conference in Glasgow. 
• Among all issues, mobilizing new funding to compensate for climate-driven destruction from rich nations over loss and damage plans will be a contentious one. 
• Read more about this story: Reuters 1 & 2, The Guardian   

EU | France withdraws from controversial Energy Charter Treaty

• Speaking after an EU summit in Brussels on Friday, French president, Emmanuel Macron announced its decision to exit the Energy Charter Treaty (ECT) to prevent energy giants to take further court action against climate policies unfavorable to their investments in France.  
• The French withdrawal will take about a year to be completed. In that time, discussion in Paris will likely move on to ways of neutralizing or reducing the duration of a “sunset clause” in the treaty that allows retrospective lawsuits. 
• By withdrawing from the ECT, France follows the Netherlands, which announced its withdrawal on October 19^th. Previously, Spain, Poland and Italy had already withdrawn. 
• Read more about this story: Le Monde, The Guardian  

Comment from Codo: The Energy Charter Treaty has been under growing criticism from environmental NGOs, as this text puts national governments at risk of being sued by major energy companies when they implement new policies in favor of climate – generally not favorable to oil and gas investments. Europe and Japan have been in opposition on this matter for a few years already, with Japan rejecting amendments proposed by the EU to improve the framework. 

Australia | First fine for greenwashing issued over misleading green statements 

• The Australian Securities and Investments Commission fined Tlou Energy $53,280 for making misleading sustainability-related statements to the Australian Securities Exchange in October 2021, marking the first ever Australian penalty for greenwashing. 
• The Commission’s Deputy Chair, Sarah Court, said that it is ‘currently investigating […] listed entities, super funds, and managed funds in relation to their green credential claims’ in a move to step-up its anti-greenwashing actions. 
• Read more about this story: The Guardian  

Comment from Codo: Financial or competition regulators worldwide are becoming increasingly strict about greenwashing. In August for instance, we were reporting about the investigations started in the UK against major fashion brands. With its green taxonomy and the upcoming reinforced disclosure framework on sustainability CSRD, Europe is taking the lead to address the issue through mandatory regulations applying to all companies and facilitating scrutiny by observers such as NGOs, national regulators or activist investors. 

Japan | ESG fund labels disappear in Japan after FSA warning 

• In the last five months, no new fund has put ‘ESG’ in response to the new regulation on ESG-labeled funds implemented by the Japanese Financial Service Agency (FSA) last year, leading to a $426 million outflow for these investments.  
• Beyond the FSA regulation, weaker yen and lagging performance impacted the ESG fund flows momentum negatively, as only 18 new green-related funds were launched this year, compared with 56 over the same period in 2021. 
• Stricter disclosure guidelines could still attract more flows, as investors develop a growing interest in ESG and impact investments, demanding more transparency from assets managers.  
• Read more about this story: Bloomberg