Weekly News | 20th to 26th September 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 | Biodiversity rises as a central theme of ESG investing 

• As science shows human mismanagement of the environment could lead to a sixth great extinction, biodiversity rose as one of the fastest ESG developing themes in global markets and species loss is now seen as a problem at least as impacting as climate change. 
• One of Britain’s top asset management companies partnered with two data providers to invest in “natural capital”. However, according to a report from ShareAction, an NGO promoting responsible investments, none of the world’s 75 largest assets managers currently has a dedicated policy on this subject, urging the need of biodiversity disclosure initiatives. 
• Read more about this story: Financial Times 

Comment from Codo: Following the wide adoption of the TCFD framework launched after COP21 to help companies disclose their climate-related financial risks, a similar initiative – TNFD – will offer guidelines on biodiversity-related risks. Corporates have been focused on climate change since the Paris Agreement, but this is only the first of two major global environmental challenges: even while they keep finalizing their climate plans, they now have to also start thinking about biodiversity. 

US | UN chief calls for windfall tax on energy companies

• After a first attempt early August, UN secretary-general called again on all global economies to tax the windfall profits of fossil fuel companies so that those funds can contribute to helping the most vulnerable nations to climate change and people struggling with rising food and energy prices. 
• As countries are lagging in their efforts to cut emissions, analysis showed that the world’s proven reserves of fossil fuel, concentrated in countries such as the US and Russia, would easily reduce the remaining carbon budget before climate breakdown if consumed. 
• Read more about this story: The Guardian 1 & 2 

Norway | Norway sovereign wealth fund pledges 100% carbon neutrality by 2050 

• Norway’s sovereign wealth fund, representing $1.2 trillion in assets, is gradually turning its back on carbon-based activities and intends to require the 9,000 companies in which it has invested to achieve zero net carbon emissions by 2050. 
• However, the country is Europe’s second-largest supplier of natural gas, and demand is expected to rise sharply after Russia cuts energy supplies due to the Ukrainian conflict, pushing Norway to expand its fossil fuel production. 
• Read more about this story: La Tribune, Bloomberg 

China | China keeps building overseas coal plants after vowing no new ones 

• Despite Xi Jinping having promised to stop building coal power plants overseas in 2021, China has completed 14 such facilities and is expecting another 27 soon. According to a report from NGOs CREA and ICSC, these installations are bound to emit about 140 million tons of CO2 a year in total, representing more than the national emissions of a country such as the Philippines. 
• Since 2021, China however canceled 26 projects, others facing cancelations because of financing and construction permit deficiency or converted to clean energy since their construction still has not started. Overall, this total avoidance would represent an estimated 8.6 billion tons of cumulative CO2 which will be decisive to evade 2°C of warming and carry the Paris climate targets. 
• Read more about this story: Bloomberg , CREA 

Japan | Japan starts carbon credit trading trial 

• Tokyo Stock Exchange (TSE) has been commissioned by the Ministry of Economy to start the trial of a carbon credit trading system, as Japan aims to create market mechanisms to achieve carbon neutrality. The J-Credit scheme is expected to launch next April if tests go well. 
• Even so, carbon credit scrutiny rises as firms are charged with greenwashing over marketing operations to improve their image. 
• According to Trove Research, a data analysis firm, only 10% of 3133 companies committed to net zero have purchased a “meaningful” amount of credits over the past three years, 25% more percent tending to be consumer-facing and less clear in ESG investment. 
• Read more about this story: Reuters, Financial Times 

Japan | Japan to launch compact carbon capture units by 2023 

• Mitsubishi Heavy Industries readies to launch compact carbon capture, utilization, and storage (CCUS) designed for medium and small business use next year. The technology is used to trap CO2 produced by thermal power plants or large factories to store it and possibly reuse it to create other products. 
• CCUS proves to be crucial to align with the pathway to net-zero emissions by 2050 but still shows limiting obstacles in form of the size and cost of conventional systems, that could be prevented with more government support or market incentives to accelerate its development. 
• In 2021, 195 commercial CCUS facilities were operating on in development worldwide, and more than 50 new carbon capture projects have been announced in 2022’s second quarter alone. 
• Read more about this story: Nikkei 1 & 2 

Comment from Codo: CCS and CCUS remain controversial technologies, as their real potential and commercial viability are not proven yet. Even though they were identified in a recent IPCC report, these technologies should not be used as excuses to not invest now in more mature solutions, such as renewable energy or energy savings, and to avoid deeper changes in business models to better align with a circular-based economy. In the case of Japan, NGO TransitionZero also found in a recent study that the domestic capacity for carbon storage would be fully used in less than 10 years under the current plans.