Weekly News | 1st to 7th May 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 | Climate tech start-ups funding increasing but key sectors still underfunded

• Start-ups are hosting most of the promising next-generation technologies for decarbonization, an important part of the needed transformation of our economies. Climate tech includes the development of lower-carbon fuels technologies and optimization tools, to be used in a variety of sectors such as mobility and the food industry, that are pressured to decarbonize, because of stricter regulations and sky-rocketing fossil fuels prices.
• However, these technologies show a lot of disparity in their promises: some offer decarbonization strategy while others only help to make incremental gains through improved efficiency. More concerning is the fact that innovation is lacking in the largest emitting industries, like steel, construction, and concrete. These sectors remain critically underfunded while they are the hardest to decarbonize.
• Read more about this story: Financial Times, Carbon Pulse

Europe/Japan | European green ruling is spreading worldwide, Japan at risk if it doesn’t adapt

• Europe’s set of regulations, standards, and definitions on “green” matters, are now recognized by US companies and financial organizations as the best tools to align decarbonization objectives and industry promotion. However, Japanese companies may be harshly hit by these regulatory trends if they do not adapt promptly.
• Rating companies and international organizations such as CDP are becoming more inquisitive towards Japanese companies about their compliance with the EU’s ESG standards.
• Businesses in Japan and other Asian countries that are not classified as “green” enough for the EU will struggle to attract funding, lose investors’ trust, and be targeted by activists NGOs, warns Mizuho R&T consultant.
• Read more about this story: Nikkei, European Commission

Codo’s comment: National economic newspaper Nikkei makes a very good point here, highlighting the danger for Japanese companies to stay in a passive position and limit their efforts to what the Japanese government is asking. In a global economy, companies need to also pay attention to trends and regulations outside of Japan, as it will impact their capacity to export, stay in international supply chains, and attract foreign investors sensitive to climate plans.

Europe | Consultation group welcomes EU’s carbon removal certification mechanism

• The European Commission is proposing a policy framework to certify technology and nature-based solutions to remove greenhouse gases from the atmosphere. Stakeholders including private companies, NGOs and citizens have expressed their support to the project, under conditions.
• Feedback emphasized that the priority must remain emissions reduction, which can never be replaced by removal alone, following the last IPCC report. Facing the complexity of the framework in preparation, another challenge is the harmonization of removals with other EU schemes such as carbon markets.
• NGOs suggested that the EU sets a separate removals target, so that removal does not “interfere” with mitigation ambitions.
• Read more about this story: Carbon Pulse, European Commission

Europe | More financial incentives for energy efficiency and building renovations

• Resiliency in a geopolitical context that put pressure on energy security is possible through improving energy efficiency. Europe is currently revising its regulation on energy performance so that it aligns with European climate goals, as part of the European Green Deal. The revision will impose Member States to act for building renovation and to reduce the greenhouse gases emissions coming from energy used to heat and cool buildings.
• Financial instruments are needed to help householders finance the low energy retrofit of their properties and this means more than subsidy programs, which cannot cover the €200 billion the continent needs in this project up to 2030. More flexible, sophisticated instruments (green mortgages, renovations loans, energy-efficient investments), provided by the mobilization of the private sector, will be required.
• Read more about this story : Environmental Finance, Energypost

Korea | Top asset manager engage in international carbon credit market

• Hana Financial Investment, one of the largest asset managers in Korea, made the purchase of carbon credits a key part of its ESG plans. The group is thus about to become a leading market maker in the region, while it is already the major trader for domestic emissions.
• In parallel, the group leads ESG projects in South Asian least developed countries and invest in climate-related tech ventures.
• Korean companies have been proactively working under the country’s emission trading scheme and are now planning to get involved in international voluntary markets.
  • Read more about this story: Carbon Pulse

Codo’s comment: The introduction of a national carbon market in South Korea in 2015, following the European experience, has forced companies to include the price of carbon in their business plans, ultimately helping them improve their readiness for the low-carbon economy towards which the world is heading.

Japan | Japan proposes carbon tax for maritime transport

• Japan made a proposal to the International Maritime Organization (IMO), in an attempt to decarbonize maritime trade.
• The proposal includes a pricing of $56 per ton of CO2 from 2025, to be gradually increased from 2030 up to $135. Money collected from emitting shippers would be ideally transferred to greener operators, helping them to recover their upfront capital costs.
• Negotiations within the IMO to sort out financial solutions for cutting sectors’ emissions are going on. Japan advocates for a carbon tax system, rather than levies to rebates for cleaner vessels and carbon trading schemes, as it would allow operators to make accurate financial plan from now.
• Read more about this story: Financial Times, Splash

Codo’s comment: This proposal from Japan at the International Maritime Organization is very different from what Japan is doing at home, with a very low level of carbon pricing. Without waiting for higher carbon price set by the government, some Japanese companies such as Hitachi use internal carbon pricing to guide their investment decisions.