Weekly News | 26th July to 1st August 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 | ISSB under scrutiny for new rules protecting profits over planet 

• The International Sustainability Standards Board (ISSB), the organization tasked with establishing global climate reporting standards for the foreseeable future, is criticized for putting corporate interests ahead of the planet. 
• The main source of criticism is that the ISSB’s proposals don’t involve the principle of ‘double materiality’, since they require corporations to disclose the material impact of outside ESG risks on their business without specifically demanding extensive disclosures about the impact of their operations on the environment and society. 
• The importance of this principle was recognized and recently adopted by the EU to give investors a clearer view of overall corporate impact. 
• Read more about this story: Bloomberg  

Comment from Codo: Frameworks for corporate climate governance usually fall into two categories: those focusing on the risks that climate change represents for companies (e.g. TCFD), and those focusing on the risks that companies represent for climate because of their environmental impact (e.g. CDP scoring). Both sides are essential: the first one is needed to prevent financial instability despite climate change, the second one to ensure that efforts are made to limit climate change. This is why the EU is introducing this principle of double materiality in new regulations such as the Corporate Sustainability Reporting Disclosure (CSRD). 

The U.S. | U.S. Senate to pass $369 billion climate spending deal 

• The $369 billion climate and tax package forged in a surprise deal by Senate Democrats constitutes the biggest single climate investment in US history. The deal, if it passes, would unlock investment over the decade in climate change-fighting strategies including investments in renewable energy production and tax rebates for consumers to buy new or used electric vehicles. 
• The package, called the Inflation Reduction Act, would cut U.S. emissions by 40% by 2030 and help put the U.S. on track to meet President Biden’s goal of cutting emissions by as much as 52% from 2005 levels by the end of the decade. 
• Read more about this story: Bloomberg, NY Times 

Europe | British fashion brands investigated by regulator over greenwashing 

• Three British fashion brands, including London Stock Exchange listed ASOS, will be investigated by Britain’s competition regulator over their environmental claims. 
• The investigation comes as regulators worldwide, especially in Europe, increase their scrutiny on companies that may be exaggerating their green credentials in an attempt to attract consumers and environmentally-focused investors. 
• If the companies are found to be misleading customers, the regulator will take enforcement action, including in court, if necessary. According to the British competition watchdog’s head, this initiative is “just the start” of the work in the clothing sector. 
• Read more about this story: The Guardian, Bloomberg, RTE  

Comment from Codo: The clothing sector is responsible for 8% of global carbon emissions. Climate-conscious consumers and investors will raise pressure on brands for credible climate plans and truly decarbonized products. A study conducted in 2021 by the Changing Markets Foundation found that 60% of the environmental claims of major fashion brands including Asos, H&M, and Uniqlo were misleading. The sector is also under scrutiny on gender inequality issues: the World Benchmarking Alliance found in its 2021 Gender Benchmark that less than 10% of the 35 biggest fashion firms were taking active steps to address gender pay gaps. 

Australia | Australia pushes for tougher climate action legislation 

• Prime Minister Albanese has pledged to reduce greenhouse gas emissions by 43% from 2005 levels by 2030, compared to the previous government’s objective of 26 to 28%, and to achieve net zero emissions by 2050. 
• Albanese’s proposal has underwhelmed some campaigners including the Greens Party, risking the support needed to pass the new legislation. 
• After nine years of fossil fuel-supporting conservative governments in rule, Australia ranks second in CO2 emissions per capita among G-20 countries. Recently, the government has come under scrutiny regarding the accounting of coal mine emissions, leading to a revision in the method used to estimate methane pollution from open-cut mines. 

• Read more about this story: Bloomberg, Reuters 

Comment from Codo: Until the change of Prime Minister in May this year, Australia was one of the developed countries with the lowest climate ambition. Prime Minister Albanese has promised a “new era” of climate action and energy innovation. Australia indeed has a very important potential to contribute to decarbonization, both domestically and in the Asia-Pacific region. The change of stance of the Australian government could have consequences for Japan, which has been a long-time partner of Australia on fossil fuels (see example below). 

Japan/Australia | Japan’s Inpex net-zero plan in Northern Australia considered greenwashing by NGOs 

• The Australian Northern Territory Government and Japan’s largest oil exploration and production company Inpex have signed a non-binding Commitment Statement to reach net zero emissions, while also committing to an increase in LNG production, and an expansion of Inpex’s processing plant in 2030. 
• The two parties discussed plans for a new carbon capture and storage hub near the company’s LNG production. 

• Energy experts are questioning the viability of carbon capture to offset emissions, with local NGOs labeling Inpex’s plan as a “smokescreen”, claiming that the technology has yet to be demonstrated to function at scale anywhere in Australia. 
• Read more about this story: ABC News 

Asia | Solar power generation in Japan and South Korea hit record high in May 

• Sunlight-generated electricity in Japan exceeded 10 TWh in May, accounting for nearly 15% of overall power generation. Solar power generated more than 7% of the nation’s electricity in South Korea, an all-time high for the month. 
• Asian countries currently account for five of the top ten economies in terms of installed solar capacity, with Japan ranking fourth and South Korea ranking ninth. Yet, both countries are still heavily reliant on dirty fuels: Japan generates 68% of its power from fossil fuels, and Korea 56.2%. 

• Solar and wind power will need to generate more than 40% of global electricity by 2030 in order to maintain climate change at or below 1.5 degrees Celsius, according to energy think tank Ember. 
• Read more about this story: Bloomberg, Ember 

Comment from Codo: Year after year, renewable energy break high records in production, and low records in costs. Though this trend is easily expectable in the context of active development of renewables in most countries, what was not expected is the speed at which these records would be broken. In this context of the more rapid growth of renewable capacity and decrease in costs, one can wonder how long plans to maintain fossil-based energy solutions will remain viable: stranded assets may appear sooner than expected, and investments in solutions to keep fossil-based plants in operation (such as carbon capture) may become unprofitable.