Weekly News | 28th June to 3rd 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 | Report shows all sectors could be faced with climate litigation

• The London School of Economics (LSE) published a report showing how climate change litigants have expanded their reach to a variety of sectors beyond oil giants. Airlines, fashion firms, farming and other polluting industries have been increasingly implicated in climate lawsuits.
• The same report estimates that climate change cases against companies have more than doubled since 2015. These litigations are now considered to be one of the crucial tools to force public and private actors to account over their climate pledges and accelerate their actions to mitigate global warming.
• Read more about this story: Bloomberg, LSE

Comment from Codo: Most climate cases in the past have been filed in the US, but the trend is now expanding to other countries and regions, including Europe and Asia. The global nature of climate change also opens cross-border litigation possibilities: in 2021, NGOs filed a case in the US against Japan’s development agency JICA for its support to coal in developing countries, and German’s energy giant RWE is currently sued by a Peruvian farmer for its contribution to climate-related hazards in Peru.

World | G7 backslide climate goals over energy security matters

• G7 group said in its final communique that fossil fuel like liquefied natural gas had to be invested to as an “appropriate temporary response” to the “exceptional circumstances” of Russia’s war against Ukraine. Among them, some countries like Germany also announced their intention to restart coal-fired power stations.
• The group has consequently been intensely criticized from climate campaigners all over the world for failing to deliver expected new climate pledges, especially in the finance sector, nor accelerating their currently too weak climate commitment and actions.
• Read more about this story: Financial Times, Carbon Brief

World | Major fashion sustainability index attacked for greenwashing

• Norwegian Consumer Authority pointed out that H&M Group was using an inaccurate and misleading index to support its environmental claims. The group consequently decided to suspend the labelling of its product, as it was warned against economic sanctions if such marketing practices were to be maintained.
• The rating system, developed by the Sustainable Apparel Coalition (SAC) is also used by global major brands like Nike, Primark, Amazon, Walmart. Fashion sustainability activists started to criticize its methodology since the beginning of the year. The index has been described as “textbook greenwashing” as it provides consumers with inaccurate and misleading information.
• Read more about this story: The Guardian, The New York Times

Comment from Codo: One of the criticisms made against the SAC’s index is its lack of transparency. Activists are asking the developer to publish the methodology and make it open source. In the same way companies are asked to be more transparent about their climate plans, it makes sense that methodologies used to assess, rank or index sustainability efforts are shared with the public.

Europe | Majority of European fund managers to halt non-ESG products

• Consulting firm PwC surveyed more than 3350 fund managers operating in Europe and forecasts a steep increase in ESG assets domiciled in Europe up to 56% of European mutual funds’ assets.
• Moreover, more than 70% of the respondents plan to halt all non-ESG product launches in the medium term.
• PwC analyst explains that because of increasingly stringent regional regulations as well as collective efforts around sustainability goals at the global level, fund managers are willing to align their operation ahead of upcoming standards.
• Read more about this story: Reuters, Funds Europe

Europe | EU members agree on more ambitious climate measures

• growing concerns over energy shortages among EU countries, the group of 27 has struck a deal towards tougher climate policies. Among them, a ban on the sale of combustion engines by 2035, a reform of the EU’s carbon market and a set of prohibiting regulations over products linked to deforestation.
• Some campaigners worry however that these very ambitious goals, in alignment with the EU’s Green Deal, may be too difficult to achieve. Others point out some loopholes in the law that may deter some countries from achieving emissions reductions target by 2030.
• Ministers also presented a set of accompanying measures and put money on the table to compensate the most affected by the climate transition and help them finance their efforts toward improving energy efficiency and the introduction of low-carbon transport systems.
• Read more about this story: Financial Times, The Mainichi, Le Monde

Comment from Codo: Europe confirms its global leadership on climate, with a new set of rules and measures that will support the implementation of the union’s pledge under the Paris Agreement – a 55% cut of CO2 emissions by 2030 (vs. 1990) aiming to put the continent on the pathway to carbon neutrality by 2050. Japanese companies present on the European market or in supply chains of European groups will have to step up their own climate plans if they wish to stay competitive and aligned with increasingly demanding regional regulations.

Japan | 26% of J-Power’s shareholders support climate disclosure resolution

• The majority of shareholders of the largest coal-fired power operator in Japan turned down the joint proposals from Amundi, HSBC and Man Group supporting a better climate strategy, with the resolutions receiving between 18% and 26% of favorable votes.
• In their proposals, the European investors pointed out that the company is currently not on track to meet the Paris Agreement targets, creating “significant financial risks”. Failing to account accurately for all the emissions coming from its activities domestically and abroad, the climate strategy is considered lacking “credible targets” and a proper roadmap to reach them. The investors were also asking more transparency about the plan, as well as linking remuneration of executives with the achievement of climate goals.
• Read more about this story: Nikkei Asia, Financial Times

Comment from Codo: Even though it did not receive a supporting majority, this initiative remains historically significant, as it was the first time that a coalition of major foreign investors engaged in such a frontal manner against a Japanese company on its climate strategy. This case will most likely open the door to more. Japanese firms can decide to have a passive approach and wait for these attacks, or a proactive attitude, making sure their low-carbon transition plans are solid by having them assessed by independent auditors.