Weekly News | 30th November to 13th December 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 | World Bank, partners launch tracking system to clean up carbon offsets 

• The World Bank and its partners, including Singapore, launched a global tracking system to snuff the opaque rules controlling the carbon credits market out, called Climate Action Data Trust (CAD Trust). 
• While the $2billion private “voluntary” market remains small, governments still struggle to create an effective ruling system to trade the credits and sometimes fail to track them.  
• The CAD Trust thus aims to collate all the projects and carbon credit data in one place available to everyone to improve transparency over all the existing carbon markets. It will also host such trading activities to make it easier for both firms and countries to join the system.  
• Read more about this story: Reuters, Carboncredits   

Comment from Codo: Carbon credits, also known as carbon offsets, have been under growing criticism recently, mainly because of their opacity. A lack of traceability across the chain often makes it difficult to know if a carbon credit purchased by a carbon emitter is actually contributing to removing CO2 from the atmosphere. Other concerns include the limited amount of carbon offsets available globally. Regarding tree-planting programs for instance, one of the most popular carbon offsetting solution, it has been estimated that there is only 500 million hectares of land available on earth to plan new forests, while the tree-planting carbon offset of Shell alone uses 10% of this amount. 

World | $1.3tn Norwegian fund to vote against companies with no net zero goal 

• The chief executive of the Norwegian oil fund said it will become a more vocal shareholder. The fund plans to vote against companies failing to set a carbon neutrality goal, as well as those that lack diversity on their boards. 
• The fund, that has increased in size sixfold since the 2008 financial crisis, now owns on average 1.5% of every listed company in the world. According to its top executive, only 10% of listed companies have a clear net zero target in place. 
• Read more about this story: Financial Times 

World | Tiny investor seeks ouster of BlackRock CEO for inconsistent ESG strategy 

• Bluebell targets BlackRock (over $8trillion in assets) and its CEO Larry Fink, accusing the asset management giant of alienating clients through its inconsistent ESG strategy and failing to distance itself from investment in fossil fuel. 
• In 2021, BlackRock has been openly encouraging companies to enhance climate efforts, but in 2022, the asset manager took a more distanced position. 
• The hedge fund, owning 0.01% of BlackRock, is known for waging campaigns against important companies with very small investments, pressing Belgian chemical company Solvay to address environmental issues at one of its factories earlier this year. BlackRock is Bluebell’s most high-profile target yet. 
• Read more about this story: Reuters, Solvay   

EU | European regulator to set stricter definitions for ESG investments 

• A plan by the European Securities and Markets Authority (ESMA) to set calculable ESG and sustainable investing standards draws portfolio managers to rethink how they design and market ESG fund class. According to the plan, some of the existing ones could be requalified as “non-ESG” if they don’t have at least 80% of its holdings in investments that meet the strategy description. 

• Morningstar estimates that only 18% of such investments, representing about $4trillion of assets, currently meet ESMA’s expectations.  
• This decision is the latest in a wave of regulatory updates which made the fund managers “struggle” to keep up with the European regulator’s pace. As part of the process, the Sustainable Finance Disclosure Regulation, also known as the EU’s anti-greenwashing notebook, keeps receiving updates after its first implementation in march 2021.  
• Read more about this story: Bloomberg, Reuters  

France | TotalEnergies under multiple legal attacks for its role in the climate crisis 

• These past months, not a week goes by without actions being taken against the French oil company TotalEnergies: demonstrations in front of the group’s headquarters, a disrupted general meeting, civil disobedience operations, etc. At the same time, the firm is being attacked in court to denounce its insufficient climate commitments.  
• According to an expert at Paris 8 University, “NGOs are now using litigation as a weapon and exploring all legal avenues to increase the pressure on the group”. TotalEnergies has became increasingly emblematic and representative of oil companies, moreover after it declared significant profits since the war in Ukraine.  
• TotalEnergies is now being sued for its projects in Uganda, where the company wants to drill 400 wells, a quarter of them being in a protected natural area.  
• Read more about this story: Le Monde   

Comment from Codo: French TotalEnergies is currently under the spotlight, however all oil and gas companies, in any country, are at risk of becoming targets of similar actions if they cannot demonstrate to society how they truly transform their business to align with the requirements of moving away from fossil fuels. They are at risk of losing their social license to operate, if trust between them and society at large disappears. 

Japan | 25 years after the Kyoto Protocol, missed opportunities to build a legacy  

• On 11th December 1997, 160 parties agreed on the Kyoto Protocol at COP3 hosted by Japan. This agreement was the world’s first serious attempt to cut off fossil fuels, resulting in a global pledge to cut emissions by 5.2% between 2008 and 2012. It was an essential step towards the Paris agreement adopted in 2015.  
• Despite this major achievement, Japan has not been able to build on the legacy of the Kyoto Protocol. The country now appears as a laggard among developed countries, both for its public policies on climate and for the alignment of its companies with global climate goals. 
• Fossil fuels still heavily dominate the energy landscape of Japan, and roadmaps to 2030 do not demonstrate any ambition to phase out coal. The recent announcement to invest in nuclear energy again was also met with some criticism, as NGOs consider support would be better use for renewables. 

• Read more about this story: The Guardian