Weekly News | 1st to 14th June 2023

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. 

Japan | Shareholders’ pressure mounts on Toyota to cut emissions 

• Toyota faces more and more pressure from shareholders regarding governance structure, climate policy, and its approach to electric vehicles.  
• Glass Lewis, a U.S. proxy advisory firm, has urged shareholders to vote against the reelection of Toyota Motor Chairman Akio Toyoda and expressed concerns about the lack of independence in the automaker’s board, citing CO2 emission reporting issues and the need for improved disclosure on lobbying activities. 
• Japan’s heavy reliance on fossil fuels raises concerns of a competitive disadvantage and an environmental policy out of step with the global community, especially linked to the question of the production of fully electric cars. 

Read more about this story: Financial Times, The Japan Times, Nikkei Asia 

Codo’s comment: Toyota was already criticized in 2021 and 2022 by some of its foreign shareholders on climate matters. In 2023, for the first time, three European asset managers have filed a climate resolution for the car manufacturer’s annual general meeting. In their filing, AkademikerPension (Denmark), Storebrand Asset Management (Norway) and APG Asset Management (The Netherlands) refer to the analysis of independent think tank InfluenceMap, which ranks Toyota as “one of the most negative companies on climate lobbying”. 

Asia | New carbon credit trading platforms in Singapore and Japan 

• Singapore launched Climate Impact X, a new carbon credits exchange platform, as the city-state bets on the growth of an industry that has been under growing controversy for being associated with corporate greenwashing.  
• Some of the first users of the platform include Chevron, Vitol, Standard Chartered and China’s CICC. Climate Impact X hopes to challenge other global exchanges, by focusing on fewer but higher-quality carbon offsets projects. 
• In Japan, SBI Holdings and Asuene announced the creation of Carbon EX, a joint venture that will operate a carbon credits trading platform for offsets generated in Japan and abroad. This follows a similar move from Tokyo Stock Exchange, who led a first experiment at the end of 2022 and plans to launch its own platform in 2024. 

Read more about this story: Reuters, Bloomberg 

World | Verra’s CEO resigns following controversy around the company’s carbon credits 

• The CEO of Verra, the world’s leading carbon credit certifier, announced his resignation amid concerns about approving worthless offsets. David Antonioli, who led the organization for 15 years, will step down next month. 
• Verra has issued over one billion carbon credits under Antonioli’s leadership, but it has also faced accusations of approving ineffective offsets that could undermine climate commitments. 
• The company, dominating the $2bn voluntary carbon market, faced criticism for its certification process and rainforest credits’ environmental integrity. 

Read more about this story: Climate News Home, The Guardian 

Codo’s comment: In February this year, an investigation by two European newspapers and a non-profit organization revealed that more than 90% of Verra’s rainforest offset credits – among the most commonly used by companies – were likely to be “phantom credits”. This story added to a growing wave of distrust regarding carbon credits which are becoming more and more associated with greenwashing. The new carbon credit trading platforms recently announced in Asia (see above) have an opportunity to position themselves as next-generation platforms, offering higher-quality and better controlled carbon offset projects. 

Europe | EU regulators observe instances of greenwashing throughout the financial sector across the bloc 

• Banks, insurers, and investment firms in the EU have been found to make “misleading claims” about their sustainability credentials, according to EU watchdogs. 
• The European Securities and Markets Authority (ESMA) confirms that misleading claims can encompass various aspects of a product or entity’s sustainability profile, including ESG governance and resources. 
• The European Banking Authority (EBA) has noted a clear increase in the risk of misrepresenting sustainability efforts among EU financial institutions. 
• The EU is taking action against greenwashing through the development of mandatory ESG disclosures and the issuance of final reports and recommendations on potential changes to EU rules by May 2024. 

Read more about this story: Reuters, Financial Times 

North America | Canada to invest $9 billion for cleaner oil production 

• Canada is investing billions of dollars in an oil industry plan to convert highly polluting oil into cleaner forms, despite concerns about the viability of the technology and the industry’s future. 
• The tar found in Canada’s northwest region, historically used by indigenous people to waterproof canoes, was refined into crude oil by Suncor Energy in the 1960s, leading to Canada becoming a major oil producer. However, the energy-intensive extraction process makes Canadian oil one of the most environmentally damaging. 
• To address carbon emissions while supporting the oil industry, Prime Minister Trudeau’s government has committed $9.1 billion in tax credits for carbon capture projects, aiming to capture and reduce emissions from oil sands sites. However, the effectiveness of carbon capture technology has been inconsistent, making this a risky strategy. 

Read more about this story: Bloomberg Green, Financial Post 

Codo’s comment: Investments aiming at making the production of fossil fuels less polluting are questioned by climate experts: even if the production of oil becomes cleaner, the end product remains a source of energy that will emit massive amounts of CO2 when burnt by the end-user. As calls to put fossil fuel phase-out on the agenda of UN climate talks are growing, new investments into fossil-related technologies represent a risk of stranded assets.