Weekly News | 6th to 13th June 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/Asia | GFANZ launches a regional hub in Asia-Pacific

• The Glasgow Financial Alliance for Net Zero, a voluntary coalition of more than 450 financial institutions working toward the reduction of GHG emissions, is about to expand its network to banks in Asia-pacific region, which accounts for half of global emissions and is heavily reliant on fossil fuels such as coal.
• For now, only 20% of GFANZ members are located in the region. Not a single bank from China, the largest emitter, joined the coalition yet. The newly established branch will work on “supporting decarbonization initiatives tailed to local circumstances” and cooperate with regional governments to “combine public funds” to attract private climate money.
• Read more about this story: Environmental Finance, Nikkei

Comment from Codo: This initiative from the Glasgow Financial Alliance for Net-Zero shows two things. First, it highlights how late Asia is in getting involved in these international alliances working on decarbonization. Second, it proves that there is a great potential to cut emissions in the region, justifying a specific regional approach. Most banks in the region lack emission reduction plans. GFANZ’s objectives is to encourage them to shift towards low-carbon strategies and to invest further in the development of renewables.

World/France | Macron, Bloomberg announce climate data transparency initiative

• French President Emmanuel Macron and UN Special Climate Envoy Michael Bloomberg launched a new committee to promote transparency over business climate actions, as part of the One Planet Data Hub initiative announced by France last year.
• Political leaders worldwide are aware of increasing needs to cope with greenwashing and make sure that companies actively work on implementing climate actions. To do so, standardized and accurate data should be made available to markets and public, stated the French presidency and the UN Envoy.
• Read more about this story: Responsible investor, Reuters

Comment from Codo: Seven years after COP21 and the Paris Agreement, France intends to keep an active role in structuring international efforts for climate. The focus on the role of finance, that was a key message of President Macron under his previous mandate, is confirmed with this new initiative that aims are improving the capacity of investors to access transparent, standardized data about corporate climate action plans.

Europe/US | Stock-price divergence highlights climate-related risks

• Stock prices’ difference tells us about the vulnerability of US and European companies since Russia’s invasion of Ukraine and the following energy crunch. This stands as another indication that it is crucial to part with fossil fuels and promote renewables, according to latest research.
• The paper shows that compared to their European counterparts, US companies are the most affected by climate transition risks, soaring since the launch of the Ukrainian conflict.
• A possible interpretation for the results is that investors predicted differentiated impacts of the conflict on climate policies in the two regions. It shows anyways the complex interactions between energy transition and financial interests.
• Read more about this story : Advisor Perspectives, Bloomberg

Taiwan | Climate stress tests for banks to become mandatory

• Taiwanese banks will have to put in place climate-change stress test on a mandatory basis from next year.
• This measure was ordered by the national financial authority to have a clear measure of the impact of potential environmental disasters on asset management. Climate change mitigation measures are becoming top priorities for financial authorities in East Asia as well.
• Read more about this story: Regulation Asia, Bloomberg

South Korea | Steelmaker predicts green rules’ impact on competition in Asia

• South Korean steel group Posco warns that upcoming environmental rules are likely to advantage Chinese and Indian rivals. Efforts to green the steelmaking process to meet regulation and customers’ expectations would make the firm less competitive in the regional market.
• The largest national polluter faces increasing calls for low-carbon steel products from its customers, including Apple. The company also shared its concerns over the European carbon border tax and the reduction of carbon credits for the industry in Korea.
• Read more about this story: Financial Times

Japan | Financial authorities to tackle greenwashing

• The Financial Services Agency (FSA) is considering several measures to prevent and sanction greenwashing and make sure that ESG financial products are as sustainable as they are supposed to be.
• Guidance and monitoring are to be reinforced on ESG products, with new requirements for asset managers to increase disclosure, following the global trend towards further scrutiny over ESG funds.
• Japan, one of the largest ESG market in Asia, is expected to be equipped with this new set of regulations by March 2023. This reform is to be part of PM Kishida’s “new form of capitalism”.
• Read more about this story: Bloomberg

Japan | National drugmaker to track supplier emissions

• Takeda Pharmaceutical joins other global drugmakers including the American Pfizer and multinational AstraZeneca to assess the GHG emissions of their supply chains in a joint initiative. Together, they aim at aligning with global trend toward decarbonization.
• A total of 1000 companies will thus use the same assessment system. The largest companies are already discussing with their suppliers in anticipation of further decarbonization efforts.
• This initiative shows how the pharmaceutical industry is leading in terms of multilateral collaboration over others. It also signals that it is ready to tackle the difficult process of gaining understanding over Scope 3 emissions and to respond to the growing pressure for further disclosure from institutional investors.
• Read more about this story: Nikkei, Nikkei Asia

Comment from Codo: A significant number of companies communicate only on their scopes 1&2 emissions – i.e. their internal emissions and the emissions from the electricity they purchase – but scope 3, which includes emissions from suppliers and customers, is in most cases the larger part of the total emissions generated by a company. Tackling scope 3 is complicated for large firms – because it needs engagement with dozens or hundreds of suppliers – but it is a necessary step to implement a real low-carbon transition.