Weekly News | 9th to 15th 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 | ECB, IMF call for global climate disclosure standard for corporates 

• According to the European Central Bank and the International Monetary Fund, a global standard setter for corporate climate disclosures should correspond with European and US counterparts for easier implementation across jurisdictions and to avoid fragmenting information to investors. 
• While many support the formation of global norms, they also demand improved definitions of important concepts, a longer phase-in period, and for them to be “interoperable” with standards developed by the European Union and the US Securities and Exchange Commission. 
• The EU expects to finalize its first batch of ESG disclosure standards by November, with the SEC following suit by the end of the year. 
• Read more about this story: Reuters, IB Times 

Comment from Codo: By speaking together with the International Monetary Fund, the European Central Bank confirms the EU’s ambition to position itself as the leading global influencer on climate finance standard-setting. With the US now catching up – the SEC is getting ready to release its new regulation on climate disclosure, and Asia including Japan running late, interoperability between European and American standards is the next logical step toward a global climate disclosure system. 

Asia | South Korea pension fund under pressure to reduce coal investments 

• The National Pension Service of South Korea, the world’s third-largest retirement fund, is criticized by opposition leaders and NGOs for potentially weaker-than-expected measures to reduce coal investments. 
• The fund managing $700 billion in assets is considering various possibilities, including limiting ownership in companies that generate more than half of their revenue from coal mining and electricity generating, which is a far more lenient threshold than global peers. 
• South Korea has set a deadline to zero out emissions by 2050 but President Yoon’s reluctance to accelerate a transition away from existing energy sources may have reduced the pressure on the state-owned NPS to follow global pension managers in blacklisting fossil fuels. 
• Read more about this story: Bloomberg 

Europe | Spain turns on Europe’s biggest solar power plant 

• Iberdrola powered up Europe’s largest solar project in western Spain, as the government increases renewable energy generation to reduce dependency on fossil fuels. 
• Due to Russian gas restrictions, Spanish power is trading nearly three times higher than the five-year seasonal average. 
• Spain aims to get almost three-quarters of its electricity from renewables by the end of the decade, up from about 47% last year. 
• Read more about this story: Bloomberg, Iberdrola 

Comment from Codo: Iberdrola set its ambition to become a leader in renewable energy 20 years ago, investing in clean power while closing coal and oil plants. In 2022, the company opens the largest solar farm in Europe and demonstrates how locally-sourced renewable power is providing resilience to energy systems, in front of a crisis situation. Only by setting a long-term vision aligned with a low-carbon world and supported by a concrete transition plan will companies manage to overcome the challenges of the next decades.  

Asia | India to miss renewable electricity goal, according to experts 

• According to analysts, India will miss its renewable electricity target by the end of the year due to “multiple challenges” such as a lack of financial assistance and import taxes. 
• The goal set in 2018 would have expanded India’s renewable capacity to 43% of the country’s current electricity mix. The government now hopes to meet the target by mid-2023. 
• India, the third largest CO2 emitter after China and the US, recently finalized its climate targets and announced that by 2030, 50% of power generation will come from sustainable energy sources. 
• Read more about this story: Nikkei  

The US | Senate bill to boost the US renewables investments 

• For the first time, investors looking to put money into clean energy projects in the US can rely on at least a decade of substantial federal subsidies, giving them long-needed confidence in the world’s third largest renewables market. 
• Last year, wind and solar accounted for only 12% of total electricity output in the US. However, decarbonizing the nation’s electrical industry by 2035, as stated by the Biden administration, will require significantly more. 
• Longer-term tax breaks under the $430 billion package voted by the Senate would “open the floodgates” for more financing, leading to an upcoming “golden decade” experts say. 

• Read more about this story: Reuters 

Japan | Green transition bonds surge in Japan, with $2 billion issued this year 

• Japanese companies have issued 285 billion yen ($2.12 billion) in transition bonds this year through July, 14 billion more than the total of 2021, as they capitalize on increased investor interest in ESG concerns. 
• Steelmakers, oil companies, and other businesses that cannot reach net-zero emissions rapidly issue transition bonds to assist funding efforts to reduce their carbon footprints. Buyers must be presented with specified emissions goals and decarbonization measures by issuers. 
• From January 2021 to July 2022, Japanese companies accounted for around 40% of the $6 billion in transition bonds issued globally. However, there remain concerns overseas about whether they genuinely aid in decarbonization. 
• Read more about this story: Nikkei 

Comment from Codo: Though seeing “green transition” bonds taking off in Japan is encouraging, let us not forget that there is no regulated definition of “green” or “transition” in Japan. Unlike the EU, the country has not established any taxonomy defining what investments and activities can be considered as contributing to a “green transition”. As a result, some companies issuing such bonds include fossil fuel installations as part of the financed activities, raising questions about the credibility of their contribution to building a low-carbon economy.