Companies are increasingly using the Sustainable Development Goals as their strategic north star in setting targets

Companies are increasingly using the Sustainable Development Goals (SDGs) as their strategic north star in setting targets, according to The 10th Annual BSR/Globescan State of Sustainable Business Survey, which provides insight into the world of sustainable business and identifies common perceptions and practices of corporate sustainability professionals.

150 sustainability executives from the Business for Social Responsibility (BSR) network have participated and 71 per cent are either using the SDGs to set internal targets or intend to do so in the near future.

Some of the key findings of the report are the following:

-Companies are defining a new sustainability agenda. Corporate integrity and diversity and inclusion are top priorities for sustainability efforts in 2018.

-Sustainability needs to be integrated into strategy: Three-quarters of practitioners observe that effectively navigating global megatrends means ensuring that sustainability is a mainstream business issue, necessitating both organizational integration and new approaches to strategy and governance.

-SDGs are driving strategy: There has been a significant increase in companies using the SDGs to inform their goals.

-Companies have limited focus on value chain impacts: Companies take an inconsistent approach to addressing key issues across their value chains, with efforts to go beyond their own operations still limited.

-There is a need for more cross-functional collaboration: Sustainability teams still struggle to get traction with strategic planning and core business functions.

-There is room to improve communications.

-Corporate integrity and ethics are top priorities for sustainability teams in 2018.

-Companies are experimenting with new governance structures and approaches to manage evolving stakeholder concerns. This necessitates closer coordination between the sustainability, ethics and compliance, and government/corporate affairs functions.

You can read the full report here

The Global Climate Action Summit ended with new commitments announced by thousands of attendees

The Global Climate Action Summit, which took place in San Francisco from 12th to 14th September and bring leaders and people together from around the world to “Take Ambition to the Next Level”, ended with new commitments announced by thousands of states, regions, cities, business, investors and NGOs.

These commitments are aimed at avoiding risks and seizing the opportunities outlined in a suite of reports, including the new Unlocking the Inclusive Growth Story of the 21st Century by the New Climate Economy. It finds that a stepped-up transition to a low-carbon economy can result in $26 trillion in economic benefits worldwide through 2030; generate over 65 million new low-carbon jobs in 2030; avoid over 700,000 premature deaths from air pollution in 2030; or generate, through just subsidy reform and carbon pricing, an estimated US$2.8 trillion in government revenues per year in 2030.

So, some the commitments announced to get all these benefits were the following:

-An alliance of more than 60 state/regional, city governments and multinational businesses are now committed to a 100% zero emission targets through the ZEV Challenge.

-Business is stepping-forward with 23 multinational companies in EV100, with revenue of over $470 billion, committed to taking fleets zero emission.

-Almost 400 global companies along with health care providers, cities, states and regions now have 100% renewable energy targets.

-488 companies from 38 countries have adopted emission reduction pathways in line with the science of the Paris Agreement—up nearly 40 per cent from last year.

-At the Summit, 21 companies announced the Step Up Declaration, a new alliance dedicated to harnessing the power of emerging technologies and the fourth industrial revolution to help reduce greenhouse gas emissions across all economic sectors and ensure a climate turning point by 2020.

-Over 70 big cities, home to some 425 million citizens, are now committed to carbon neutrality by 2050, including Accra, Los Angeles, Tokyo and Mexico City and further 9,100 cities representing 800 million citizens are now committed to city-wide climate action plans.

-A powerful Leaders Group and a new alliance linking over 100 NGOs, businesses, state and local governments, indigenous groups and local communities was launched to fire up action across the forest, food and land agendas.

-The Investor Agenda was formally launched bringing together nearly 400 investors managing US $32 trillion of assets including CalPERS, the largest US pension fund; La Caisse de dépôt et placement du Québec (CPDQ), Danish pension fund PKA, and Sumitomo Mitsui Trust Asset Management.

-296 investors have now joined Climate Action 100+ which is working with some of the highest emitting companies to assist them in lowering emissions, getting on track with clean energy and the goals of the Paris Agreement.

Carbon Tracker Report: Demand for fossil fuels will peak in the 2020s

The Carbon Tracker Initiative, a team of financial specialists making climate risk real in today’s capital markets, published a report predicting that the peak in fossil fuel demand will have a dramatic impact on financial markets in the 2020s.

2020 Vision: Why You Should See Peak Fossil Fuels Coming shows that solar and wind will displace all growth in fossil fuels as they continue to expand against a backdrop of falling energy demand. With global energy demand expected to grow at 1-1.5% and solar and wind at 15-20% a year, fossil fuel demand will peak between 2020 and 2027, most likely 2023.

Kingsmill Bond, Carbon Tracker New Energy Strategist and author of the report, said: “The 2020s will be the decade of fossil fuel demand peaks, as one bastion after another is stormed and overwhelmed by the rising renewable tide. This will inevitably lead to trillions of dollars of stranded assets across the corporate sector and hit petro-states that fail to reinvent themselves.”

The impacts of the energy transition will be vast: The fossil fuel sector has invested an estimated $25 trillion in infrastructure and there will be systemic risk to financial markets as they seek to digest vast amounts of stranded assets; the transition will directly affect companies that compose up to a quarter of equity indexes and debt markets, hitting banking, capital goods, transport and automotive sectors and fossil fuel exporting countries will suffer.

Carbon Tracker warns that the first impacts of the energy transition are already being felt: Coal-fired and gas-fired power plants in Europe and parts of the US are already being closed down because they are uneconomic; Peabody Energy, the world’s largest private sector coal producer, went bankrupt in 2016 and in 2017 electric vehicles were 3 million out of 800 million cars globally, but 22% of growth in car sales, and are set to provide all growth in car sales in the early 2020s.

Kingsmill Bond said: “Investors anticipate, so they will typically react even before companies see peak demand. This is what happened recently in the coal and European electricity sector transitions. We believe that investors will start to react faster as the energy transition works its way through the world’s capital markets.  As each sector is impacted, it becomes easier for the market to anticipate something similar happening to the next sector.”

You can download the full report here

 

 

EU ETS Monthly Report – August 2018

Carbon enjoyed its best-ever August this year, with the front-year contract increasing by €3.31, or 19%, to close at €21.09. In euro terms, that’s the largest monthly gain since August 2008.

Prices have always risen during the month of August, supported by the annual 50% cut in auction volumes during the peak of the holiday season, but this year additional factors sparked the market’s performance.

Firstly, the 16-month bull run has brought an overwhelming bullish sentiment to the market: compliance buyers are now more proactive and looking to lock in low prices wherever possible. This together with speculative activity means that any price dips are heavily bought; as a number of traders have put it: “nobody wants to be short in this market.”

Secondly, power and fuel prices rose sharply in August: German calendar 2019 baseload power jumped 16%, and calendar 2019 API2 coal added 7.1%. At the same time, NBP winter 2018 natural gas gained nearly 18%. The result was a significant improvement in the clean dark spread at the expense of the clean spark spread, and a boost for EUA demand.

Taken in conjunction with the cut in auction supply, the conditions created a “perfect storm” for carbon prices to rise significantly.

EUAs rose from around €17.40 to €18.00 in the first half of the month before demand exploded. Allowance prices gained as much as €3.80 in the second half as buyers flooded the market and chased prices higher.

Average trading volume in the December 2018 contract was just 8.7 million tonnes a day during the first two weeks, but jumped to more than 14 million tonnes/day in the second half of the month.

Some strategy-based traders had predicted an effort by speculators to drive the EUA market higher in order to set a new level before the end of the supply-constrained month, but the impact of nuclear outages in France and later in Belgium added a further dimension that traders had not expected.

Power was therefore the biggest factor in carbon prices during the second half of the month, and may well dictate EUAs’ price direction in September as well.

September sees auctions revert to their normal size, around 82 million EUAs compared to August’s 46 million. This additional supply may take the heat out of the market, while a significant September options contract expiry may also lead to some selling. The previous options expiry in June triggered a €2.30 drop in prices.

The resumption of full auction volumes, together with the expiry of September options contracts could bring bearish pressure into the market, and traders have already noted carbon’s sideways movement in the final week of August as evidence that in the absence of abnormally strong power prices, carbon would already have started to correct downwards.

EU ETS Report – June 2018

Carbon prices rose for the 14th consecutive month in June even though the market endured some significant profit-taking after prices reached a new seven-year high.

The December 2018 EUA futures contract ended the month at €14.99, a gain of 0.5% from the end of May.

EUAs have trebled in value since the end of May 2017 as speculative traders entered the market and built significant long positions in anticipation of further gains after the Market Stability Reserve begins to remove surplus allowances from the market.

The impact of this buying has been exacerbated by industrial companies beginning to shift to a more proactive compliance strategy. Previously these businesses chose to cover their shortfall by buying during the first quarter of every year, but faced vastly increased costs in 2018 as prices more than doubled.

Most participants expect to see industrial companies managing their EUA price risk more proactively in future, and this may add to the buying interest going forward.

Prices continued their steep rise in the first week of the month and peaked at €16.70, after which traders began to take profit from long positions. EUAs plunged as much as 15% over the next fortnight to a low of €14.18 but stabilised towards the end of the month at around €15.00.

The decline in prices was slowed by numerous technical support levels, mostly in the region either side of €15.00, and in particular at €14.22. The strong demand that characterised the bull market of the first quarter had largely dissipated by the time prices reached €16.70. As prices moved above €16.00, traders reported greater caution being exercised in the market as participants waited for a sell-off to begin.

After peaking on June 5, EUAs punged €2.00 in ten days, and reached a low of €14.16 on June 20. Total screen-traded volume in the December 2018 contract on ICE Futures was 342 million tonnes, the second largest total since the market crash of January and February 2016.

Participants say the decline is a temporary phenomenon, as the market is entering the peak of the summer holiday season in July and August, when liquidity usually shrinks and demand from compliance compaies is at its lowest.

While July prices are broadly expected to stabilise at current levels, there remains a risk that the relative lack of participation may allow speculative traders to force prices up or down. However, the 50% reduction in auction supply in August is likely to stabilise the market, traders say.

And as the start of the Market Stability Reserve begins to loom larger on the horizon, sources suggest that demand may pick up as more speculators and coimpliance companies look to acquire EUAs at what may be relatively low prices.

New CDM issuance rules penalise developers and discriminate against smaller companies

The UNFCCC’s Clean Development Mechanism (CDM) has enjoyed great success in deploying more than $300 billion of investment into clean technology in developing countries around the world.

But recent decisions by the UNFCCC risk alienating many of the companies whose activities support this mechanism and discriminate against smaller enterprises.

Returns on CDM investments have fallen far short of expectations after prices for CERs collapsed and demand plunged. Project developers face shrinking returns but their costs remain high.

Unfortunately, the UNFCCC’s reaction to the drop in demand and prices for CERs has been to penalise project developers by requiring them to pay their Share of Proceeds before submitting their Request for Issuance rather than after the CERs have been generated and possibly, monetised.

This means that smaller developers have to divert precious cash flow to the UN before they have realised the assets. Bigger companies with greater financial resources naturally don’t find this a problem.

What’s more, the UNFCCC has introduced financial penalties for developers who withdraw requests for issuance or whose request is rejected. Developers stand to lose up to $30,000 for each issuance that is withdrawn after it has been published or that is rejected.

The CDM secretariat is already notorious for rejecting requests or issuance for the flimsiest reasons, ignoring the merits of the project and the accuracy of its verification.

Such financial penalties will act as a powerful deterrent to developers from requesting issuance, and could even kill off remaining interest in the CDM. Project developers take on enormous risk when setting up CDM projects in terms of time, money and resources, and to face a new, additional risk from the mechanism’s administrator is unacceptable.

Again, larger companies can devote greater resources to ensuring requests for issuance are compliant, so this decision also discriminates against small and medium sized enterprises which have fewer resources to devote to administration.

Project developers and investors must unite in their opposition to these new financial demands, which act as a deterrent to new investment and development and as a punitive tax on their activities, which benefit both the UNFCCC as well as the entire planet.

We hope that developers can agree a common approach and appoint a representative body to bring these concerns to the attention of the CDM authorities.

Alexis L. Leroy

CEO, ALLCOT Group

ICAO Council reaches landmark decision on aviation emissions offsetting

The ICAO Council made important headway on the key international standards supporting the UN aviation agency’s Carbon Offsetting and Reduction Scheme for International Aviation, or ‘CORSIA’.

Its adoption of the First Edition of Annex 16, Volume IV, to the Convention on International Civil Aviation (Chicago Convention), comes less than two years after ICAO’s 192 Member States achieved their historic agreement on CORSIA at the Organization’s 39th Assembly, an emissions-offsetting first for any global industry sector.

“Gaining agreement on this new Volume IV to Annex 16 is critical to helping States and airlines to operationalize CORSIA per its established deadlines,” stressed ICAO Council President Dr. Olumuyiwa Benard Aliu. “This especially pertains to its monitoring, reporting and verification (MRV) scheme, which describes in detail what has to be done, by whom, starting with the collection of information on international aviation CO2 emissions by airlines as of January 2019.”

Also approved at the Council’s meeting was the 2018 version of the ICAO CORSIA CO2 Estimation and Reporting Tool (CERT), which provides a simplified tool for small operators to monitor and report their CO2 emissions, and further agreement was achieved around the specifics for a CORSIA Central Registry (CCR).

Future Council work on CORSIA will focus on the timely realization of the remaining CORSIA Implementation Elements, including the evaluation of carbon market programmes against a set of robust criteria, the determination of its Eligible Emissions Units, and which aviation fuels will meet the CORSIA Sustainability Criteria.

The adoption of CORSIA SARPs complements other elements in the basket of measures including the enhancement of air navigation efficiency, the adopted aircraft CO2 certification standard and the long-term vision on the use of sustainable aviation fuels.

Developing countries face additional interest payments of up to $168 billion over the next ten years due to climate change

Developing countries face additional interest payments of up to $168 billion over the next ten years as a result of climate change, according to new research that has been prepared by Imperial College Business School and SOAS University of London.

The study is the first systematic effort to quantify the relationship between climate change, sovereign credit profiles, and the cost of capital in a sample of developing countries. It finds that, over the past decade, vulnerability to climate change has already raised the cost of debt by 117 basis points, translating to more than $40 billion in interest payments on government debt alone. Incorporating higher sovereign borrowing rates into the cost of private external debt, the figure reaches $62 billion across both the public and private sectors.

However, the researchers also found that investments in climate resilience can help improve fiscal health at the national level.

“Our work demonstrates that climate change is not only imposing economic and social costs on developing countries, but it is also amplifying existing risks that are already priced in fixed income markets. These impacts will grow. The good news is that investments in climate adaptation can not only reduce social, ecological and economic harm, but can buffer against fiscal impairments.  But to be effective, these investments need to be made now” Dr Charles Donovan, Director of the Centre for Climate Finance and Investment at Imperial College Business School, said.

Investments in effective climate mitigation and adaptation projects could include planting trees and building dikes for coastal protection in countries such as Bangladesh, Barbados, Cambodia, Fiji, Haiti, Honduras, Sri Lanka and Vietnam.

You can download the report here

Climate Financing by the world’s six largest multilateral development Banks Hit Record High of US$35.2 billion in 2017

Climate financing by the world’s six largest multilateral development banks (MDBs) rose to a seven-year high of $35.2 billion in 2017, up 28 percent on the previous year. In 2016 climate financing from the MDBs had totalled $27.4 billion.

The MDBs’ latest joint report on climate financing said $27.9 billion, or 79 percent of the 2017 total, was devoted to climate mitigation projects that aim to reduce harmful emissions and slow down global warming.

The remaining 21 percent, or $7.4 billion, of financing for emerging and developing nations, was invested in climate adaptation projects that help economies deal with the effects of climate change such as unusual levels of rain, worsening droughts and extreme weather events.

The latest MDB climate finance figures are detailed in the 2017 Joint Report on Multilateral Development Banks’ Climate Finance, combining data from the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group and the World Bank Group (World Bank, IFC and MIGA).

Latin America, Sub-Saharan Africa and East Asia and the Pacific were the three major developing regions receiving the funds. The report contains a breakdown of climate finance by country.

The sharp increase came in response to the ever more pressing challenge of climate change. Multilateral banks began publishing their climate investment in developing countries and emerging economies jointly in 2011, and in 2015 MDBs and the International Development Finance Club agreed to joint principles for tracking climate adaptation and mitigation finance.

Climate finance addresses the specific financial flows for climate change mitigation and adaptation activities. These activities contribute to making MDB finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development, in line with the Paris Agreement. The MDBs are currently working on the development of more specific approaches to reporting their activities and how they are aligned with the objectives of the Paris Agreement.

You can download the report here

Sport and Sustainability International webinars

Sport and Sustainability International (SandSI), a not-for-profit international organization based in Geneva that leverages the unequaled power of sport to encourage mind and behavior changes towards more responsible conducts, announced the launch of three free webinars.

The first one was about sustainable events certification-ISO 20121 from Euro 2016, Roland Garros and World Economic Forum and attendees could hear some success stories from the sports industry on improved social, economic and environmental business practices. If you could not attend the webinar, the record is available here

The moderator of this webinar was Russell Seymour, Chair-BASIS (British Association for Sustainable Sport) and the speakers, recognised experts in the field of sport and environment, were Neil Beecroft, ex-Sustainability Manager-UEFA, Viviane Fraisse, Head of Sustainable Development – Roland Garros, and Caroline Durand-Gasselin, Sustainability Specialist – World Economic Forum.

Beecroft spoke about the International Olympic Committee (IOC) sustainability strategy and explained that candidate cities should follow official criteria and recognized standards. He also emphasized that one of the most important standards is ISO 20121 and he explained how UEFA EURO 2016 earned this certification for operations at the tournament in France.

Fraisse explained that French Tennis Federation has put sustainability at the heart of its strategy and she told that they decided to measure and reduce their impact. Thanks to it, the French Tennis Federation got ISO 20121 in 2014 and they renewed it in 2017.

For its part, Durand-Gasselin told how the World Economic Forum Annual Meeting in Davos got ISO 20121 and recommended that people who organized events should use existing best practices to feed in a practical approach to sustainability to create a system for action, that is to say, structuring the approach to sustainability.

The next two webinars of this series will be on Carbon offset and UN SDGs applicable to sport events.

If you want some information, you can write at info@sandsi.org