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Sustainable Finance Community Update

Working towards a sustainable future

An IFoA Sustainability Board initiative. Follow us on LinkedIn and Twitter for further updates and insights, and subscribe to the newsletter here.
16th July 2021
Nearly a third of the world’s oceans and land would be protected by 2030 under a UN plan to stem extinctions and ensure humanity lives in harmony with nature (see news section). Photo by Andreas Gücklhorn on Unsplash
In the news
G20 recognises carbon pricing as climate change tool for first time
G20 finance leaders recognised carbon pricing as a potential tool to address climate change for the first time in an official communique, taking a tentative step towards promoting the idea and coordinating carbon reduction policies. The move marked a shift from the previous four years when former U.S. President Donald Trump's administration routinely opposed the mention of climate change as a global risk in such international statements.
Carbon pricing was mentioned amongst a "wide set of tools" on which countries should coordinate to lower greenhouse gas emissions. Such tools include investing in sustainable infrastructure, new technologies to promote decarbonisation and clean energy, and phasing-out fossil fuel subsidies.
Read the article here (Reuters).
Global climate change laggards identified by MSCI emissions tracker
Greenhouse gas emissions from global listed companies are on track to exceed Paris Agreement targets in just six years, despite the plethora of net zero corporate pledges, according to a new tracker by index provider MSCI covering more than 9,000 companies. The MSCI analysis identifies some of the worst and best climate change performers.
Climate laggards include state-backed publicly listed companies based in India and China, including Coal India, Shaanxi Coal and Chemical Industry, China State Construction Engineering, and the US-based oil refiner PBF Energy.
Climate leaders include Procter & Gamble, Dutch semiconductor group ASML, brewer Anheuser-Busch, Equinor and the Chinese vehicle company BYD. However, even among the climate leaders, the tracker highlighted major gaps in disclosure.
Read the article here (FT – paywall).
UN plan would protect 30% of oceans and land to stem extinctions

A UN plan has outlined that almost one third of oceans and land must be protected by 2030 to reduce extinctions and ensure harmonious cohabitation of humans and nature. The 30% target will be a large increase from today’s 16.6% of land and 7.7% of oceans. This plan, the Global Biodiversity Framework (GBF), also outlines other initiatives such as boosting conservation funding from $100bn to $200bn a year, ending farming subsidies which lead to wildlife degradation and reformation of planning systems to ensure protection of animal species. For context, the GBF is the nature equivalent of the Paris Agreement on climate change, seeking to cut rates of extinction. Critics argue that many of the 21 targets must be met before 2030, when it is too late to reverse substantial and irrevocable nature loss.
Read the article here (New Scientist).
Climate change: US-Canada heatwave 'virtually impossible' without warming
The searing heat that scorched western Canada and the US at the end of June was "virtually impossible" without climate change, say scientists who used 21 climate models to estimate how much climate change influenced the heat experienced in the area around the cities of Seattle, Portland and Vancouver. They compared the climate as it is today, with the world as it would be without human-induced warming and concluded that the deadly heatwave was a 1-in-1,000 year event.
The study suggests that extreme events such as this could become more common as the world heats up due to climate change. Scientists worry that global heating, largely as a result of burning fossil fuels, is now driving up temperatures faster than models predict. The research has not yet been peer-reviewed. However, the scientists use well-established methods accepted by top journals.
Read the article here (BBC).
BOJ Seen Paying Banks to Lend in Battle Against Climate Change

Bank of Japan is likely to offer incentives for lending in the battle against climate change, according to economists. Most analysts expect it to model the facility at least partially on Covid-19 loan incentives introduced in March. The framework could include offers to pay commercial banks different rates depending on the purpose of lending.
The decision to support climate change mitigation efforts already takes the BOJ well beyond the conventional remit of a central bank. However, with European central banks taking the lead on dealing with the issue, BOJ officials do not want to be seen as passively sitting back, people familiar with the matter said.
Read the article here (Bloomberg – paywall).
We're reading
Reversing the trend: Managing biodiversity loss in the UK

Reversing biodiversity loss requires transformative change. To achieve this, the UK's Environment Audit Committee (EAC) in its latest report has proposed a package of recommendations spanning biodiversity monitoring, funding, policy implementation, economics and education. The IFoA’s evidence informed several of the EAC’s recommendations. The IFoA's recommendations included:

  • Reviewing the fiscal framework - the natural capital inequality, as outlined in the Dasgupta Review, should be put at the heart of the government’s economic objectives.
  • Nature-related financial disclosure, for example by supporting ongoing efforts to establish a Taskforce on Nature-related Disclosure (TNFD).
  • Building capacity and capability - the Government should explore setting up a Biodiversity Education Charter to increase knowledge of biodiversity risk within the financial sector.
  • Nature-related stress tests - similar to the BoE's climate stress tests, exploratory exercise into stress testing biodiversity loss should be conducted.
  • Fiduciary impediments - a review of the Law Commission’s 2014 report to assess the barriers to integration of climate (and biodiversity) risks into the Fiduciary Duties of Investment Intermediaries.

Read the blog here (IFoA).

Study of global climate-related mortality links five million deaths a year to abnormal temperatures

More than five million extra deaths a year can be attributed to abnormal hot and cold temperatures, according to a study led by Monash University. The study found 9.43 per cent of global deaths could be attributed to cold and hot temperatures. This equates to 74 excess deaths for every 100,000 people, with most deaths caused by cold exposure.
Of the global deaths attributed to abnormal cold and heat, the study found:

  • More than half occurred in Asia, particularly in East and South Asia;
  • Europe had the highest excess death rates per 100,000 due to heat exposure; and
  • Sub-Saharan Africa had the highest death rates per 100,000 due to exposure to cold.

Read the paper here (Science Daily)

Tune in
Imagining Climate Futures with Kim Stanley Robinson

Kim Stanley Robinson, the legendary science-fiction novelist, has a private utopian hope: “to dodge a mass extinction event.” He joins Azeem Azhar, the host of the Harvard Business Review podcast, to explore his recent novel, The Ministry of the Future, and what it would take for institutions, individuals, and emerging technologies to save millions of lives.
This discussion also covered: when civil disobedience and direct climate action may become a moral necessity, why central banks and a radical shift of economic incentives are vital to drive decarbonisation and what climate restoration is and why it offers better prospects than climate engineering.
On demand here (HBR podcast).
Opinion on
Harvard's Money Manager Has a Plan to Turn Short Sellers Against Emitters

Richard Slocum oversees investments at Harvard Management Co., the U.S.’s largest college endowment, with almost $42 billion of assets as of June 2020. Last year, the university pledged to reduce its portfolio to net-zero emissions.

To help achieve this goal, Slocum is proposing a novel way to turn short-selling within a hedge fund portfolio into a type of offset, combining one aspect of financial engineering with another. Under his approach, an investor with a short position in Company A would be allowed to deduct emissions associated with that company.

Slocum argues that the approach would be a key lever for investors working toward a net-zero world. Short selling not only puts negative pressure on emitters, in his framework, it also allows them to advocate for changes as activist shareholders.
Read the piece here (Bloomberg).

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Communication is at the heart of shifting mindsets on climate and sustainability issues, and is vital in highlighting and understanding steps we can take as finance professionals to implement positive change.

The purpose of Sustainable Finance Community is to encourage members to read, share and discuss content, in order to help us with this aim. We want to encourage information to flow both ways, so please get in touch by replying to or follow us on LinkedIn and Twitter.

The weekly newsletter summarises information from different sources for the benefit of subscribers. While we take care to select articles, papers and opinions from reputable sources, we do not perform independent verification and hence these summaries should not be relied upon for any purpose. Further, the statements, opinions and conclusions that are summarised within the newsletter do not necessarily represent the views of the IFoA nor the newsletter authors and their employers.

This initiative is brought to you by the Institute and Faculty of Actuaries (IFoA) Sustainability Board (formerly Resource & Environment Board). The Sustainability Board is a group of voluntary actuaries working with the IFoA to encourage change within finance. We work alongside - but separately to - the IFoA and as such this is not an IFoA communication. Find out more about the IFoA Sustainability Board here.

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