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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.
27th August 2021
This week, Carbon Brief compares the changes between IPCC AR5 and AR6 reports: including humans' impact on the surface melt of the Greenland ice sheet being upgraded from likely to very likely (see News). Arctic Icebergs in Ilulissat, Greenland by Alexander Hafemann on Unsplash.
Introductions and thanks

Happy Friday SFC readership! Thank you for sharing your Friday mornings/afternoons/evenings with us   depending on where around the globe you are situated. We’d like to take the opportunity to extend a huge thank you to co-editors Angelina and Travis for their work on the Sustainable Finance Community Digital Team as they step back and move on to new projects. Oliver and Cat take up the reigns as co-editors, and we welcome new members to the team in Dhruv, Naveena, Sukrita and Shreya, to join Keziah, Om, Rohan and Shane.

As always, please feel free to share any ideas and feedback with us at, we’d love to hear from you.
In the news
IPCC: How the AR6 WG1 summary for policymakers compares to its predecessor

More than 200 authors from around the world have spent the past three years drafting and redrafting over 3,000 pages of the full report. Released on Monday, the findings from the first installment of the sixth assessment report (AR6)   known as Working Group 1 (WG1), which focuses on the “physical science basis”   have made headline news around the world and drawn responses from global political figures.

It is eight years since the IPCC’s fifth assessment of climate science (“AR5”). Therefore, the new report benefits from almost a decade’s worth of additional research, observations and technological progress. In this article, Carbon Brief has pulled out the key statements   where directly comparable   from the two assessment reports, as well as those of the three special reports that the IPCC published during the AR6 cycle   on 1.5C of warming, land, and the ocean and cryosphere.

Perhaps the most prominent change between the two reports is the headline statement on the human influence on observed global warming. AR5 found that it was extremely likely that “human influence has been the dominant cause of the observed warming since the mid-20th century”. According to the IPCC’s calibrated language, this means that scientists were between 95% and 100% sure that humans were warming the planet. For AR6, the authors conclude that it is “unequivocal that human influence has warmed the atmosphere, ocean and land”.

Read the article here (Carbon Brief).
Carbon from UK’s blue hydrogen bid still to equal 1m petrol cars

The UK Government has set out plans to use a “twin track” approach to support hydrogen production by allowing both blue and green hydrogen to be used in factories, refineries and heating. Blue hydrogen is extracted from fossil gas in a process that requires carbon capture technology to trap emissions, but unlike green hydrogen, it still fails to capture 5% - 15% of CO2. 

However, since there is no mandated split between the usage of blue and green hydrogen, there exists a risk of over-reliance on blue hydrogen, which would lead to millions of tonnes of carbon emissions. This would be equal to 1m cars on the road, even if zero-carbon green hydrogen was used for a third of the hydrogen demand in the UK.

While many feel that this could help create thousands of jobs and bridge the gap until the UK builds its green energy infrastructure, many thought that the strategy was “less helpful than it otherwise could have been” and are calling on the Government to prescribe the proportion of hydrogen produced from fossil fuels in favour of green hydrogen by the late 2030s to meet its legally-binding climate targets.

Read the article here (The Guardian).
Climate crisis made deadly German floods ‘up to nine times more likely’

New research has confirmed that the extreme flooding witnessed across Germany and Belgium in July was made up to nine times more likely by the climate crisis. In addition, downpours were 20% heavier due to human-induced global warming. This research reiterates the IPCC’s recent findings that there is “unequivocal” evidence of human-driven increases in global greenhouse gas emissions being the main driver of worsening extreme weather.

The World Weather Attribution Group highlighted that as temperatures continue to rise, western and central Europe will face increasing instances of flooding and extreme rainfall. This new study, by 39 scientists, combined meteorological data, high-resolution computer modelling and peer-reviewed research methods to compare extreme rainfall occurrences as seen of recent versus those anticipated in a climate with no human-induced climate change. The research centred on two particularly adversely affected areas: by the Ahr and Erft rivers in Germany, and the Belgian Meuse region. Some river levels couldn’t be analysed due to destruction caused by flooding at hydrological measurement stations. Prof Hayley Fowler of Newcastle University, urged the need for emergency warning systems, cutting emissions and enhancing the resilience of infrastructure.

Read the article here (The Guardian).
We're reading
Climate action will stall until the finance problem is solved

Analysts at UBS say the climate debate can be captured in three simple questions: is there an emergency? Will we address it? And who should pay the costs? The first has been answered by the latest IPCC report, the second should be settled at COP26 in November, leaving the third and hardest question unanswered. UBS’s research suggests that if the world could take the capital it still invests every year in coal, oil and gas (around $1 trillion) and switch it to green projects, we could at least double our clean energy budget and put ourselves broadly on track for a 100% clean energy supply. However, to really slow climate change, the world also needs clean demand and the research suggests that this is where the most money is needed.

UBS believes as much as $300 trillion in extra investments could be needed to re-tool the global economy with assets that can be fabricated, distributed, operated and eventually recycled using clean energy sources alone. For example, a fridge-freezer made using zero-carbon metals, plastics, rubber, glass, paints, adhesives, electronics, refrigerant, and so on. The manufacturing process and distribution network will need to be zero-carbon too. To put the $300 trillion in context, humanity’s investment spend today (for everything we do) is about $20 trillion dollars a year and the options to raise the money (debt, taxes or austerity) are politically unpalatable. However, given the dire outcomes set out in the IPCC report, the world needs to urgently address how it’s going to pay for a greener self.
Read the article here (FT - paywall). 
Tune in
10-minute explainer: The Carbon Border Adjustment Mechanism

Andrew Hilton from the Centre for the Study of Financial Innovation talks to Mike Clark, Founder and Director of Ario Advisory about the Carbon Border Adjustment Mechanism (C-BAM).

If the price of carbon rises too high, it persuades industries to relocate activities, or carbon-intensive products to be imported to avoid carbon-related costs. This is defined as 'carbon leakage', and C-BAM aims to address this by applying carbon prices to a select group of 'high risk' imports.

Andrew and Mike talk through the theory and practical issues posed by C-BAM. Can it work in practice? Is it penalising industries, or is it paying nature's invoices?

On demand here (Youtube).
AIUK: the climate emergency

In March 2021, the Turing hosted a two-day online event, AI UK, to showcase the very best of UK academic work in artificial intelligence, bringing together leading thinkers, innovative businesses and specialist third sector bodies. As the UK takes COP26 Presidency in 2021, the AI and data science sector is ramping up its research across environmental sciences and the use of technology to forecast and mitigate against climate change. Howard Covington, Chair of the Board of Trustees at The Alan Turing Institute opened this theme by setting out the three changes underlying ‘the Great Transition’. 

The three changes are warming and acidification (affecting the climate), biomass and species loss (affecting nature) and human fertility decline (affecting humans). Artificial intelligence can be used to slow the transition across all three changes: (1) dynamic electricity grids and process re-optimisation to slow climate change, (2) farm robotics to slow the impact on nature and (3) the creation of new molecules and materials to slow fertility decline.

On demand here (Youtube).
ESG-labelled debt can address climate funding gap in infrastructure

Issuance of green infrastructure and project finance bonds is expected to rise as more governments adopt a net-zero carbon emission target by 2050, says Fitch Ratings in a new report. This will be supported by strong investor demand for ESG-labelled bonds. The report argues that the bulk of financing required to address climate transition and adaptation will be allocated to sustainable infrastructure assets, such as renewable energy, and to upgrade existing assets to function in a 2°C temperature increase scenario.

There has been consistent demand for high-quality green bonds in recent years. Green project finance bonds can limit an investor’s exposure to non-green activities compared with green corporate bonds, where the issuer may have carbon-intensive operations outside of the bond’s specific use of proceeds. As banks increasingly impose negative screening policies on fossil-fuel related activities, reallocation of capital towards sustainable investments can meet requirements under new climate-focused financial regulations.

Read the piece here (Fitch Ratings). 
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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.

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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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