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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.
23rd July 2021
The recent deadly floods in Europe have sharpened focus on climate change (see news section). Photo by Chris Gallagher on Unsplash
This week's updates at a glance:
From the Editors
Calling for volunteers to join the SFC Newsletter team!
The SFC newsletter has grown significantly since its inception just under 2 years ago and we couldn’t be happier with its reach and we have you to thank!
We are seeking volunteers for both the digital co-leads and digital team support, the main duties would be to collate and edit for this very newsletter. We would very much welcome anyone to apply for either of the roles and join this exciting team to continue the work!
Apply here.
Job vacancies at High Level Champions team for COP26
An exciting opportunity to join the High Level Champions for Climate Action team, working at the heart of the climate action community in close collaboration with partners from across the Marrakesh Partnership, investor networks and leading finance institutions around the world to build on our incredible progress to date and maximize our impact at COP26. 3 roles are immediately available:
  • team coordinator (manager level);
  • emerging markets lead (director level);
  • GFANZ support (manager level).
The posts are open to independent contractors and job seekers, as well as employees who can secure at least a 6 month secondment agreement with their employer. If a pro-bono secondment is possible that is preferred to allow us to do even more with our limited resources.

More details here (UNFCCC).
In the news
Deadly floods sharpen focus on climate change in German election campaign
Extreme flooding in Germany has now killed over 130 people, with many more still missing. The flooding led to covered roads, bridges and destroyed houses as otherwise tame rivers burst their banks in western Germany. With Germany’s election on the approach, the devastation caused by the torrential rains has bought a sharper focus to the issue of climate change amongst political candidates. Climate and energy policy have moved up in voter priority rankings since the previous election of 2017.
The conservative chancellor candidate, Armin Laschet, (the current most likely successor of Angela Merkel) has previously been criticised for insufficient climate advocacy, but has now called for faster emissions reductions and has explicitly linked the flooding to climate change. The Social Democrat candidate, Vice-Chancellor Olaf Scholz, outlined the devastation as both an incentive to address the destruction, and an obligation to stop man-made climate change on behalf of the flooding victims. Meanwhile, Environment minister Svenja Schulze described the flooding as ‘climate change arriving in Germany’. Experts recommend a rapid adaptation, as climate change and torrential rainfalls continue in the region, by expanding green spaces to help better soak up excess water and provide avenues for it to seep away.
Read the article here (Clean energy Wire).
Brussels unveils sweeping plan to reduce Europe’s carbon footprint
Europe is set become the first continent with a comprehensive architecture to meet climate goals by reducing greenhouse gas emissions by 55% by 2030 and net zero by 2050, compared to 1990 levels. The European Commission unveiled 13 policies in a strategy targeting all sectors of the economy and trade, including transport. However, there is a risk of backlash from poorer EU countries and parts of the industries which argue that the pace of change and increased regulations will become a financial burden.

The new strategy focuses on the Emissions Trading Scheme that will make companies pay for the cost of polluting. The plan has been extended to include emissions from the car industry and building heating, which has many raised concerns including political revolts for creating a separate carbon market for the same. The commission’s targets will in effect lead to ban of new diesel and petrol cars by 2035 and aim to increase the availability of charging points to increase use of EVs. A tax on aviation and maritime fuels was also proposed for the first time affecting the aviation and shipping industry.

The bloc’s trading partners will closely examine measures such as the carbon border adjustment mechanism (CBAM), as their companies could face penalties on export of carbon intensive products such as steel and cement that might force importers to pay for soaring carbon costs.

The commission will also raise its renewable energy targets to make up 40 per cent of its energy mix by 2030 and increase the size of the EU’s carbon sink that is made up by forests and soil. One of the commission’s top executives expressed that the strategy would be difficult to implement, but the cost of non-action would be much worse.

Read the article here (FT ‑ paywall).
Aviva launches Climate Transition Real Assets Fund

Aviva Investors has raised an initial £425m (€493m) for a newly launched climate transition real assets fund to target direct real estate, infrastructure and forestry assets investment opportunities in Europe. The fund will aim to provide various investor groups, including defined contribution schemes, with access to climate-focused solutions across the breadth of the European real assets universe ‑ principally direct real estate, infrastructure and forestry assets.
The Climate Transition Real Assets Fund is one of the first of its kind in the industry to offer investors direct investment in nature-based solutions alongside real estate and infrastructure. The fund will aim to deliver a net annual return of approximately 8% per annum over rolling five-year periods, whilst targeting net zero by 2040 or sooner.

Read the article here (Business Green).
Major breakthrough for steel industry': Swedish plant produces sponge iron using hydrogen
A pilot plant in Lulea, Sweden, has produced the world's first sponge iron reduced using fossil-free hydrogen gas. The successful completion of the tests - which started operation in August 2020 - proves it is possible to use fossil-free hydrogen gas to reduce iron ore instead of using coal and coke to remove the oxygen.
Overall, the global steel industry accounts for 7%-8% of total CO2 emissions. The HYBRIT project, whose stakeholders are Sweden's specialty steelmaker SSAB, was launched in 2016 with the goal of eliminating CO2 emissions from steelmaking. HYBRIT are aiming to be the first to market, in 2026, with industrial-scale fossil-free steel. However, the reduction in CO2 is dependent on fossil-free electricity in Sweden - HYBRIT technology will require around 15 TWh of fossil free electricity a year at SSAB's current production levels.
Read the article here (S&P Global).
Chinese Unesco official defends plan to list Great Barrier Reef as ‘in danger’
The Australian government has embarked on a lobbying campaign to avoid an “in-danger” listing of the Great Barrier Reef that was defended by the Chinese host of a UN World Heritage Committee. A report by the Australian Institute of Marine Science suggested that the 2,300km reef found coral coverage after a year of benign conditions without high ocean temperatures or cyclones. But it also warned that the new coral growing as a result of the mass beaching events in the past, could be quickly wiped out.

The Australian government argued that other sites’ listings that are at risk from climate change had not yet been changed. An “in-danger” listing could affect the tourism and imperil the livelihoods the people who work on the reef. However, their Chinese counterparts think that the Australian government should attach importance to the opinions of the advisory bodies and earnestly fulfil the duty of world heritage protection.

Read the article here (Guardian).
We're reading
The illusion of choice: five stats that expose America’s food monopoly crisis

US supermarket shelves appear to be abundant with choice, with countless different brands offering all types of food and drink. But a joint investigation published this week by the Guardian and Food and Water Watch showed how this choice is largely an illusion. In fact, a handful of mega firms dominate every link of the food supply chain: from seeds and fertilisers to slaughterhouses and supermarkets to cereals and beers.

This is bad for consumers in terms of choice and competition on prices, as well as for small and medium-sized farmers given little choice on what they grow or which animals they raise, while food industry workers face low pay and high risks. The planet may also lose out when industrial agriculture is focused on extracting maximum profits for minimum costs ‑ a model with potentially grave consequences for animal welfare, water, land and global heating.
Here are five facts from the investigation showing the extent of the monopolisation of food in America:

  1. Almost 80% of dozens of everyday grocery items are supplied by four or fewer companies
  2. PepsiCo has a huge grip on the market for dips, with 88% of market share
  3. Ninety-three per cent of the sodas are owned by just three companies
  4. Just three firms dominate sales of 73% of the breakfast cereals ‑ despite shelves stacked with different boxes
  5. More than 80% of beef processing and 70% of pork processing is controlled by four multinational giants

Read the blog here (Guardian). 

Discussion paper on governmental carbon-pricing

The UN-convened Net-Zero Asset Owner Alliance this month published its discussion paper on carbon pricing, for delivery to G7 and G20 policymakers. Members of the Alliance currently oversee $6.6trn of assets, and are jointly committed to ensuring their portfolios are aligned to limiting global warming to 1.5 degrees Celsius. The paper calls on policymakers to encourage private sector confidence and investment through policy transparency, combined with leveraging private and public finance, legislative targets, effective carbon pricing and sectoral regulation.
The paper calls for a number of carbon pricing mechanisms specifically, including:

  • Coverage of all human-induced greenhouse gas emissions, and coverage of all necessary sectors (including aviation and shipping);
  • A legally binding pricing corridor in line with scientific targets in order to meet the 1.5 degrees Celsius trajectory;
  • Making carbon-pricing revenue-neutral, i.e. by clarifying when revenues come from such carbon-pricing mechanisms;
  • Consideration of ‘social cost of carbon’ approaches: to address intergenerational aspects of emissions;
  • Avoidance of carbon leakage when pricing emissions (i.e. exploiting arbitrage through lower carbon prices in other jurisdictions) including an agreed global carbon price floor amongst G7 and G20 nations.

Read the paper here (UN EPFI)

Tune in
Traffic wars: who will win the battle for city streets? ‑ podcast

Radical new plans to reduce traffic and limit our dependence on cars, such as the Streetspace plan in London, have sparked bitter conflict and protests. As legal challenges escalate, will Britain’s great traffic experiment be shut down before there is time to see the benefits?
This podcast is an audio version of Naimh McIntyre’s March Long Read published in The Guardian.
On demand here (Guardian ‑ The Audio Long Read).
Opinion on
Chile’s green lessons for emerging markets

Chile is a notable exception to Latin America's addiction to fossil fuels. It has put together one of the world’s most ambitious plans for renewable energy, hoping to capitalise on the blessings of abundant strong winds in southern Patagonia and fierce sun in the northern Atacama Desert to generate green electricity at rock-bottom prices. The government hopes to establish the Pacific nation as a leading global exporter of green hydrogen, a fuel produced without emissions.
Chile’s pitch is that the electrolysers needed to make the hydrogen will fall sharply in price as production scales up and larger models are built.  It can access clean renewable energy at very low cost, allowing it to undercut potential rivals such as Saudi Arabia and Australia as the world’s cheapest producer of green hydrogen. However, hydrogen's future is uncertain and there are questions about whether green hydrogen is the best solution and hence whether a global export market for it will emerge. One of the main obstacles is how to transport it:  it must be liquefied at temperatures close to absolute zero, a costly process, which consumes 30% of the gas’s energy value, before being moved.

Read the piece here (FT - Paywall).
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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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