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Sharon Kimathi
Energy and ESG Editor, Reuters Digital


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Four days in and Climate Week has exposed plenty of division in the banking sector. A top European Central Bank (ECB) supervisor said that banks face the risk of being sued if they don't stick to their climate goals or try "greenwashing" their image. This comes as major Wall Street banks threatened to leave United Nations climate envoy Mark Carney's financial alliance due to fear of potential litigation. Whilst some banks are rolling back their climate commitments, others are curbing their exposure to fossil fuel assets including HSBC, which told Reuters it will stop financing the expansion of thermal coal from funds it manages actively with immediate effect. Elsewhere, a coalition of civil society groups called for the World Bank to fire its President David Malpass after he declined to say whether he accepts the scientific consensus on global warming during an event hosted by the New York Times at Climate Week in New York City.

ECB supervisor Anneli Tuominen said banks faced risks if they don't keep climate pledges. "If banks do not meet the targets they have announced or follow the climate strategy they have communicated, they expose themselves to litigation and reputational risks," Tuominen said during a conference in Frankfurt. She added that obligations under the international Paris Agreement on climate may be enforced by legal means if banks fail to respect them voluntarily.

Climate-related lawsuits are on the rise, according to the Network for Greening the Financial System. In fact, the cities of Paris and New York have recently joined a coalition of associations and local authorities that are suing oil major TotalEnergies for failing to adequately fight climate change. And in one landmark case last year, oil major Royal Dutch Shell was ordered by a court to cut its greenhouse gas emissions by 45% by 2030.

The fear of litigation has made major banks such as Morgan Stanley, JPMorgan and Bank of America, consider exiting from the Glasgow Financial Alliance for Net Zero (GFANZ), formed last year by the former Bank of England governor Carney. GFANZ is a coalition of asset managers, banks and insurance firms representing $130 trillion in assets directed toward tackling climate change. Some members of the alliance have recently said that they "feel blindsided by tougher UN climate criteria and are worried about the legal risks of participation", according to a Financial Times report on Wednesday, citing several people involved in internal talks.

This comes as HSBC Holdings told Reuters on Thursday it would immediately stop investing in listings or primary debt issuance of any company engaged in thermal coal expansion, marking an acceleration of a broader commitment it made last year. Thermal coal, a cheap energy source used widely across Asian markets where many of HSBC's clients are based, is one of the fossil fuels most responsible for climate-damaging emissions. Standard Chartered, a competitor of HSBC in emerging markets, said earlier this year it would end all direct coal financing for clients by 2032.

And finally, World Bank President Malpass came under heavy criticism on Wednesday after he declined to say whether he accepts the scientific consensus on global warming, rekindling concerns about the bank's lack of a deadline to stop funding fossil fuels. Malpass appeared at an event hosted by the NYT at Climate Week in New York City and was asked whether he believes that the "manmade burning of fossil fuels is rapidly and dangerously warming the planet." Malpass tried at first to dodge the question but later said: "I don't even know. I'm not a scientist." A coalition of civil society groups called for the World Bank to fire Malpass. "People & governments now need a WB leader who listens to science," said Laurence Tubiana, CEO of the non-profit European Climate Foundation. The World Bank and White House declined to comment.

Talking Points

China's chief climate negotiator Xie Zhenhua smiles as he takes part a panel discussion at the World Economic Forum 2022 (WEF) in the Alpine resort of Davos, Switzerland May 24, 2022. REUTERS/Arnd Wiegmann
Europe and other developed countries must take "positive action" to implement climate change goals as geopolitical uncertainties threaten to undermine their efforts, China's top climate envoy told his German counterpart.
A total of 19 companies applied to develop carbon dioxide (CO2) storages off Britain in the country's first such licensing round, the North Sea Transition Authority (NSTA) said on Thursday.
Barbados has issued the world's first government bond with a clause allowing payments to be suspended in the event of another global pandemic, a move expected to attract interest from dozens of other countries savaged by the COVID-19 crisis.
The United States may be able to avoid the European Union's plan to slap tariffs on imports of polluting goods based on its similar climate targets, the head of EU climate change policy said.
Breakingviews: Samsung’s 2050 net-zero goal underwhelms next to those set by Apple, Intel and others. Blame South Korea’s power-market monopoly and regressive renewable policies. With investors and customers demanding action, Samsung's corporate heft will be put to the test.

In Conversation

Mark Woods, chief technical advisor, EMEA at American software company Splunk:
"For businesses to close the ESG gap, they need to focus on using data to understand what the current situation is and what operations can and can’t be changed. If you limit yourself to a top-down target of ‘reducing carbon by 10%’, even if you hit that target at the end of the year, have you measured and understood how that was achieved?

"When everyone, not just your technology team, is able to read, understand and communicate data in context, they're empowered to make actionable changes (for the better). This data and the context needed to understand it has often already been created by expert operational teams to address the imperative to provide efficient, effective and secure products and services.

"Data should be available at the right time to allow teams to progress beyond ‘assumptions’ to a place where operations can be challenged and enhanced for long-term efficiency gains. ‘Following-the-sun’ with product workloads to maximize solar-powered data centers could deliver the same customer experience for a fraction of the environmental cost. Or dynamically identifying opportunities for longer lead-time supplies for manufactured goods could reduce the impact of transportation, whilst making supply chains more robust.

"Data is only as meaningful as the positive change it can bring."

ESG Lens

ESG Movers and Shakers

Global investment management firm AXA Investment Managers has hired Adam Gibbon, Edoardo Cavallo and Camila Alva Estabridis to join its AXA IM Alts natural capital strategy team. Gibbon joins AXA IM Alts with over 17 years of experience investing in nature-based climate solutions. Cavallo is a specialist in emerging markets and has extensive expertise working with investors and entrepreneurs to provide nature-based solutions to climate change. And Estabridis, development and environmental economist, joins having spent more than 10 years in public policy, working with governments and development institutions including the World Bank and the International Food Policy Research Institute.

International professional services firm PwC has appointed Will Jackson-Moore as its new global ESG leader. Jackson-Moore most recently served as PwC’s global private equity and sovereign investment funds leader based out of London. He was previously based in the UAE where he was managing partner for PwC in the Middle East, and prior to that, he ran PwC's transactions services, private equity and SWF teams in the UK.
Impax Asset Management, UK-based specialist asset manager has named Charlie Donovan as a senior economic advisor, specializing in the global energy transition. He joined Impax this week, and is based in Seattle, where he remains a visiting professor of sustainable finance at the Foster School of Business at the University of Washington. Donovan was previously professor of practice at Imperial College London and founding executive director of the business school’s Center for Climate Finance and Investment.

Knight Frank Investment Management (KFIM), a global real estate investment management company, has hired Chantal Beaudoin as its head of ESG. She will be responsible for driving ESG efficiencies in the KFIM operational business. Chantal previously worked as a senior sustainability manager at UK-based family-owned real estate investment Lamington Group.

Quote of the Day

“Physical climate risks such as heat stress, water stress, wildfires, floods and rising sea levels are credit negative for many rated regional and local governments (RLGs) in Europe and the expected increase in severity and frequency of weather events will likely also have further longer-term credit negative effects.”
Matthieu Collette, vice president and senior analyst at credit rating agency, Moody’s Investors Service

Looking Ahead

Students plan to hold climate protests in capitals around the world on Sept. 23, coinciding with the U.N. General Assembly meeting of world leaders in New York.
German Chancellor Olaf Scholz heads to Qatar on Sept. 25, where he will meet Emir Sheik Tamim bin Hamad al-Thani for talks, during a trip to the Gulf. He will focus on deepening cooperation in the areas of energy and IT.
Japan will host an International conference on Sept. 26 to discuss carbon recycling, a key technology for achieving carbon neutrality. It will also host a hydrogen energy ministerial meeting to discuss hydrogen-related initiatives.
Lookout for a Reuters feature on Sept. 27 that examines Australia’s footprint on the offshore wind developer market and the potential hurdles that lie ahead.
Disrupted
If an earthquake strikes in the not too distant future and survivors are trapped under tonnes of rubble, the first responders to locate them could be swarms of cyborg cockroaches.

That's a potential application of a recent breakthrough by Japanese researchers who demonstrated the ability to mount "backpacks" of solar cells and electronics on the bugs and control their motion by remote control.

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