Stuart Kirk, HSBC Asset Management’s head of responsible investing, sparked an explosive debate at our conference in London two months ago by challenging some of the core tenets of the environmental, social and governance agenda.
Yesterday, Kirk declared that he had left HSBC and railed angrily against what he described as “cancel culture.” “Investing is hard. So is saving our planet. Opinions on both differ,” Kirk wrote on his LinkedIn page. “But humanity’s best chance of success is open and honest debate. If companies believe in diversity and speaking up, they need to walk the talk.”
We at Moral Money strongly agree on that point — and have tried to illuminate all sides of the pro and anti-ESG debate. So we are sorry to see Kirk depart, particularly given the wider pressures to redefine ESG now. But we are also intrigued by his statement: “I’ve been gathering a crack group of like-minded individuals together to deliver what is arguably the greatest sustainable investment idea ever conceived. A whole new asset class.”
Meanwhile, for other signs of flux check out today’s newsletter for the latest in Europe’s fierce debate over nuclear and gas, and how satellites are reshaping the climate conversation. Read on. (Gillian Tett)
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EU taxonomy’s green label for gas and nuclear lives another day
Loyal readers will remember the controversy that surrounded the European Commission’s proposal, back in January, to give a green label to gas and nuclear power plants meeting certain conditions. Critics said that the move would undermine the credibility of the EU’s green taxonomy, intended to be a clear framework of what counts as sustainable investment.
For all the furore, most observers considered it overwhelmingly likely that the move would be approved by the European Parliament. But then came an unexpected element: Russia’s invasion of Ukraine.
As this week’s parliamentary vote approached, Ukrainian activists — and Ukraine’s ambassador to Germany — urged lawmakers to reject the proposal, saying it would boost Russia’s economy by bolstering European gas demand. Yet Ukraine’s energy minister took the opposite position, saying that the country, which has huge gas reserves and a substantial fleet of nuclear stations, would benefit economically if the proposal went through.
The mixed messages from Ukraine highlight the intensely political debate surrounding an initiative that was meant to be purely science based. In the end, the proposal survived Wednesday’s vote, despite a revolt by 278 of the parliament’s 705 members. Austria and Luxembourg, as well as Greenpeace, are planning legal challenges but barring a very big upset indeed, the amended taxonomy will officially come into use at the start of next year. What does this mean for European energy investment, and the continent’s green ambitions?
Antonio Totaro, an energy analyst at Fitch, told me the taxonomy change would boost the outlook for investment into nuclear and gas. But there are still plenty of hurdles confronting investors in those sectors, not least the broader uncertainty surrounding regulations and policy. And taxonomy definitions would be only one factor in any serious analysis of a potential investment. “Sophisticated investors will need to do more than look at the labels,” he said.
Given the widespread opposition to new gas and nuclear projects, many investors may well disregard the stance taken by the taxonomy’s authors. The European Investment Bank, notably, has far more restrictive rules around gas power financing than suggested by the taxonomy, and has said it has no plans to change this. Private-sector investors, leery of public scrutiny, might well steer clear of gas and nuclear for fear of greenwashing accusations, said Elise Attal, head of EU policy at the UN-supported Principles for Responsible Investment.
If the taxonomy did succeed in boosting the flow of capital to gas and nuclear power, it would have a dire effect on Europe’s climate agenda, argued Tsvetelina Kuzmanova, a policy adviser at the consultancy E3G. In a recent paper, she and colleagues wrote that there was a real risk of sucking capital away from investment in renewable power and energy efficiency. And the weakening of the taxonomy, they added, would undermine the EU’s perceived leadership on climate issues — while encouraging other countries from South Korea to Norway to lower standards.
The taxonomy change was also opposed by some institutional investors, worried that it would undermine the drive for clear sustainable investing standards. “For many people the credibility of the taxonomy will be suffering,” said Thomas Richter, chief executive of BVI, the main industry group for German asset managers. “We would have preferred [gas and nuclear] not to be in the taxonomy as it’s so contentious.”
Still, Richter said, the introduction of a green taxonomy — even a flawed one — was a step forward. “We shouldn’t exaggerate,” he said. “It’s not that the entire taxonomy is compromised. The taxonomy is way larger than this.” (Simon Mundy)
Eye in the sky — for good?
The world of green finance and business has suffered several high-profile setbacks recently, most notably on the policymaking front in America. But here is something more cheerful to ponder: at June’s Collision conference in Toronto, a team from Climate Trace, the emissions tracking company created by former US vice-president Al Gore (among others) last year, delivered an electrifying presentation showing how satellite feeds are enabling big data analysis that reveal emission patterns, in real time.
More specifically, Gavin McCormick, Climate Trace co-founder, said that six academic teams in places ranging from Malaysia, to the UK, to Australia were parsing the data to create tracking tools so detailed and granular that investors would be soon able to see, in real time, exactly which regions and companies were producing the most emissions. And while the full website would not be ready for several more months, fascinating results had already emerged.
“We have learnt that there are far more landfills in the world than previously believed — it was under-reported by a factor of three,” McCormick said, noting that this was crucial for tackling methane. Meanwhile, a team in Malaysia “has done great work on rice fields and showing how this is [also] generating methane”, and research from another group showed that “45 per cent of all coal plants in the world are making so little money that it would be cheaper to shut them down — but they have been hiding it from their banks and investors”.
In more encouraging news, the data also suggest “many countries have been more honest than [widely] thought” in reporting their emissions: the patterns revealed in the satellite pictures are roughly in line with what most governments were reporting. This leaves McCormick concluding that most countries “have been negotiating in good faith” at recent climate change talks, even if they do not trust each other.
Yes, we know that this last comment might beggar belief among activists. But the crucial point is this: this type of real-time transparency could be a game changer for the climate change fight in the coming years, since it will help those activists — and investors — hold companies to account. “Any company which thinks it can keep hiding its emissions only has 13 months more, at best, to do this,” said McCormick. And to accelerate this process, Climate Trace is making its open-source data freely available to businesses that want to build monitoring tools.
This is a fast-growing area. Just this week, to cite one example, Kayrros, another climate data company, said that it had started using the European Space Agency’s Sentinel satellites to track the installation of solar panels in America. Previously, this would have been tough to monitor in real time. But Kayrros said its up-to-date feeds showed that a third of announced “solar projects in Texas are at risk of delay or have not begun construction” — which has big implications for the energy debate. The transparency race is on. (Gillian Tett)
With the UN COP27 summit in Egypt coming up in November, does the US have the credibility to take a leading role in tackling climate change? Culture wars and government gridlock have fuelled fears that the environmental crisis is taking a back seat. The FT’s Leslie Hook has an update on the state of climate change regulation and the impact of the Supreme Court’s recent ruling on the Environmental Protection Agency, amid a plethora of other legislative roadblocks.