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Eight themes to watch after UNGA week

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So what did we learn? Or achieve? That is the question that everyone wonders after leaving the craziness of the UN General Assembly and Climate Week. And one of the most obvious lessons from last week is that the UN is not the source of dynamism in the climate fight. The UN events were overshadowed by glitzy initiatives organised by Michael Bloomberg’s foundation, the Clinton Global Initiative, and other bodies. It all added up to a chaotic kaleidoscope. But, for our money, here are the top themes that we think will matter in the months ahead:

1. Renewable energy is heating up

Yes, we know that the headlines have been dominated by the global energy crisis, Russia’s invasion of Ukraine and the ensuing rush to secure fossil fuel supplies in Europe and the US. This — unsurprisingly — sparked strong complaints from green activists at UNGA. But last week we also heard about frenetic activity around renewable energy innovation in many corporate corners (not least because the cost of renewable energy has fallen so fast that it is now at parity with — or cheaper than — fossil fuels in many markets). Big companies, including oil majors, are jumping in. But the new development of this year’s UNGA was that flocks of sustainability entrepreneurs were meeting venture capitalists; dealmaking is likely to intensify.

One project of note: Amazon last week announced three renewable energy projects in India to power the company’s local offices, fulfilment centres, data centres and stores. The deal includes a 210-megawatt solar farm in north-west Rajasthan state — the largest business-to-business solar project that India’s ReNew Power is developing in the country. Watch for more copycat deals soon.

2. The Inflation Reduction Act fires up

Another hot topic was the impact of the Biden administration’s recently passed IRA bill. This is wildly misnamed since it is unlikely to tame inflation. But it does offer chunky green incentives for businesses operating on American soil; so much so that some global companies, such as Fortescue, told us that they might steer more renewable energy projects to America. So watch closely to see whether companies do now take advantage of these tax breaks, and whether Europe, or places such as Australia, feel compelled to respond. And another point to note is whether companies start to treat their sustainable investments as a source of competitive advantage — and thus try to keep quiet about the proprietary details, rather than overhyping their green credentials, as many did before. This appears to be another trend.

3. Nature counts (too)

The Task Force on Climate-related Financial Disclosures has become well known in recent years, after being launched by Mark Carney, former head of the Bank of England. Its younger sibling, the Taskforce on Nature-related Financial Disclosures, however, only emerged recently, with far less fanfare. But the TNFD is now rolling out its framework and this has sparked particularly strong interest in places such as Japan, where Kirin has become one of the first companies to start reporting its accounts with this system.

Interest in nature-linked reports could soon rise in America too, not least because the concept of protecting nature is something that has bipartisan support in Washington and is thus less politically contentious than climate change.

4. (Almost) everyone loves to hate the World Bank

There is rising frustration among green policymakers about how little finance is flowing to the energy transition in emerging markets, and the failure of the World Bank to launch an effective blended finance framework is often cited as an important obstacle. So much so that there are swelling calls for the resignation of David Malpass, president of the World Bank, not least because he was appointed to the post by Donald Trump, a renowned climate science doubter.

This criticism might be unfair: although Malpass shocked the UNGA crowd early this week by refusing to say that he accepted the science on climate change, he later said (under pressure) that he did. And other multilateral development banks have not made much progress in blended finance either. But expect to hear more grumbling about Malpass in the months ahead — and speculation about his possible replacement.

5. Populism is complicating things

A common theme in UNGA conversations was how the rise (or return) or rightwing politics in America will affect green policymaking, particularly given the energy crisis and looming midterms. The Italian election and arrival of the Truss government in the UK have created similar fears in Europe. As a result, some company leaders told us they are navigating an impossible tightrope: they are under attack from environmental activists over alleged greenwashing (ie not being radical enough with their sustainability agendas); but they are also being lambasted by rightwing politicians for being “woke” (too sustainable).

This has not necessarily stopped green commitments from emerging. On Friday, six global banks — Citigroup, Crédit Agricole CIB, ING, Société Générale, Standard Chartered, and UniCredit — said they would start to measure and disclose their emissions linked to their steel-related loans. Steel production, which typically uses metallurgical coal, generates about 7 per cent of carbon emissions globally, the banks said.

On the other hand, one executive in a different sector said his firm converted to a public benefit corporation last year — but he was told not to talk about that too loudly when discussing business in Republican states that have passed anti-ESG legislation. Fear is afoot.

6. Green coalitions are facing headaches

The Glasgow Financial Alliance for Net Zero, the group of financial companies fostering collective commitments to cut carbon emissions, tried to garner some positive headlines this week by pledging to create a public database of corporate carbon reduction commitments. Hooray: it is an entirely sensible idea.

But the topic many financiers will be watching in the weeks ahead is whether GFANZ will lose some members because the UN’s Race to Zero body, which sets the rules for GFANZ membership, has tightened its standards. Two pension funds have already dropped out, and some banks such as JPMorgan are threatening to follow. So expect to see some intense behind-the-scenes wrangling between GFANZ, UN and its members in the coming months about how to keep everyone involved.

7. The global south is getting angrier

Recent floods in Pakistan have illustrated the pain that climate change is inflicting on poor nations — and there are growing fears of a looming emerging market debt crisis because of the strong dollar and faltering pace of global growth. Indeed, UN officials have deemed more than 40 developing countries to be at risk of default or crisis. Meanwhile, risks of severe hunger and famine are also rising, but have hitherto received woefully little attention in the west. Unsurprisingly, this is sparking anger among poorer nations about the lack of proper help from the developed world around climate transition and economic pain. In response, the small island nation of Vanuatu is among those calling for binding climate treaties and more action from richer nations. But expect the fury to swell.

8. COP27 could be a cop-out

“Are you going to Egypt?” — as in the COP27 meeting at Sharm el-Sheikh in mid-November — was a common question in UNGA conversations. But many people we spoke with seemed unsure (or muttered “no”) even though they attended the COP26 gathering in Glasgow. Why? One reason is that the British government was adept at throwing money and diplomatic muscle into the COP26 meeting, but the Egyptians have hitherto been more chaotic. Another is that companies and policymakers are still digesting the stream of announcements that emerged from COP26, and expect less action and fewer commitments in COP27. Which, of course, can be a self-fulfilling perception — and one that is likely to make poor nations even angrier.

And let’s not forget the horrifying human rights record of Egyptian president Abdel Fattah al-Sisi, who seized power in a 2013 coup. Remember, al-Sisi’s security forces killed at least 800 at the 2013 Rabaa massacre. More recently, al-Sisi’s forces have targeted human rights organisations. That could be yet another factor weighing on the turnout in Sharm el-Sheikh. (Gillian Tett and Patrick Temple-West)

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