Commentary

ICYMI, Summer is Shrinking

We may all need a break, but there’s a long reading list for those with the appetite for climate action.

For many, the first week of August traditionally offers an opportunity to relax and reflect. This is even true for investors, executives and policymakers focused on tackling the increasingly urgent risks of the climate crisis. Notwithstanding pandemic-related travel disruption, that window of opportunity looks vanishingly small this year.

On Tuesday, the European Commission’s Platform on Sustainable Finance issued its preliminary recommendations for technical screening criteria for the EU taxonomy (complete with the helpful disclaimer: ‘This is a long report. Please think before printing’). In short, the document proposes eligibility criteria for economic activities in line with the taxonomy’s four environmental sustainability priorities beyond climate change mitigation and adaption. Given the rows over the taxonomy’s climate-related criteria, we can expect prosecco-fuelled eyebrow-raising among any policy wonks perusing its 100 pages on their screens in the shade.

In the US, President Joe Biden refreshed his green credentials with an executive order aimed at accelerating the country’s migration to electric vehicles. This sets a 2030 target for EVs to account for 50% of new US car sales and calls for the development of long-term fuel efficiency and emission standards. Biden couched the policy in terms of securing long-term, unionised green jobs and a “race for the future” in competition with China. To succeed, Biden will need the EV elements of his US$1.2 trillion infrastructure bill to survive tomorrow’s vote in the US Senate.

Across Asia, central banks and financial markets supervisors stepped up their efforts to direct private sector investment toward sustainable opportunities. Japan and China both laid out plans to encourage ESG investments by financial institutions, while Malaysia progressed adoption of its climate taxonomy. In the UK, PM Boris Johnson signed off for the summer with a shot across the bows of institutional investors, calling for a ‘big bang’ approach to investing in UK-based innovation and infrastructure to support a “greener future”.

It’s not summer everywhere of course. In Australia, investors are hard at work, outlining their expectations from investee companies, in terms of ensuring a just transition for workers and communities, as well as searching out new opportunities in the renewables and low-carbon technology sectors. The received wisdom that these climate-friendly opportunities are best pursued via private equity channels does not always hold true. But belief in the listed markets may have taken a knock with BP indicting this week a preference for using rising energy prices to fuel dividends and share buy-backs rather than green investments.

Energy is far from the only sector under scrutiny. This week, climate-focused investor group Climate Action 100+ announced a sector-specific engagement strategy, with the steel industry among those targeted for closer attention. Meanwhile, the Principles for Responsible Investment co-launched guidance for investors on how to engage with investee companies to reduce plastic use.

Next on the summer reading list is ‘Climate Change 2021: The Physical Science Basis’, a summary for policymakers due for release by the Intergovernmental Panel on Climate Change (IPCC) on Monday. Until then, with doubts looming over the UN’s Kunming biodiversity summit, those in search of lighter summer reading could do worse than turning to the 12-page draft of the Convention on Biological Diversity’s proposed agreement for tackling biodiversity loss.

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