Commentary

Take Five: Biden Takes a Stand

This week’s major stories impacting ESG investors, in five easy pieces. 

In a week where we simultaneously feared summer and winter, effective action on climate was sometimes hard to distinguish from hot air.  

Biden takes a stand – During his visit to the coal-turned-wind Brayton Point power plant in Massachusetts, US President Joe Biden unveiled plans to commit US$2.3 billion to mitigate the impacts of climate change. He stopped short of formally declaring a climate emergency, which would give him the power to circumvent Congress entirely. Given Congress’ efforts to delay and deny, not to mention the Supreme Court’s intervention, it’s likely that this may be the next step Biden takes – particularly following the actions of Democratic West Virginia Senator Joe Manchin, who blocked measures to introduce climate and energy provisions and boost taxes for the rich and corporations. In a radio interview, he argued that it was “not prudent” for Democrats to approve a major spending package while Americans continue to deal with the cost-of-living crisis. With his long-standing financial ties to coal, Manchin’s motives are open to question.  

“Collective suicide” – If the wildfires across the rest of Europe aren’t a clear indication that climate change has well and truly arrived, the declaration on Tuesday of a “major incident” as temperatures in London soared to record-breaking highs of 40°C, sparking fires all over the city, certainly was. It follows devastating heatwaves in India, south Asia and both poles, as well as droughts in parts of Africa. Addressing ministers from 40 countries meeting to discuss the climate crisis, UN Secretary General António Guterres warned that “half of humanity is in the danger zone”, exposed to life-threatening heatwaves, floods, extreme storms and wildfires. “We have a choice. Collective action or collective suicide,” he said.  

Bracing for the winter – As countries around the world continue to battle against the heatwave, it’s easy to push aside the reality of a winter fraught with soaring energy prices and limited gas supply. EU member states are particularly vulnerable following their exit from Russian gas in protest of the country’s invasion of Ukraine. International Energy Agency Executive Director Dr Fatih Birol noted that progress in accelerating the transition to renewables is “not enough”, leaving Europe in “an incredibly precarious situation”. Consensus is scarce. Spain, Greece and Portugal rejected the EU’s call for 15% cuts in natural gas consumption over the next eight months. Fears mount that countries will backslide into coal, while investors remain wary of policymakers’ plans to upscale nuclear energy to meet their net zero pledges. Some 2050 plans – such as the UK’s – have been deemed too vague and “unlawful”, underlining the need for ambitious and credible strategies going into COP27 later this year. The solution must be out there somewhere 

The Africa we want – The indefatigable Guterres was also on hand this week to reconfirm the UN’s support for Agenda 2063, the African Union’s vision for prosperous and peaceful continent, which aims to build on the 2030 Sustainable Development Goals. To ward off the triple threats to progress – Covid-19, Russia’s invasion of Ukraine and climate change – Guterres recommended effective policy frameworks, investment in digital technology, skills development, access to sustainable energy and an overhaul to financing. It’s hard to disagree with the prescription, but recent efforts to electrify Africa suggest the package requires discipline by the policymakers, imagination by the financiers and a strong following wind.  

Something about mining – What is it about mining that brings out our baser instincts? Following Glencore’s admission of widespread and systematic corruption across its global operations, civil society organisations this week called on banks, investors and trading partners to demand evidence of its commitment to becoming a “responsible and ethical operator” as a pre-condition to further engagement. With Glencore facing further allegations in Switzerland and the Netherlands, the organisations warned both of lower public revenues in affected countries and obstruction to the global shift to low-carbon sources of energy, due to the threat corruption poses to “reliable critical mineral supply chains”. Glencore is far from the first mining firm to attempt to rebuild its corporate culture from scratch, demonstrating the challenges facing investors committed to helping the sector play its role in the renewables transition. 

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