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Take Five: The Deep Green Sea?

A selection of this week’s major stories impacting ESG investors, in five easy pieces. 

This week, scientists observed that global warming is turning the world’s oceans green, underlining the urgent need for the shipping industry to set ambitious GHG emission targets.

The deep green sea? – The world’s oceans are changing from blue to green due to climate change, according to a new report from Nature, with researchers deeply concerned that the changing pigmentation of our oceans suggests “we are affecting the ecosystem in a way that we haven’t seen before”. The news certainly brought climate-related risks for our oceans to the fore, yet the International Maritime Organization missed the boat to set a credible path to net zero for the shipping sector. Attempts to impose a levy on GHG emissions from international shipping to fund climate action were delayed after two weeks of talks. And while GHG reduction goals were agreed, they were criticised by environmentalists for being woefully inadequate. All eyes will be turned to Jamaica, where intense negotiations are underway at the International Seabed Authority, as more countries step forward to call for a ban on deep sea mining.

The Beast – US President Joe Biden has been commended for reinstating the US into the Paris Agreement hours after taking office, while his Inflation Reduction Act – which will provide around US$386 billion in energy and climate spending over the next ten years – represents an important step in the transition to clean energy. Sadly, his gas-guzzling limousine – nicknamed ‘the Beast’ – somewhat tarnishes the president’s ESG credentials. The armoured car chauffeured Biden to Windsor Castle for a spot of tea with King Charles, with the two heads of state discussing how best to tackle the climate emergency. However, when the president stopped off for a brief visit to Downing Street, the topic of climate failed to surface, with the conversation dominated by Ukraine and its aspirations for NATO membership – further evidence that suggests the British Prime Minister Rishi Sunak is apathetic about the environment.

War on the world – As global temperatures soar to new highs, scientists and environmentalists are calling for the UN to force militaries to disclose their emissions and put a stop to exemptions that have let one of the largest sources of climate pollution off the hook, with the armed forces accounting for 5.5% of global GHG emission, according to a Scientists for Global Responsibility report. Over the first six months of 2023, environmental groups including Tipping Point North South and The Conflict and Environment Observatory, alongside academics from UK-based universities, have been campaigning to close the so-called ‘military emissions gap’, calling for comprehensive and transparent reporting. The UNFCCC responded to campaigners, stating that there are no concrete plans to amend guidance on military emissions accounting, with attention likely turning to COP28 in Dubai for movement on the issue.

“Investment by edict” – UK Chancellor Jeremy Hunt hopes to unlock approximately £50 billion from pensions funds for investment into high-growth, private companies to boost allocations to green and impact investments. The pledge, made by nine of the UK’s largest DC pension providers, forms part of the so-called Mansion House Reforms. But Charlotte Moore, a UK pensions expert, warned that pension schemes shouldn’t be doing “investment by edict”. Currently, few pension schemes in the UK invest in venture capital due to the high-risk nature of the market. So, while the reforms may offer a potential opportunity to increase allocations to impact investing to address the climate challenge via alternative assets, that capital may well be better placed in UK infrastructure projects across clean energy, water and transport.

Trailblazer – Paul Watchman, a trailblazer in the ESG movement and a pioneering sustainable finance lawyer, has sadly passed away. Watchman lived a life many can only dream of. Playing professional football at Dunfermline and Clyde before becoming a Professor of Law at the University of Aberdeen to special adviser for the UNEPFI. His role in authoring the Freshfields Report for the UN created a legal framework for the integration of ESG issues into institutional investment and he played a pivotal role in wider discussions around the evolution of fiduciary duty. Put simply by Paul Clements-Hunt, former Head of the UNEPFI: “His lifetime of work will never be forgotten.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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