ESG Essentials: Investors changing mining and a methane emissions cap

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Global Investor Commission on Mining 2030 announces new support from major financial institutions

The Global Investor Commission on Mining 2030 has announced support from financial institutions representing $11 trillion in AUM in its efforts to introduce more robust standards for the mining sector. The group of backers include Aviva PLC and Legal & General, showing the commission has support from some of the world’s largest asset managers.

According to its website, the commission seeks to realise “a vision of a socially environmentally responsible mining sector overall by 2030”, tackling issues such as tailings, corruption and deep sea mining via a practical implementation plan informed by stakeholders across the sector. 

The commission argues that mining will be critical for the net-zero transition, providing the much-needed materials for solar panels, batteries and a host of other sustainable technologies. Crucial to meeting those needs will be maintaining the social licence to operate, and reducing social harms that hamper investment and threaten support.

EU passes legislation imposing a methane emissions cap on imports of fossil fuels

The EU will impose methane emissions limits on Europe’s oil and gas imports from 2030, urging international suppliers to reduce leaks of the greenhouse gas. Methane, the second-largest contributor to climate change after carbon dioxide, has a higher short-term warming effect, meaning rapid cuts in emissions are crucial.

European Parliament and EU member states agreed to impose maximum methane intensity values on fossil fuel imports into Europe by 2030. The new legislation will hit major gas suppliers such as the U.S., Algeria and Russia. After slashing deliveries to Europe last year, Moscow has been replaced as Europe’s biggest pipeline gas supplier by Norway, whose supply has among the world’s lowest methane intensity.

Once enforced, the methane standard will be obligatory for all supply contracts signed and EU importers will face financial penalties if they buy from non-compliant foreign suppliers. The Environmental Defence Fund Europe stated that the measures send a clear message that climate responsibilities don’t end at country borders ahead of COP28.

Ahead of COP28, UN places chances of world remaining below 1.5C warming as low as 14%

Ahead of COP28, the UN issued a dire warning on the planet’s climate progress, saying that the chances of global average temperatures staying below 1.5C could be as low as 14% if current emissions reduction targets remain in place. 

UN chief Antonio Guterres argued that the ambitions of countries around the world are insufficient and that climate change cannot be solved without “tearing out the poisoned root of the climate crisis: fossil fuels.”

A New York Times report showed that while many nations are making progress towards eliminating high-polluting fossil fuels, many are doing so insufficiently quickly. Some, like China, are fuelling economic growth with coal, the most polluting, and are seeing exponential growth in their emissions as a result. 

Many are hoping that COP28 will provide the first global commitment to phase out fossil fuels, an idea that was resisted by many countries at COP27. The stakes for this agreement have never been higher, given that data such as this is consistently showing a narrowing window to avoid disastrous climate consequences.

Brazil finds immediate success with its first Sovereign Sustainability Linked Bond

Brazil has raised $2 billion through its first-ever ‘green’ bond issuance, setting a benchmark for the private market and channelling funds towards Lula’s ambitious sustainability agenda. The seven-year bonds featured a 6.5% yield, with demand greatly outstripping its volume, with the order book bordering on $6 billion. The ESG-linked bonds, maturing in 2031, will be issued in dollars.

The final application saw approximately 75% of investors originating from Europe and North America while Latin America, including Brazil, accounted for the remaining 25%. The spread was lower than the government received for its conventional $2.25 billion issuance in April.

In early 2016, Brazil lost all its investment-grade scores following a deep economic recession and political crisis at the end of a global commodity boom. Despite rating agencies S&P and Fitch upgrading Brazil’s credit rating in July and June, the country is yet to reclaim its investment-grade rating.

The operation was led by banks Itaú BBA, JPMorgan, and Santander with proceeds of the operation going on to bolster Lula’s Climate Fund under the oversight of state development bank BNDES.

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