ESG Essentials: NZAOA, UK government taking on greenwashing and the growing risks of fossil fuel investment

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Combined emissions from $9.5 trillion Net Zero Asset Owner Alliance falls by over 7 million tons

The UN-convened Net Zero Asset Owner Alliance (NZAOA), a large coalition covering $9.5 trillion in AUM, announced that the collective CO2e enabled by its investments had declined by 3.5% even as its membership increased, representing a total decrease of around 7.8 million tons between now and the same time last year. 

The organisation commits its members to set out concrete plans to reduce emissions across their portfolios to net zero by 2050. Individual members have committed to reducing their emissions between 22-52% by 2025.

The economic might of these funds, which include Allianz SE and Legal & General, has the potential to push portfolio companies towards better environmental behaviour through investor engagement. These figures represent a positive trajectory towards that goal – notwithstanding how much remains to be done in the future.

UK’s Advertising Standards Agency to make climate change a ‘multi-year priority’ in greenwashing crackdown

Speaking to Semafor, the Head of Investigations at the UK’s Advertising Standards Authority (ASA) said the agency was looking to make climate change, and misleading statements contributing to greenwashing, a ‘multi-year priority’. It sends a clear signal that the government will  clamp down on false climate statements throughout the economy, much as the EU has committed to do.

This is also the focus of the Transition Plan Taskforce, a UK government initiative created to set out a ‘gold standard’ for corporate and financial transition plans. Its recommendations, which are due to come into force in 2025/26, include a new provision that organisations must disclose key assumptions and material dependencies in their plans. It hopes this will avoid entities from publishing unrealistic emissions goals based on external developments it cannot guarantee, such as advancements in unproven technology like CCS.

These provisions will increase clarity for investors, allowing them to hold portfolio companies accountable to their climate goals with more readily available information.

Investing in fossil fuels is riskier than ever says IEA chief

In comments to the Financial Times, Fatih Birol, head of the IEA, has claimed the risks facing oil and gas investment have “evolved”, and that given the IEA’s prediction that oil and gas demand will peak by 2030, have become especially risky. 

Speaking on two multi-billion dollar fossil fuel acquisitions that have occurred recently, Birol said “larger-scale fossil fuel investments” not only posed a “risk for our climate but also have some business risks as the world may not need an increase of oil production”. 

The IEA’s predictions state that oil demand will fall by almost half by 2050 if governments follow through on their pledges. If this projection holds true, investors and financial institutions will face significant risk of stranded assets as supply outstrips demand by far.

Global polls show a growing realisation of the threat climate change represents

An increasing amount of data is showing that people around the world are realising the challenges of climate change at an accelerating pace. This Pew research poll finds that across a large number of developed countries, a majority see climate change as a ‘major threat’ to the country 

A more recent poll shows that two thirds of Americans say the US government should prioritise developing alternative energy such as wind and solar, with a similar amount favouring the government taking steps to become carbon neutral by 2050. 

With an increasing number of destructive natural disasters in recent years, including record breaking summer heat that exacerbated wildfires and dried up water supplies, it is perhaps unsurprising that many are coming to this conclusion.

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