New reports and announcements show how financial institutions are managing the risks of climate exposure, and how disclosure can show efforts and gaps in the private sector to reduce emissions.
Research in mitigation technologies show solar power has more potential to displace demand for fossil fuels than energy companies generally expect.
Efforts and research on energy efficiency are creating policy dialogues and identifying opportunities among G20 countries.
6 February 2017: Several recent reports and developments have highlighted the risks and opportunities climate change can hold for investments and supply chains, as well as the potential of existing technologies to mitigate emissions on a significant, and perhaps unexpected, scale.
Entities Take Steps to Divest from Fossil Fuels
At the end of January, major financial institutions took steps to mitigate their fund’s exposure to climate-related risks. Deutsche Bank announced amended guidelines for coal financing. Under the new guidelines, the Bank and its subsidiaries will not grant new financing for greenfield thermal coal mining and new coal-fired power plant construction. The Bank will also gradually reduce its existing exposure to the thermal coal mining sector. OPTrust, one of Canada’s largest pension fund managers, issued a position paper and a report assessing climate risk exposure across the CAD$18.4 billion fund and detailing the approach to navigating the complexities of climate change with respect to institutional investing. OPTrust also called for collaboration in the development of standardized measures for carbon disclosure [Deutsche Bank’s Amended Guidelines for Coal Financing] [OPTrust Press Release]
Reducing GHG Emissions Throughout the Value Chain
Since the risk of stranded assets can exit throughout companies’ value chains, increased transparency will be key if the divestment movement is to continue to gather steam. A report by CDP, formerly the Carbon Disclosure Project, called the ‘Global Supply Chain Report 2017,’ used its disclosure mechanism to detail the efforts of purchasers and suppliers to reduce greenhouse (GHG) emissions and water use throughout supply chains. The 89 members of CDP’s supply chain programme encourage their suppliers to disclose their environmental data to CDP. This information shows that disclosing companies reduced their GHG emissions by 434 million tonnes in 2016, more than France’s annual GHG emissions, while realizing USD$12.4 billion in savings. CDP notes, however, that only 22% and 16% of responding companies work with their suppliers on carbon emissions and water use, respectively, indicating that further efforts could realize emissions reductions and improved water use across supply chains. These further efforts could help model ways to achieve voluntary information provision in line with SDG 12.6 (encouraging companies to adopt sustainable practices and to integrate sustainability information into their reporting cycle). [CDP Global Supply Chain Report 2017]
A report finds that solar photovoltaic cells (with associated energy storage costs included) could supply 23% of global power generation in 2040 and 29% by 2050, entirely phasing out coal and leaving natural gas with a 1% market share.
Existing Technologies Hold Unexpected Promise
Recently-released reports show that existing technologies in renewable energy, electric vehicles and energy efficiency can drastically reduce emissions and demand for fossil fuels and provide information useful for SDG 7.2 (increase substantially the share of renewable energy in the global energy mix by 2030). The Carbon Tracker Initiative, with the Grantham Institute at Imperial College London, released a report titled ‘Expect the Unexpected: The Disruptive Power of Low-carbon Technology,’ which analyzes the potential for solar power and electric vehicles to displace demand for fossil fuels. Extrapolating from what the researchers call the “current state of play,” the report finds solar photovoltaic cells (with associated energy storage costs included) could supply 23% of global power generation in 2040 and 29% by 2050, entirely phasing out coal and leaving natural gas with a 1% market share. Electric vehicles could account for approximately 35% of the road transport market by 2035. In both cases, the findings of this report differ from the forecasts of large energy companies, which the authors suggest illustrates that these companies underestimate the scale of the low-carbon transition by continuing to base their projections on business as usual assumptions. [Carbon Tracker Initiative: Expect the Unexpected: The Disruptive Power of Low-carbon Technology]
Also highlighting the potential of existing standards for energy efficiency, the Transport Task Group of the International Partnership for Energy Efficiency Cooperation (IPEEC) published a report detailing the impacts of adopting world-class practices for efficiency and emissions standards, and outlines that adopting such standards in six G20 countries, which have not already adopted such standards, could reduce fine particle-related health impacts by two-thirds and avoid 60,000 premature deaths in urban areas annually by 2030. This reports could foreshadow ways to progress on SDG 7.3 (doubling the global rate of improvement in energy efficiency) and efforts to reach SDG 3.9 (substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water, and soil pollution and contamination). The IPEEC also published its annual report for 2016, detailing its achievements under nine working groups now operating under the G20 Energy Efficiency Leading Programme. In several areas, the IPEEC highlights new partnerships and policy exchanges. For example, the Super-efficient Equipment and Appliance Deployment (SEAD) Initiative launched the Advanced Cooling Challenge and established the SEAD Policy Exchange Forum. Reaching an audience of 1800 stakeholders, the Energy Efficiency Finance Task Group held over 18 workshops in 2016 and obtained further support for two energy efficiency finance statements from banks and investors, raising the number of signatories to over 120 banks and investors totaling over USD$4 trillion of funds under management. [Press Release: Launch of IPEEC’s Annual Report 2016] [Press Release: IPEEC’s Transport Task Group, Release of New Impact Analysis]