Australasian Centre for Corporate Responsibility (ACCR)

A major recalibration in approach is needed. The climate governance ecosystem must decisively reckon with the best available climate science, and correct for the lag in science uptake and integration into its architecture. This will involve looking thoroughly and honestly at the norms and practices the investment sector accepts. For just one example, existing oil, gas and coal reserves take us many times beyond our global carbon budget. Yet investor climate initiatives are reluctant to take a position in support of the scientific and practical necessity of ending hydrocarbons exploration, and company boards that authorise continued expenditure of shareholder funds on fossil fuel expansion enjoy strong shareholder support. This is a loophole that investors now need to close, and the most up to date science gives them the opportunity to do so. Investors have not adequately factored the cost of our collective delay and its impact on global temperature pathways into their investment models. This is because the models themselves are no longer fit for purpose, with their failure to account for to cascading physical impacts – including climate tipping points, acute weather events and socio-economic factors – and the severity of our inaction to date. Investors must accurately assess what the costs of overshoot will be to their portfolios – and ask is it a cost that can be borne? This problem is particularly worrisome to defined benefit investors that must be able to adequately identify and evaluate risks to their long term ability to deliver to beneficiaries.   While there has always been an urgency to our work, there is a deeper urgency now, with the prospect of irreversible change to the state of our climate. Some level of climate harm is now unavoidable, and as a global community we are now coming to understand that 1.5 was never safe – we are seeing this play out almost every week, from Gujarat to Brazil to Florida to Valencia. There will be no reversion to the mean of pre-industrial climate stability within the lifetimes of all people now living. Read the full article in Woodsford Engage Quarterly: https://lnkd.in/g6C45Xny

Rio Tinto maintains its focus on operational emissions, resisting calls to set reduction targets for customer emissions despite growing investor pressure. The miner’s targets focus on reducing emissions directly under its control (scope 1 and 2). These include a 15% reduction by 2025, 50% by 2030 and net zero by 2050. However, Scope 3 emissions — generated when customers process and use Rio’s iron ore, primarily for steelmaking — account for 95% of the company’s total emissions last year. Investor and campaigner focus on Scope 3 emissions continues to grow, reflecting a broader push for companies to address the entire lifecycle impact of their products. Naomi Hogan, company strategy lead at the ACCR, acknowledges Rio’s progress but calls for further steps: “Rio Tinto’s upcoming Scope 3 disclosures, alongside growing ambition and investment partnerships for green iron and green steel, should put the company in a position to set a clear Scope 3 target in future.” via Scope 3 Magazine https://lnkd.in/gfez6sbf

In light of recent scientific, political and corporate developments, the climate finance and governance community needs to take stock, recalibrate, and plan for a step change. Read Brynn O'Brien's latest article in the December edition of Woodsford Engage Quarterly.

As they retreat from their push into renewable energy and downgrade their ambitions to build major exposures to electricity generation, the British and European oil companies are refocusing on their traditional oil and gas businesses. Where previously they planned to cap or reduce their production, now they are planning and investing to increase it. Both BP and Shell still seem committed to solar, which is less capital-intensive than wind, but that won’t help them escape the criticism from climate activist groups and ESG (environmental, social and governance) investors, who are particularly vocal and litigious in Europe and the UK. Those who invest purely in renewables appear unconcerned about the gradual withdrawal of the oil majors who gatecrashed their sector and, seeking to gain scale rapidly, drove up the costs of developing greenfield projects. via Stephen Bartholomeusz, The Sydney Morning Herald https://lnkd.in/gNagsWxM

There has been a growing focus by some investors and environmental campaigners on scope 3 emissions, usually the largest parts of companies’ carbon footprints. After pressure from some investors, including the Australasian Centre for Corporate Responsibil­ity (ACCR), a shareholder advocacy group, Rio Tinto committed itself to enhanced disclosure of plans to reduce scope 3 emissions from processing iron ore before its next annual meeting in March. Naomi Hogan, company strategy lead for the ACCR, said that it had “long encouraged Rio Tinto to present a clear scope 3 plan, including targets and timelines”. She added: “Rio Tinto’s upcoming scope 3 disclosures, alongside growing ambition and investment partnerships for green iron and green steel, should put the company in a position to set a clear scope 3 target in future.”

To protect long-term shareholder value in an evolving market, J-POWER needs to prioritise increasing the flexibility of domestic coal plants. Read our full report: https://lnkd.in/gZBXjtnS

Top insurance companies suffered $10.6 billion of climate-attributed losses this year, just shy of the $11.3 billion of direct premiums they underwrote for commercial fossil-fuel clients in 2023, according to Insure Our Future Global. Of the 28 insurers reviewed, more than half were hit by climate-attributed losses that exceeded the coal, oil and gas premiums they earned, Insure Our Future said in a statement. On average, fossil-fuel premiums account for less than 2% of total premiums, raising questions about why insurers aren’t using their immense influence to protect the other 98% of their business from spiraling climate risks. The report said climate change accounted for about $600 billion, or more than 33%, of global insured weather losses over the past two decades. Climate-attributed losses rose to an average 38% of total insured weather losses over the past decade, up from 31%. Insure our Future said the climate price tag should persuade the firms to stop underwriting fossil-fuel expansion and align their businesses with 1.5C transition pathways. “Insurers are walking away from communities to protect shareholder returns from losses, sparking the crisis of insurance affordability and access,” the report said. via Bloomberg

Watch Alex Hillman in this webinar presenting our report Equinor’s challenge: which way to Paris?, evaluating whether Equinor’s operations are aligned with the Paris Agreement and the potential to align with climate goals without materially diluting shareholder value.

Rising solar penetration in Japan drives down midday prices and increases intraday volatility of the electricity grid, exposing J-POWER to the risk of being forced to generate power during low-pricing periods. To protect long-term shareholder value in an evolving market, J-POWER needs to prioritise investment in initiatives that lower minimum load levels and increase the flexibility of its domestic coal plants – and clearly articulate this in its decarbonisation strategy. Read our latest report: https://lnkd.in/gZBXjtnS

bp has agreed a deal worth up to £4.5bn to build offshore windfarms with Japan’s biggest power producer, JERA Co., Inc. BP has faced strong criticism for watering down carbon reduction targets, and has backtracked on plans to curb fossil fuel exploration and production under Murray Auchincloss. Auchincloss said the joint-venture would create “a top five wind developer globally” while limiting the amount of money requested from shareholders. The joint-venture will seek to raise funding itself, separate from BP’s balance sheet. “This will be a very strong vehicle to grow into an electrifying world, while maintaining a capital-light model for our shareholders,” Auchincloss said. Via The Guardian https://lnkd.in/ggRNjcSk