ESG Weekly Update – August 25, 2022 – Climate Change

EU: ECB Research Finds Introducing Carbon Pricing More
Effective than Green Quantitative Easing

This month, the European Central Bank released a working paper
entitled “Climate Change Mitigation: How Effective Is Green
Quantitative Easing?” The paper considers whether central
banks can effectively contribute to reduced global warming through
“green quantitative easing” (QE), a process in which
central banks’ privately issued financial asset holdings are
gradually shifted toward green investments. The ECB research also
considered the effectiveness of green QE in combination with other
fiscal policies, including the introduction of a carbon tax.

The research found that green QE would result in a 0.04-degree
Celsius reduction in global temperature by 2100 based on a scenario
in which a global central bank moves its entire investment to green
bonds.

In contrast, a global carbon tax of $50 per ton would be four
times more effective, leading to a 0.17-degree Celsius reduction by
2100. Current carbon prices are at $53.75 per ton in the European
emissions-trading system and $6.89 per ton in the Chinese
emissions-trading system.

Link:

Report

EU: Platform on Sustainable Finance Publishes Draft Report on
Minimum Safeguards

Last month, the Platform on Sustainable Finance (PSF) published
its Draft Report on Minimum Safeguards, which if adopted by the
European Commission would fulfill criteria for environmentally
sustainable activities under the EU Taxonomy Regulation. The
minimum safeguards, which are set out in article 18 of the Taxonomy
Regulation, require that companies implement procedures to comply
with the OECD Guidelines for Multinational Enterprises (MNE), the
UN Guiding Principles on Business and Human Rights, the eight
Conventions on Fundamental Principles and Rights at Work and the
International Bill of Human Rights. The PSF report establishes a
close link between the minimum safeguards and other anticipated EU
regulation, including the Corporate Sustainability Due Diligence
Directive and the Corporate Sustainability Reporting Directive. The
safeguards are also relevant to the definition of sustainable
investments under articles 8 and 9 of the Taxonomy Regulation,
which include a “do no significant harm” test and require
compliance with good governance principles. The PSF report includes
examples of what should be considered as non-compliance with the
minimum safeguards and generally serves as important guidance from
the European Commission. PSF is accepting comments to the draft
report through September 6, 2022.

Link:

Draft Report

Global: Ceres Partners with Dutch Government to Spearhead Valuing
Water Finance Initiative

This month, Ceres launched the Valuing Water Finance Initiative
(VWFI), an effort to engage companies with significant water usage
to “value and act on water as a financial risk and drive the
necessary large-scale change to better protect the water
system.”

Ceres, along with members of the Valuing Water Finance Task
Force, developed the “Corporate Expectations for Valuing
Water,” a series of considerations corporations and investors
can refer to when seeking to address water risk, including:

• ensuring current business processes do not impact water quality
  or availability;




• integrating water management into business practices, including
  board oversight and policy engagement;




• ensuring access to water and sanitation essentials across
  company value chains; and




• protecting ecosystems that are critical to the freshwater
  supplies used by their businesses.

In addition, the VWFI will develop a water-related disclosure
framework for financial institutions and use it to score and rank
businesses. In this way the VWFI will highlight best practices and
boost ambition while promoting leaders in the effort. A group of 64
signatories with $9.8 trillion of assets under management has
joined forces with Ceres and the Dutch government, which hosts the
global Valuing Water Initiative.

Links:

Valuing Water Initiative

Ceres

Vanuatu: Pacific Island State Proposes Novel “Loss and
Damage” Costing in Climate Action Plan

Vanuatu has updated its Nationally Determined Contribution (NDC)
under the Paris Climate Accord, a document that sets out how a
country plans to phase out fossil fuels and tackle destruction
caused by storms and rising sea levels. Vanuatu’s updated plan
is innovative in that it sets out a comprehensive plan to address
“loss and damage” from global climate change at a country
level.

Vanuatu is made up of 80 islands and is part of Oceania.
Although it is carbon-negative, the island nation is at the
forefront in experiencing many of the effects of climate change,
including severe storms, drought and rising sea levels. In order to
combat the crippling losses to GDP resulting from climate change,
Vanuatu has proposed innovative country-level measures including
the use of micro-insurance, building construction plans that
minimize risks, essential healthcare and funding for people
displaced by climate change. Vanuatu has estimated the cost of
implementing these measures by 2030 at $178 million. In order to
achieve full mitigation, Vanuatu anticipates financial and
capacity-building support from global funds, including the Green
Climate Fund, the Adaptation Fund or the Least Developed Countries
Fund. Vanuatu is also calling for the creation of a Loss and Damage
Finance Facility under the UN Framework Convention on Climate
Change to fill critical financing gaps experienced by vulnerable
communities.

Climate-vulnerable countries have called for similar plans for
years to little effect. However, Vanuatu has identified loss and
damage measures in the form of concrete, country-level solutions.
Loss and Damage is expected to be a key issue and point of
discussion at COP27, taking place in Egypt in November of this
year.

Link:

Vanuatu
Climate Plan

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