ImpactAlpha, Oct. 14 – The International Energy Agency’s World Energy Outlook is full of stark warnings just 18 days before a make-or-break global climate summit kicks off in Glasgow. The agency pushed the report out early to help guide discussions – and spur action – at COP26.
Current pledges and net-zero commitments by global governments will result in global average temperatures breaching 2 degrees warming by the end of the century. The pledges fall 80% short of the emissions that need to be eliminated to reach net zero by 2050, an “ambition gap” of 14 gigatons of greenhouse gases. To stave off climate catastrophe, investment in clean energy infrastructure needs to triple by 2030, to $4 trillion annually.
“A wave of investment in a sustainable future must be driven by an unmistakable signal from Glasgow,” the IEA warns.
Fossil fuels may be staging a temporary comeback, but demand for the polluting fuels falls in each of the four scenarios that the IEA plays out. The agency, which declared in May that new fossil fuel investment should stop immediately, sees a $1 trillion market market for wind, solar, batteries and other net zero technologies by midcentury.
Under the IEA’s Paris-aligned net zero scenario, carbon prices will hit an average $250 in advanced economies by 2050. The report, says Andrew Logan of Ceres, is “a flashing signal to all fossil fuel companies: Under no circumstances will the future look like business as usual.”
The agency recommends four sweeping measures to turn the tide: a massive push for clean electrification, energy efficiency, methane emission cuts and investment in key technologies like carbon capture and low-carbon fuels that are in their earthly stages today. The good news: 40% of these actions can save money.
Support for the Task Force on Climate-related Financial Disclosure, a disclosure framework, has grown by a third, to more than 2,600 organizations globally, according to the group’s 2021 status report. Publicly traded companies are responsible for 40% of all greenhouse gas emissions, according to Generation Investment Management.
Global regulators are also basing reporting policies on the framework. The U.S. Securities & Exchange Commission is expected to propose mandatory disclosure rules by early 2022 and adopt them by mid-year.
Yet implementation of the voluntary reporting framework remains spotty. The taskforce has added new guidance this year, including recommending Scope 1 and 2 emissions reporting for all companies, independent of any materiality assessments, and encouraging reporting of Scope 3 emissions and internal carbon prices.
ESG rules redux
The U.S. Department of Labor is (again) clearing the way for environmental, social and governance, or ESG, funds in government-regulated retirement accounts, which represent more than $10 trillion in assets and cover more than 140 million workers.
The proposed rule, the “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” reverses Trump-era guidance and makes clear that climate and other ESG factors fall under “a fiduciary’s duty of prudence.”
The proposal, says US SIF’s Lisa Woll, “is an important step towards ending the regulatory pendulum that is holding back the inclusion of funds utilizing ESG criteria in retirement plans and complicating proxy voting by plan fiduciaries.”
The proposed will be a 60-day public comment period.