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Climate inaction CEOs in Legal and General's sights; no let-up in plastics debate; Europe nudges non-carbon energy targets
Insurers aren’t known for being combative. So when the asset management arm of one of the world’s largest comes out railing against a clutch of big-name companies, you know it’s serious. Earlier this month, Legal and General Investment Management declared it would use its stockholding might to try and oust the chairs of eight publicly listed global firms for “persistent inaction to address climate risk”. On its hit-list are oil giants Occidental Petroleum and Rosneft Oil. LGIM also has its sights set on China Construction Bank, Dominion Energy, Japan Post Holdings, Subaru, Loblaw Companies and Sysco Corp. In addition, should any of the targeted companies appear in its $6.7bn multi-factor Future World Fund equities index, the investor pledges to divest them.
In line with its 2016 Climate Impact Pledge, LGIM has spent a year trying to assess the climate-change strategies of 84 of the world’s largest firms. Of the 74% that responded to its requests for information, not all were laggards. Among the large firms leading the charge against climate change are Toyota, Wells Fargo and Iberdrola (the Spanish electricity utility is lauded for lobbying the EU to raise its carbon price). Grounds for praise are even found in the hydrocarbon sector, where French oil and gas major Total is cited for “significant investments” in clean energy and battery manufacturers.
According to new figures from the insurance market Lloyd’s of London, potential economic losses from climate change and extreme weather events now exceed $540bn, equivalent to 1.54% of global gross domestic product (up from 1.48% last year). Large cities are particularly vulnerable, with the 10 most exposed cities collectively accounting for $127bn worth of potential loss (almost a quarter of the total). Climate-related risks now amount to around one fifth of potential lost GDP covered by the influential Lloyd’s City Risk Index, the latest findings reveal.
The Lloyd’s report adds weight to a call by a group of UK Members of Parliament and industry experts, who are calling for large companies and asset owners such as pension funds to disclose the potential risks that climate change might pose. The suggestion was made earlier this month in a report on green finance issued by the Environmental Audit Committee. The committee is proposing that current rules for company listings be changed to make such disclosures compulsory by 2022. Should global temperatures increase by 4°C, “the insurance business model fails to exist”, the report states. UNEP, the global body’s environmental division, is proposing to issue global guidance to assist insurance firms in the underwriting of environmental risks. The organization is currently carrying out a worldwide survey to ascertain what underwriters, brokers, risk engineers, loss adjusters and others in the non-life insurance industry see as the big risks on the horizon.
Plastic waste weighed in at 300m tonnes in 2015. (Credit: Mohamed Abdulraheem/Shutterstock)
WORLD ENVIRONMENT Day, celebrated earlier this month, came primed and packaged in plastic this year. Not since the outcry about the effects of hydrofluorocarbon (HFC) refrigerants on the ozone layer came to light in the 1980s has an environmental issue shot so fast up the international agenda. Leading the charge for an end to plastic waste, which came to a staggering 300m tonnes in 2015, is the UN. In a new “roadmap” for making single-use plastics more sustainable, the global entity beefs up its findings with some sobering statistics.
Plastic packaging comprises nearly half (47%) of all the world’s plastic waste. Around half of the world’s packaging waste comes from Asia, meanwhile, with China the biggest culprit. That said, per capita, the US tops the list for the worst offender when it comes to single-use packaging waste. Looking ahead, the UN warns that the world must work out a way to deal with 12 billion tonnes of non-biodegradable plastic by 2050. At present 9% of plastic is recycled and 12% is incinerated; the remainder is dumped, mostly in landfill. Again, if the current trajectory continues through to the middle of this century, plastic will come to account for one fifth (20%) of global oil production (up from 6% today). More positively, the report highlights Morocco’s seizure of 421 tonnes of plastic bags after the recent introduction of a ban on single-use carrier bags. China’s 2008 prohibition of bags thinner than 25 microns, meanwhile, saw bag use drop by 70% in 12 months (saving an estimated 40 billion bags).
World Oceans Day, just a few days later, also saw a spate of plastic-related announcements. One of the most significant is the G7 Ocean Plastics Charter, which came at the end of the G7’s fractious meeting in Quebec, Canada. The agreement commits the signatories to recycle and reuse at least 55% of plastic packaging by 2030 and recover 100% of all plastics by 2040. Two of the seven states – the US and Japan – were absent from the list of signatories. Canada subsequently said it would invest $100 million to help reduce marine litter and plastic pollution in the world’s oceans. Greenpeace said the agreement of a “common blueprint is good news”, but pushed the G7 to introduce binding reduction targets on single-use plastics. The G7’s 2040 goal is similar to a commitment made last month by the industry-backed American Chemistry Council. The council’s initiative has also drawn criticism from environmentalists, who say its inclusion of the term "recovery" opens the door to the incineration of plastics.
Individual businesses used World Oceans Day to demonstrate their plastic waste reduction measures. PwC, for instance, released the headline results of a daily water consumption monitoring scheme that it has been trialling in the UK. The initiative saw 600 staff given a metal water bottle by the social enterprise GiveMeTap, resulting in a 58% reduction in their plastic bottle purchases. If rolled out across the firm’s UK operations, PwC estimates that the initiative could save up to 23 tonnes of plastic per year.
Swedish retailer IKEA, meanwhile, came out with a raft of new, forward-looking sustainability targets, including removing all single-use plastic products from its global product range and in-store restaurants by 2020. The move follows a similar commitment by UK retailer Iceland earlier this year to ditch plastic packaging from its own brand products by 2023. As for restaurant chain Burger King, it has taken a leaf out of Unilever’s book and pledged to use only recyclable, biodegradable or compostable plastic packaging come 2025. If successful, the commitment (which covers all the firm’s 500 UK outlets) will result in an estimated annual decline in plastic use of 29 tonnes. Meanwhile, American Express unveiled a prototype credit card made with upcycled marine plastic debris. The card should be rolled out publicly within the next 12 months. Last but not least, the chief executives of a string of UK companies, including Sainsbury’s, Sky and Anglian Water, have signed up to a schools-based education initiative co-organized by Business in the Community, which aims to inspire pupils to reduce plastic waste.
In a more recent move, a group of 25 institutional investors with a combined $1 trillion of assets under management have pledged to engage their clients on the brand risks associated with plastic pollution. The Plastic Solutions Investor Alliance says it will target plastic packaging to begin with, focusing on four large consumer goods companies: Nestle SA, PepsiCo, Procter & Gamble, and Unilever. Among the Alliance’s demands will be for the disclosure of annual plastic packaging use, the setting of plastic use reduction goals and the development of alternatives to plastic.
The alliance, which is coordinated by campaign group As You Sow, cites a variety of alarming statistic to prove the extent of the brand threat posed by plastic waste. This includes a projected tripling of plastic production by 2050 and the estimated $13bn in damage currently done by ocean plastic to marine ecosystems. The group also highlights “dramatic developments” in public awareness over recent months, including the formation of a global coalition of over 1000 non-profit groups under the banner of Break Free From Plastic. Also mentioned is European Commission’s release of a plastics reduction strategy back in January. If passed, the measures could require all packaging in the European Union to be recyclable by 2030.
EU ups 2030 renewable target by 5%
About 17% of EU energy is currently derived from renewables. (Credit: Mimadeo/Shutterstock)
CLIMATE NEGOTIATIONS are famous for dragging late into the night, something European Parliamentarians recently pushed to the limits. In a marathon session that ran through to 4am earlier this month, negotiators concluded an 18-month debate about the Renewable Energy Directive with a decision to increase the final target for renewable energy by 5%. Under the revised plan, EU member states will be required to source at least 32% of their energy from zero-carbon sources by 2030, up from the previous goal of 27%. The business-backed RE-Source Platform (which includes the likes of Ikea, Amazon and Danone among its members) had lobbied for a minimum 35% threshold, while Greenpeace had wanted the bar set at a no-nonsense 100%.
Green campaigners will at least take solace from the EU’s decision to phase out palm oil and soya from biofuels by 2030. The deal allows for non food-based “advanced biofuels”, which should comprise 3.5% of total transport fuels by 2030. In total, renewable fuels should account for 10.5% of all transport-related energy under the EU’s revised directive. At present, about 17% of all EU energy consumption derives from renewables, double the 2004 figure. The deal will be subject to possible review again in 2023.
In other international climate news, a draft report from the United Nation’s Intergovernmental Panel on Climate Change (IPCC) suggested that global temperature rises are likely to top 1.5°C by 2040 unless far-reaching actions are taken to reduce carbon emissions. The report’s findings, which were leaked to the Reuters news agency, suggest that the world is warming at about 0.2°C per decade. The draft says renewable technologies, such as wind, solar and hydro power, would have to surge by 60% from 2020 levels by 2050 to stay below 1.5°C, while coal would need to decrease by around 66%. This would see renewables comprising between 49% and 67% of primary energy by the middle of the century. Under the Paris Agreement, signed in 2015, nearly 200 countries agreed to limit average temperature rises to “well below” 2°C above pre-industrial levels. The accord also entertains provisions for a tougher 1.5°C goal. The decision by the US to pull out of the Paris Agreement has cast doubts over the future of the deal.