One thing to start . . . It would not be UNGA week without the US and China vying to steal the limelight. So no surprise that on Tuesday the Chinese President Xi Jinping sought to upstage America by declaring plans to become “carbon neutral” by 2060 — US President Donald Trump pre-emptively hit back by blaming China for global pollution and emissions.

But amid this verbal jostling, here are two points to ponder: although 2060 might seem a ridiculously distant deadline, Mr Xi has raised the bar for others. Moreover, the fact that Mr Trump felt the need to retaliate by touting a decline in recent years in US emissions shows that even he realises he cannot entirely ignore the “green” lobby in the Republican base. The rhetoric is shifting — even amid the mud-slinging. (Gillian Tett)

Today we also have:

  • Cities launch big divestment push

  • Mark Carney calls for mandatory climate reporting

  • ECB backs sustainability bonds

  • What have the UN’s Principles for Responsible Banking accomplished in their first year?

Cities step up in battle against fossil fuels

© AP

Since the central goal of UN week is to build more unity between “nations”, it is no surprise that national leaders tend to grab the spotlight. But nations were not the only game in town yesterday.

First, it is important to dissect Mr Trump’s statement on emissions. Technically he was correct to say that emissions have fallen recently. But what he failed to mention is that his administration had little (if anything) to do with it. Instead, this year’s decline is inextricably linked to the coronavirus pandemic. And researchers have found the US’s 2019 emissions cuts were almost solely attributable to markets’ growing distaste for coal — which happened in spite of Mr Trump’s unwavering support for coal companies. And overall, US emissions were still higher in 2019 than when he took office.

What is even more striking is what has happened at subnational levels of government. About the same time Mr Trump and Mr Xi were battling on the main stage, 12 of the world’s largest cities announced their own eye-catching pledges — a commitment to divest from fossil fuels.

As part of an initiative backed by the C40 group, Berlin, Bristol, Cape Town, Durban, Los Angeles, Milan, New Orleans, Oslo, Pittsburgh, and Vancouver all announced they would join New York and London and “[take] all possible steps to divest city assets from fossil-fuel companies.”

Details remains vague, but the city mayors (including Bill de Blasio pictured above) mentioned everything from converting city fleets to electric vehicles, to passing new green building codes and working to remove fossil-fuel holdings from their investment funds.

The state of New York also announced a plan to hold insurance companies to better account on climate risk and to ensure they start to adhere to the guidelines set out by the Taskforce for Climate-related Financial Disclosures (TCFD).

Can this type of municipal action soften the blow of Mr Trump’s decision to exit the Paris accord? Probably not: faster national action is needed too. But in a world where national governments are struggling to meet their Paris promises, this action from individual companies, cities and people is welcome. And it shows it is sometimes easier to forge “unity” on green issues at the UN outside the nation states. (Billy Nauman)

ECB gives vote of confidence to sustainability linked bonds

The European Central Bank announced yesterday it would start accepting sustainability linked bonds as collateral and make them eligible for its asset purchase programmes. This may seem like a minor technical matter — there are few bonds of this type out there and investors are not convinced this indicates a long-awaited green QE programme is on the way — but even amid the hubbub of UNGA and Climate Week, it would be a mistake for readers to ignore this development.

Sustainability linked bonds (where borrowers get better terms if they meet a set of goals tied to their environmental, social and governance performance) have been pegged by many ESG advocates as a critical element in funding the energy transition since they are available to companies of all stripes, and not just those that already qualify as green.

“We think it’s a very positive development,” said Scott Mather, chief investment officer of US core strategies at Pimco of the ECB announcement. “We believe it will encourage more issuers to come to market with [sustainability linked bonds] as it means the bonds would now receive the same benefit of ECB demand.”

Even before this announcement the market was gaining steam. Since the International Capital Markets Association (ICMA) released its sustainability linked bond principles in June, Brazilian paper company Suzano, and fashion group Burberry*, have all issued sustainability bonds.

“Of course, the ECB announcement is significant and welcome and can only help Euro-based issuances,” said Hervé Duteil, chief sustainability officer of the Americas at BNP Paribas. “It certainly facilitates investors’ purchase of [sustainability linked bonds], but the train was already on the move.” (Billy Nauman)

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For Earth’s sake: ‘The accounting profession is absolutely essential’


On the heels of the Big Four’s announcement that they are developing a framework for environmental, social and governance standards, Mark Carney, the former Bank of England governor, promised that next year’s UN climate change conference would be a turning point for mandatory climate reporting.

“We are working with a number of organisations to move from voluntary to mandatory [climate reporting],” Mr Carney told a Climate Week panel on Tuesday.

Mr Carney, who is serving as a finance adviser for the Glasgow conference known as COP26, wants climate reporting to become a ubiquitous part of financial disclosures. The information should not be tucked away in corporate sustainability reports, and should be as relevant as a company’s interest rate risks, for example, he said.

Reporting frameworks by the TCFD and the Sustainability Accounting Standards Board “are absolutely foundational to everything we are doing,” he said. And Mr Carney reiterated that to get mandatory reporting right, it falls on the accountants. “The accounting profession is absolutely essential,” he said. 

However, Mr Carney stressed that there does not need to be only one approach. New Zealand is mandating climate change disclosures, while Canada is tying disclosures to financing. The UK, meanwhile, has a comply-or-explain reporting system for climate risk.

Notably absent from Mr Carney’s remarks was any mention of climate reporting in the US. Even though there has been notably less action in the US on this front, it has received growing attention from regulators. On Tuesday, a US derivatives regulator applauded a new contract linked to the price of water as a way to manage climate risk.

But if the US continues to resist financial climate reporting, Mr Carney’s efforts might not amount to much by the time countries meet in Glasgow next year. (Patrick Temple-West)

Join the Moral Money team at the inaugural Global Moral Money Summit next week on September 30-October 1. Learn how businesses across the globe are looking internally at their supply chains and sustainability practices and vowing to build back better following a challenging 2020. Our superb line-up of speakers will share their experiences, opinions and thoughts on where they see opportunity in the future. Free tickets are available to senior executives from corporations. Register now

Good vibes only: another case for sustainability

The case for sustainability seems to be growing by the day. On top of evidence that it pays off for companies and investors, a new study has found a more sustainable society may be a happier one, according to researchers from the University of Oxford’s Saïd Business School.

Jan-Emmanuel De Neve, the study’s lead author, said there was evidence to suggest that cleaner air quality and exposure to nature improves mental health, a theme intertwined with numerous SDG pillars.

Nordic countries, well known for having some of the world’s happiest residents, topped the rankings for their SDG index scores. Countries such as Costa Rica also scored highly.

In a conversation with Gillian Tett, Costa Rican President Carlos Alvarado Quesada emphasised the country’s commitment to carbon neutrality by 2021, as it continues to serve as the leader in environmental initiatives within the region.

However, if the positive correlation between higher SDG index scores and wellbeing holds, there may be bad news ahead for our future happiness: studies suggest that the world won’t reach the UN’s SDGs for at least another 10 years. Keep a close eye on UNGA and Climate Week for more on this front. (Kristen Talman)

Chart of the day

Asset manager votes on climate resolutions in 2020

Majority Action, a non-profit shareholder advocacy organisation, published a report on Tuesday showing that many big asset managers continued to vote against climate change shareholder proposals at companies’ annual general meetings this year. “If the largest asset managers continue to shield recalcitrant boards from accountability, they will go down in history as among the few who could have truly moved the needle on climate change — but actively chose not to,” said Eli Kasargod-Staub, Majority Action’s executive director.

Grit in the oyster

The Business Roundtable’s stakeholder emphasis has taken another hit. After Moral Money colleagues reported that BRT members’ pledges have been met with scepticism, a new report funded by the Ford Foundation said the BRT statement “has failed to deliver fundamental shifts in corporate purpose in a moment of crisis when enlightened purpose should be paramount”. (New York Times)

Tips from Tamami

Nikkei’s Tamami Shimizuishi keeps an eye on Asia to help you stay up to date on stories you may have missed from the eastern hemisphere.

Since 130 banks joined the UN Principles of Responsible Banking during Climate Week last year, more than 50 additional banks have signed on to the agreement. But whether the framework has delivered real impact is yet to be seen, green advocates say.

“Change can only be measured once PRB banks have put in place concrete targets, and publicly report on their progress towards reaching these,” said Daisy Termorshuizen of Dutch-based NGO BankTrack. “Unfortunately, one year after the launch of the PRBs, such information is not yet publicly available.”

Under the framework, banks commit to assess the effects of their financing and align their business practice with the Paris Agreement and the Sustainable Development Goals (SDGs). They have 18 months to meet PRB’s reporting obligation after signing the agreement — a “generous timeline” Ms Termorshuizen said, which is problematic given the urgency of climate change.

A group of NGOs, including BankTrack, Divest Invest Protect, and Rainforest Action Network, said that the top 20 banks alone are responsible for more than $1.2tn in loans and underwriting to the fossil-fuel industry between 2016 and 2019, and the financing has been on an upward trend in recent years. The top banks that have become PRB members include financial institutions such as Citi, Mitsubishi UFJ Financial Group, and Barclays.

“PRB banks must understand that we have entered new territory where [green activists] judge [banks] on urgency, scale, ambition and impact on the ground,” said Ms Termorshuizen.

Further Reading

  • US regulator welcomes water futures as tool to manage climate risk (FT)

  • Climate campaigners turn their focus from fossil fuels to meat (FT)

  • Big Four accounting firms unveil ESG reporting standards (FT)

  • A ‘Net-Zero’ Portfolio Is a Pipe Dream. Here’s What Investors Can Do Instead to Fight Climate Change (Barron’s)

  • This Thai national park was tired of visitors leaving trash, so the government mailed it back to them (Washington Post)

*This article has been amended since initial publication to remove an erroneous reference to Chanel.

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