Chapter 3 pt 2 Flashcards
(42 cards)
1
Q
What is estimated to be the global economic loss from natural disasters in 2022?
A
- US$275 billion
with insured losses covering 45% of the damage, marking the fourth highest single-year total on record
2
Q
What are examples of transitions risks?
A
- policy risks, such as increased emission regulation and environmental standards,
- legal risks, such as lawsuits claiming damages from entities (corporations or sovereign states) believed to be liable for their contribution to climate change, and
- technology risks, such as low-carbon innovations disrupting established industries.
3
Q
What proportion of corporate bonds purchased by the BoE and European Central Bank went to carbon-intensive sectors?
A
more than half
4
Q
What are the economic impacts of physical and transition risks?
A
- Business disruption
- Asset destruction
- Migration
- Reconstruction/replacement
- Lower value of stranded assets
- Increase in energy prices with dislocations
5
Q
What do the economic impacts of physical and transition risks lead to?
A
- Lower property and corporate asset value
- Lower household wealth
- Lower corporate profits, more litigation
- Lower growth and productivity affecting financial conditions
6
Q
Describe policies introduced to ensure companies report and disclose the direct environmental impact of their actions
A
- UK gov: guidelines for businesses, emphasising the use of environmental KPIs
- European Commission: updated circular economy action plan to address climate change and pressure on natural resources and ecosystems
- European commission: Non-Financial Reporting Directive introduced concept of double materiality
- European commission 2023: Updated circular economy monitoring framework to support European Green Deal, with new indicators to measure material footprint and resource productivity and consumption footprint
- ASEAN: framework for circular economy in 2021 to guide ASEAN countries
7
Q
escribe global mining and metals sector
A
- Jan 2019: Brazil’s iron ore producer (Vale) experienced deadly dam disaster, 270 deaths, share price fell, sued for concealing environmental and economic risks
- 2015: Industry’s use of particular structure for storage of waste (tailings dams) in spotlight, Credit and ESG rating agencies downgraded Vale, number of funds selling out of the company
- Coalition of investors 13 trillion in assets have written to 700 extractive companies to call for investigations and reporting into issue of lack of transparency of location and safety of dams
- Many mining companies have the worst scores on sustainability ratings compiled by fund managers
8
Q
What sectors are particularly challenging to address emissions in?
A
- Industry: a growing demand for materials, coupled with a slow adoption rate of renewable electricity and incremental process improvements
- Food: will require changing the consumption habits of billions of people, changing the production habits of hundreds of millions of producers, and decarbonizing long and complex food supply chains.
9
Q
What are supply chain vs direct operation GHG emissions?
,
A
- GHG emissions in supply chains are estimated to be, on average, over five times as high as those from direct operations
10
Q
Which sectors have notably intricate or high-risk supply chains?
A
- oil and gas
- , mining
- Agriculture
- forestry (including such products as beef, cocoa, cotton, and palm oil),
- as well as fisheries
- leather production.
11
Q
What is the value of investments linked to deforestation?
A
$6 trillion
12
Q
How many of the 500 most influential companies and financial institutions in forest supply chains don’t have deforestation comitmants for any forest-risk commodities
A
40%
13
Q
What are the different scopes of emissions?
A
- Scope 1 emissions: core operations
- Scope 2 emissions: purchased energy
- Scope 3 emissions: indirect emissions from whole value chain including those produced by suppliers and customers
14
Q
Why is conducting a full value chain analysis important?
A
- Investors: to obtain an accurate picture of investee companies
- Companies: to ensure that their own policies are not undermined by actions taken elsewhere in their supply chain.
15
Q
What did CDP estimate about deforestation poclicies of their partner companies?
A
has estimated that while 71% of its partner companies have zero-deforestation targets, only 27% of their suppliers had policies to match this ambition.
16
Q
What are the different measurement frameworks and tools that can help trace sustainability issues in company supply chains offered by NFO orgs.
A
- The Sustainability Consortium has built a set of performance indicators and a reporting system that highlight sustainability hotspots, covering 80%–90% of the impact of consumer products.
- WWF offers more than 50 performance indicators for measuring the supply chain risks associated with the production of a range of commodities, as well as the probability and severity of those risks.
- CDP and the Global Reporting Initiative have created standards and metrics for comparing different types of sustainability impact.
- SASB/ISSB has developed standards that help public companies in 11 sectors, including consumer goods, to give investors material information about corporate sustainability performance along the value chain.
- The EU Taxonomy and the Climate Bonds Sector Criteria provide sector-specific metrics and indicators to assess whether things are compliant with the goals of the Paris Agreement.
- Transparency for Sustainable Economies (Trase) is a partnership between the Stockholm Environment Institute and Global Canopy.
- The Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool is an initiative of the UNEP World Conservation Monitoring Centre (WCMC), UNEP Finance Initiative, and Global Canopy.
- The Terra Carta, an initiative under the patronage of the prince of Wales, provides a roadmap for business action on climate change and biodiversity.
17
Q
What are some examples of global traceability schemes?
A
- the Forest Stewardship Council (FSC) ,
- the Marine Stewardship Council,
- Roundtable on Sustainable Palm Oil (RSPO) , and
- the Fairtrade Labelling Organizations International.
18
Q
What is thought to be the impact on jobs by decarbonisation?
A
- McKinsey estimated that by 2050, some 200 million jobs could be created
- while 185 million would be displaced, leading to a net potential gain of 15 million jobs;
19
Q
ive example of company that have started to disclose just transition plans?
A
- utility company SSE, have also started to disclose “just transition” plans as part of their net-zero strategies, outlining measures for retraining their workforce.
19
Q
What is another name for putting a price on carbon emissions?
A
Polluter pays principle
19
Q
What are the most common types of carbon pricing?
A
- Emission trading systems (ETSs) - compliance market, set jurisdictional limit, regulator creates permits which represent 1 ton of co2
- carbon taxes - Price for GHG emissions (per ton of co2)
20
Q
What needs to happen to the global carbon price?
A
- Estimated that an explicit global carbon price of US$40 to US$80 per tCO2 in the 2020s that more than doubles to US$50 to US$100 per tCO2 by 2030 is required to meet the goals of the Paris Agreement
- current global average price, which is US$4.5 per tCO2
20
Q
Describe how the permits work?
A
- “cap-and-trade” system.
- The permits underlying the system represent legal permission to emit GHGs.
- Market participants must acquire permits matching their annual verified emissions and surrender them to the regulator to show compliance with their obligations.
- Permits may be sold by the regulator at auction, at a set price, or allocated free of charge to covered installations.
- Cap decreases over time
- Scarcity increases cost, so alternative methods are cheaper, internalises costs of emissions
20
Q
Describe use of carbon pricing and trading of emission trading certificates in UK
A
- began trial use in the United Kingdom in the early 2000s
- a process that contributed substantially to the swift displacement of coal in the United Kingdom’s electricity mix, which provided less than 1% of electricity in 2020, compared to 40% as recently as 2012
20
Describe EUs carbon pricing
Carbon prices in multiple jurisdictions have generally been rising with the EU price notably reaching a record high of over US$100 per tCO2 in March 2023.
21
How many carbon pricing initiatives were implemented or scheduled in 2023?
1. 77 carbon pricing initiatives
2. split roughly equally between carbon taxation and ETS mechanisms.
3. They cover approximately 23% of global GHG emissions and are responsible for raising approximately US$100 billion in revenues, half of which is earmarked for financing green projects or compensating households or businesses
22
What is shadow carbon pricing?
1. An internal or shadow price on carbon creates a theoretical or assumed cost per ton of carbon emissions.
23
What was the outcome of COP26 around carbon markets?
1. introduction of more stringent rules around the use of past credits, adjustments to avoid double counting of reductions, and restrictions around what projects are eligible to count as a genuine offset
24
What are the 3 areas which can be a useful starting point when analysing materiality?
1. Energy
2. Waste
3. Water
25
Aspects that may need to be factored into the analysis of waste utilisation when assessing materiality
1. carbon capture and storage (e.g., for closed landfill and industrial operations),
2.. pollution control (soil, air, water),
3. waste-to-energy facilities,
4. waste-to-biofuel facilities.
26
What have become the globally recognised risk management framework when assessing project infrastructure initiatives?
1. the Equator Principles, which are based on IFC’s Performance Standards
2. Adopted by financial institutions for determining, assessing, and managing environmental and social risk in project finance
3. They set out performance standards that address environmental factors (such as resource efficiency, biodiversity, and land resettlement), as well as other social-oriented standards
27
Give an example of a funding platform for international development:
1. Tropical Landscapes Finance Facility (TLFF)
2. Offers long-term loans and grants to firms in Indonesia to improve rural livelihoods, reduce deforestation, and support sustainable activities.
28
What is the split in global climate finance between public and private actors?
1. Largely equal
$640 billion of $1.265 trillion total.
29
What are the primary sources of public funding?
1. national development finance institutions (DFIs; 37%)
2. state-owned enterprises (17%)
3. governments (16%)
4. multilateral DFIs (9.5%)
state-owned DFIs (9.5%).
30
How much funding goes to mitigation vs adaptation
1. 90% for mitigation
31
In what sectors are GHG emissions considered material in more than 50% of industries?
1. extractives and minerals processing and transportation
2. where the management of energy, waste, and hazardous materials features more prominently
3. Less than 50% in health care and tech/comms
32
What are some groups that have emerge to facilitate collaboration among institutional investors on climate change?
1. The United Nations Principles for Responsible Investment (UN PRI)
2. Ceres
3. The Asia Investor Group on Climate Change
4. The Investor Group on Climate Change
33
What is the UN PRI?
1. United Nations Principles for Responsible Investment
2. Founded in 2006, the UN PRI has a principles-based approach and incorporates ESG factors into investment decision making.
34
What is Ceres?
1. A non-profit advocacy group focused on sustainability.
2. Founded in 1989, its advocacy predates more recent markets interest on ESG.
3. Key focal points include climate change, water scarcity and pollution, and nature and biodiversity loss.
4. Ceres’ markets initiatives include the Net Zero Asset Managers and Paris Aligned Asset Owners organizations.
35
What is The Asia Investor Group on Climate Change?
is an initiative set up to create awareness among Asia’s asset owners and financial institutions about the risks and opportunities associated with climate change and low carbon investing
36
What is the Investor Group on Climate Change?
1. Collaboration of Australian and New Zealand institutional investors and advisers, focuses on the impact that climate change has on the financial value of investments.
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