Page 7 - LatAmOil Week 48 2021

LatAmOil COMMENTARY LatAmOil

There was also a non-legally binding agreement
on achieving a 100% zero emissions car market
worldwide by 2040 and in leading markets by
2035, with the support of UK, Canada, Norway
and Chile, and global manufacturers such as
Ford Motor Company, General Motors, Jaguar
Land Rover, Mercedes-Benz, and Volvo. How- constrained to just net-zero investment. Mem-
ever, the US and China as well as other leading bers of the alliance have committed to reach net-
car manufacturers were not part of the deal. zero emissions by 2050, alongside interim 2030
Beyond governments, investors committed to targets, across all scopes.
engage with investee companies within the auto- At present, not all the financial institutions
motive manufacturing industry to achieve this have announced their short- and medium-term
goal and to promote within all their holdings the commitments. Nonetheless, it is clear that asset
development of decarbonisation of their fleets owners and managers will increase expectations
aligned with science-based targets. on investee companies with regards to transition
It is becoming clear that any financing in the plans covering all scopes, as well as climate con-
fossil fuel sector on both the supply and demand siderations on governance structures, remuner-
side will increasingly come under scrutiny, with ation incentives and capital allocation aligned to
the spectre of a ban on new exploration com- net zero targets.
bined with a drive for zero-emissions vehicles
being examples of this trend. Creation of a global sustainability board
Finally, an important step in the future of sus-
Glasgow breakthrough tainability reporting was the establishment
An interesting announcement supported of the International Sustainability Standards
for more than 40 countries was the ‘Glasgow Board (ISSB) by the IFRS foundation which will
breakthroughs’ which aims to steer innovation work towards the creation of a global sustaina-
towards five areas by 2030: ble reporting standard. The foundation already
announced that it will be built upon existing
Clean power standards such as the Task Force on Climate-Re-
Zero emissions vehicles. Near zero emissions lated Financial Disclosures (TCFD).
steel. Renewable and low carbon hydrogen. Sus- This is a crucial step to the creation of a
tainable and climate-resilient agriculture. holistic sustainability reporting disclosures
It is worth mentioning that not all countries framework, although the results will be adopted
committed to the five areas. There also are no by countries on a voluntary basis and clear
concrete steps on how they will be implemented, definition will likely require a number of years
with the UK government inviting “responsible before the framework becomes mandatory. For
ministers to review global progress”. that reason, financial institutions and business
should continue reporting under the TCFD,
Just Transition which is becoming increasingly mandatory in
The EU, US, UK, France and Germany several jurisdictions, and keep updated on the
announced a Just Energy Transition Partner- new changes on the sustainability reporting
ship with South Africa which aims to help South landscape.
Africa achieve its decarbonisation targets. The
first phase of the partnership is worth $8.5bn in Our view
financing to help the country move away from We are broadly encouraged by the outcome of
coal-fired power generation. This partnership COP26, with enhanced climate ambition having
may serve as a model for future co-operation been agreed by the two largest emitters, despite
agreements between developed and developing a backdrop of increasingly tense geopolitical
nations. conditions.
Despite this progress, we are not on track
US and China declaration for 1.5 °C, and more work needs to be done on
The US and China announced an unexpected all areas of climate action, and so we are now
“Joint Glasgow Declaration” which aims to entering a period where implementation needs
enhance climate action this decade. Key areas of to come to the fore, with substantive progress
co-operation include reducing methane emis- made by the time the next COP takes place in
sions, CCS and DAC, electricity transmission Egypt.
and energy efficiency. For businesses, there is no let-up in expec-
tations emanating from political, economic and
Finance civic stakeholders, and as such the direction of
The Glasgow Financial Alliance for Net Zero travel on climate risks is clear. The time for busi-
(GFANZ), a group of banks, investors and insur- nesses to act on climate risk is now. ™
ers led by former Bank of England governor
Mark Carney claimed that $130 trillion of pri- Acasta is a specialist climate risk management
vate sector finance is now committed to net zero. consultancy that works with businesses to help
However, this figure is somewhat misleading, as them understand climate risk and to embrace
it represents total assets under management by the opportunities presented by the transition to
member institutions, not capital that is currently a lower carbon future.

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