Weekly Roundup December 9
Invert is focused on providing clients and subscribers up-to-date news on net-zero developments, carbon markets, and how many sectors are evolving to meet climate change goals and ESG requirements.
The Net-Zero Asset Owner Alliance has released its Call to Action to Private Market Asset Managers, providing recommendations on how to address climate risk across prominent private asset classes, including private equity, real estate, infrastructure, and debt. The Call to Action sets requests for all private asset managers and provides specific recommendations for each asset class covering governance structure, climate disclosures, and transition financing by seeking investments aligned with climate taxonomies.
Invert Insights: To date, there has been an uneven focus on publicly-listed companies and their strategies to decarbonize. By addressing private markets, the Alliance is seeking to address a significant blindspot in asset managers' portfolios and ensure their ability to meet portfolio-wide decarbonization targets.
Australia Regulator Finds Banks Expect to Reduce Exposure to Climate-Risk Affected Industries, Regions
Australia’s largest banks expect to adjust their lending practices to sectors more exposed to transition risks, such as mining, manufacturing and transport, and regions more exposed to severe and prolonged physical risks in response to increasing climate-related losses according to a recent report by the Australian Prudential Regulation Authority (APRA). The financial services regulator, in conjunction with participating banks, completed their first Climate Vulnerability Assessment (CVA), which projected banks could experience lending loss rates up to three times higher than historic averages by 2050 and make the overall sector more vulnerable to future economic downturns.
Invert Insights: Financial institutions are becoming increasingly aware of the potential impact of climate change on their operations and planning for mitigations to address those risks. Organizations facing increased physical and transition risks who risk being impacted by these potential changes can respond by developing a comprehensive climate action plan now to better understand and address these underlying risks.
The European Union has added maritime transport emissions to their emissions trading scheme (ETS) for the first time, requiring shipping operators to pay for their carbon emissions. The move will require ships traveling within the EU to pay for 100% of their emissions while international routes starting or ending in the EU will only pay for 50% of their emissions. The inclusion of the maritime sector, which accounts for 3% of global greenhouse gas emissions, is expected to increase pressure on the sector to invest in greener technologies and improve air pollution in coastal cities.
Invert Insights: The inclusion of shipping emissions within the EU ETS is a significant step forward in incentivizing action and funding emissions-reduction projects within the sector. Shipping emissions have faced much less scrutiny than other sectors to date, falling outside the scope of the Paris Agreement despite its significant contribution to global emissions and forecasted growth.