Weekly Roundup July 29
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.
Climate-related shocks have the potential to quickly spread through the financial system, triggering company defaults and bank risks, according to a new report from the European Central Bank (ECB) and European Systemic Risk Board (ESRB). The report, the Macroprudential Challenges of Climate Change, discusses the systemic risks posed by climate change and the implications these risks could have on the financial stability of the European Union. Notably, the report discusses how climate shocks could reverberate through the financial system leading to fire sale dynamics due to abrupt reassessments of climate risk pricing.
Invert Insights: Only by understanding the interdependencies between climate risks and the financial markets can vulnerabilities be exposed and addressed to reduce the fragility of the overall system. Addressing climate risks and vulnerabilities at an earlier stage, through an orderly transition, was shown to dampen the impact of these shocks and in some scenarios modeled, could eliminate the vast majority of transition risk losses.
The Integrity Council for the Voluntary Carbon Market Launches its Public Consultation for Core Carbon Principles
The Integrity Council for the Voluntary Carbon Market (ICVCM), an independent governance body for the voluntary carbon market, has launched their open public consultation on the Core Carbon Principles (CCPs), Assessment Framework (AF) and Assessment Procedure. The CCPs and AF are being developed to set threshold standards for high-quality carbon credits and provide a readily accessible means of identifying credits that create real, additional, and verifiable climate impacts. The final principles and framework are set to be released later this year.
Invert Insights: Building trust and improving the transparency of the voluntary carbon market is critical to unlocking the additional investments needed to deliver real climate impacts at the speed and scale required to meet climate targets. Through these efforts, participants can be confident that these investments are a viable tool to support their net zero transitions and are having a positive impact on climate change.
The UK Government has announced their Jet Zero strategy, an approach for reaching net zero aviation by 2050 and net zero domestic aviation by 2040. Key components of the strategy including having at least five commercial sustainable aviation fuel plants in construction by 2025 and a minimum 10% blending requirements by 2030, investment in greenhouse gas removal technologies to offset residual emissions, enhancing the UK emission trading scheme, and expediting the development of zero-emissions aircraft to provide zero-emission domestic routes by 2030.
Invert Insights: Sustainable aviation fuels presently represent one of the only viable pathways to decarbonizing long-haul aviation and early investment into their production is essential. As with all renewable fuels, however, not all are created equal and ensuring their production is sustainable and delivers meaningful reductions on a life-cycle basis when compared to fossil fuels is integral to ensuring a positive climate impact.