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Aviva Investors calls for global finance governance overhaul to support net zero

Aviva Investors calls for global finance governance overhaul to support net zero

Asset manager sets out eight recommendations for a more sustainable financial system

Aviva Investors has made a number of recommendations to G7 and G20 nations aimed at transforming the global financial system to better support efforts to tackle the climate emergency and shift towards a net zero economy.

The proposals unveiled by the asset manager yesterday were devised in collaboration with a coalition of global allies, including asset managers, advisory firms and industry bodies, which advocate the creation of an International Platform for Climate Finance (IPCF).

The group would help channel capital into areas of the economy and markets that amplify, rather than undermine, the ambition of the Paris Agreement, they said.

Mark Versey, CEO at Aviva Investors, said the core principles of UN-affiliated financial initiatives should be updated to better align with net zero targets and fully sport the Paris Agreement goals.

"The current international order pre-dates awareness of the climate crisis and was originally set-up with the primary goals of sustaining world peace and supporting global economic growth," he said. "Since then, these frameworks have not been revisited, reconfigured, or redesigned to reflect other issues affecting the world today. To these goals, we need to add the challenge of climate change, which represents a growing and catastrophic threat to life on our planet. We believe an International Platform for Climate Finance could play a critical role in harnessing the considerable power of finance to tackle the climate crisis and support long-term net zero objectives."

The firm has published a whitepaper which outlines eight steps that would help reach the transition goals, including involving the OECD in the creation of the IPCF, updating existing corporate governance principles, and getting the IMF and the World Bank involved in making sustainability and climate a key consideration in their work.

Aviva Investors is also calling for greater involvement and reporting from regulatory supervisors from across the globe on climate issues, the involvement of finance ministries and central banks in creating a greener financial system, and bringing together a new UN Finance Assembly.

Finally, it said future hosts of UN COP climate summits should also hold the same year's G7 and G20 presidencies, just as the UK is set to do in 2021, and that  the wider G77+ countries should also be included as a third co-host, in order to boost inclusivity.

"Despite substantial efforts, the international community still lacks a cohesive strategy to finance the Paris Agreement and, collectively, we are falling well short of meeting the targets it lays out," explained Steve Waygood, chief responsible investment officer at Aviva Investors. "To deliver that strategy, we need enhanced international cooperation between public and private financial institutions and a mechanism to track progress."

"We think it's right to examine international financial architecture, to allow greater focus on raising the amount of private capital invested in climate adaptation and mitigation solutions globally, how this money can best complement public finance, and how public policy, globally, regionally and nationally can help accelerate capital flowsm," he continued. "As we stare down the barrel of the climate crisis gun, now seems the time to take a different approach."

'The sky's the limit': How 'cheap, abundant' renewables could boot fossil fuels from the electricity sector by mid-2030s

'The sky's the limit': How 'cheap, abundant' renewables could boot fossil fuels from the electricity sector by mid-2030s

Carbon Tracker study finds solar and wind energy potential is 100 times as much as global energy demand

Solar and wind power could push fossil fuels out of the electricity sector by the mid-2030s and out of the energy supply system altogether by 2050, as clean energy costs continue to plummet and governments pursue policies designed to ditch fossil fuels for cheap, home-grown renewables.

That is the compelling conclusion of a new analysis from the Carbon Tracker think tank, which today argues that dramatic decline in the cost of solar and wind power over the last three years has unlocked a huge energy reserve that could meet global energy demand 100 times over. 

The report, entitled The Sky's The Limit, argues the current renewables market has only scratched the surface of total renewable reserves, with just 0.01 per cent of solar and 0.16 per cent of wind potential tapped thus far. It calculates the world's feasible reserves of solar and wind power stand at 5,800 petawatt hours (PWh) and 900PWh annually, using current clean energy technologies, figures that dwarf the 65PWh used by the global energy system in 2019.

As such, the analysts predict exponential growth for the solar and wind power sectors, noting that "humans specialise in extracting cheap energy, and fast".

The business and energy opportunity presented by clean energy development is significantly larger than that of fossil fuels extraction and production, the analysis calculates, adding there is potential to generate more solar power in one year than could be generated from burning all known fossil fuel reserves.

Harry Benham, report co-author and chairman of think tank Ember-Climate, argued that only a fraction of the world's extensive renewable resources would need to be tapped to replace fossil fuel power. "The world does not need to exploit its entire renewable resource -- just one per cent is enough to replace all fossil fuel usage," he said. "Each year we are fuelling the climate crisis by burning three million years of fossilised sunshine in coal, oil and gas while we use just 0.01 per cent of daily sunshine."

The proportion of the world's solar and wind resources that are more economically competitive than fossil fuels is growing as renewable costs continue to decline, the report notes. Roughly 60 per cent of the world's solar resource and 15 per cent of its wind resource is currently economically competitive compared to fossil fuels, and the report projects that by 2030 100 per cent of solar resource and 50 per cent of wind resource could undercut fossil fuels.

"The fossil fuel era is over," the report states. "The fossil fuel industry cannot compete with the technology learning curves of renewables, so demand will inevitably fall as solar and wind continue to grow. At the current 15 to 20 per cent growth rates of solar and wind, fossil fuels will be pushed out of the electricity sector by the mid-2030s and out of total energy supply by 2050."

The report categorises countries into four key groups based on their potential to harness solar and wind resources relative to their domestic consumption and concludes that Africa is a "renewables superpower" due to its huge solar potential and relatively low energy demand.

However, while most countries in sub-Saharan Africa have renewable energy potential 1,000 times greater than energy demand, Japan, South Korea, and many countries in Europe have potential that is less than 10 times current demand, the report finds. As such, it warns these nations face "touch political choices" about how to tap their renewable resources most effectively over the years ahead.

The UK is placed in the "replete" category, with the researchers calculating it has technical renewables potential that is just over 10 times demand.

"We are entering a new epoch, comparable to the industrial revolution," Carbon Tracker energy strategist and lead author Kingsmill Bond said. "Energy will tumble in price and become available to millions more, particularly in low-income countries. Geopolitics will be transformed as nations are freed from expensive imports of coal, oil and gas. Clean renewables will fight catastrophic climate change and free the planet from deadly pollution."

Any analysis about the planet's immense potential renewables capacity inevitably invites warnings about the reliability of a grid that is reliant on 100 per cent renewables and the land use impact of increasing solar and wind capacity by an order of magnitude. But the report argues that the emergence of the offshore wind industry and rapid improvements in solar efficiency mean that "land is no constraint" to the development of renewables. The land for solar power alone to satisfy global energy demand in the world - approximately 450,000 kilometres squared, or 0.3 per cent of all land - is smaller than the footprint of fossil fuels today, it calculates. Meanwhile, there is growing confidence across much of the energy industry that a combination of fast-maturing energy storage technologies, green hydrogen, and flexible grid systems could enable renewables-dominated grids.

The challenge of retiring the fossil fuel industry in the space of a few decades remains daunting in the extreme, but as Carbon Tracker's latest report underscores the energy industry's fundamental economics are only moving in one direction.

Re-skilling to export the UK's Green Industrial Revolution

Re-skilling to export the UK's Green Industrial Revolution

Now is the time for all UK businesses to look to international markets and take British ingenuity to every corner of the planet, writes International Trade Minister Graham Stuart MP

Since its inception in 1970, Earth Day has become a powerful tool for raising awareness of the grave ecological threats to our planet. That awareness has built. However, so has the threat. The need for concerted, co-ordinated and effective action is immediate and urgent. So, it is encouraging to see so many global leaders joining the UK in setting more ambitious national targets to protect the natural world for future generations.

President Joe Biden this week hosted a virtual summit of 40 nations to discuss the climate emergency. This will provide momentum before the UK hosts COP26, the UN's global climate change conference, in Glasgow in November. The UK has made a world-leading commitment this week to cut emissions by 78 per cent by 2035, and we are urging other nations to show the same level of ambition to reach net zero emissions by 2050.

New jobs are also at the heart of our strategy and the recent, landmark North Sea Transition deal will help to deliver these and other crucial aspects of the green energy revolution. Building on the decision from the UK to end support for the fossil fuel energy sector overseas and align government support behind clean growth industries, the deal will support workers, businesses and the supply chain through the transition.

And it is a transition. The offshore oil and gas industry has been a major British industrial success story and we need to ensure that these livelihoods and communities are protected. We will safeguard these by re-skilling this workforce, as many of the skills - geologists, project managers, engineers, fabricators - are transferrable across the wider energy sector.

To realise this vision and drive this jobs growth, we must take advantage of the significant export opportunities in emerging overseas markets in low-carbon technologies and services. Renewables now account for roughly a third of global energy capacity, so it is vital that we give UK companies a big slice of this pie by connecting them to overseas partners and projects, thus creating more opportunities for workers.

Projected export opportunities for the UK's low-carbon sector are estimated to be between £60bn and £170bn by 2030. The 10 Point Plan for a Green Industrial Revolution is designed to capitalise on our export potential by mobilising £12bn of government investment, with potentially three times as much from the private sector, to create and support up to 250,000 green jobs.

Our export credit agency, UK Export Finance (UKEF), has also put in place a £2bn direct lending facility dedicated to financing clean growth projects, helping UK exporters take advantage of opportunities they might otherwise miss.

This is already bearing fruit, with the financing of over £800m of renewable energy projects overseas since 2019, including four major offshore wind projects in Taiwan. Closer to home, we have seen businesses like Glasgow's PCT Group secure a its first-ever renewable contract through UKEF support, supplying cranes to service wind turbines at an offshore wind farm off the Fife coast.

UKEF also has representatives based in Africa, the Middle East and Asia, specifically focused on supporting exports in the renewable and clean growth sectors, as well as UK specialists in the North of England and Scotland to help SMEs take advantage of the transition, as we level up opportunities across the UK.

So, with the 51st Earth Day behind us, now is the time for all UK businesses - and clean growth ones in particular - to look to international markets and take British ingenuity to every corner of the planet.

We have the chance to help UK businesses succeed abroad, recover from the pandemic and deliver net zero right around the world. At the centre of this is the reinvigoration of our industrial heartlands, providing well-paid jobs and exports that will provide prosperity at home and lower emissions abroad.

From geologists to engineers, there are so many professions that will be involved in creating the next generation of technologies, building on some of the incredible innovation we are already seeing. With the necessary focus and investment we will not just save our planet but ensure that British businesses play a significant role in doing so.

Graham Stuart MP is Parliamentary Under Secretary of State for Exports at the Department for International Trade.

British Airways owner sets goal to run 10 per cent of flights on sustainable biofuels by 2030

British Airways owner sets goal to run 10 per cent of flights on sustainable biofuels by 2030

IAG becomes first European airline firm to commit to powering 10 per cent of its flights with sustainable aviation fuel by end of decade

International Airlines Group (IAG) has become the first major aviation firm in Europe to commit to powering 10 per cent of its flights with bio-based jet fuels by the end of the decade, in a move that will see the British Airways owner purchase one million tonnes of sustainable aviation fuel (SAF) a year.

Announcing the commitment yesterday to coincide with Earth Day, the airline giant said ramping up its use of SAF for its flights would enable it to cut its annual greenhouse gas emissions by two million tonnes by 2030, roughly equivalent to removing one million cars from Europe's roads each year.

Moreover, IAG announced it has extended its existing 2050 net zero emissions target to cover its entire supply chain, making it the first European airline to set such a goal for its Scope 3 value chain emissions, as it pledged to work with suppliers to achieve net zero for the products and services provided to the firm.

The announcement is a major boost for the fledgling market for SAF, which proponents claim has the potential to reduce emissions from flights by at least 70 per cent if used as a replacement for traditional jet fuel. As it stands, however, SAF has largely been trialled in smaller quantities blended alongside traditional jet fuel for commercial flights with critics warning its adoption is being hampered by cost and capacity challenges.

The news comes as the global aviation sector continues to reel from the devastating impacts of the Covid-19 pandemic which has severely reduced demand for international travel. However, the sector is still expected to see demand recover post-pandemic and with it a rising contribution to global greenhouse gas emissions, which currently stands at around two to three per cent.

"It's clearly challenging to transition to a low carbon business model but, despite the current pandemic, we remain resolute in our climate commitments," said Luis Gallego, IAG's chief executive. "Government support is critical to meet this target by attracting investment to construct sustainable aviation fuel plants that will deliver enough supply for the airline industry, creating highly valued green jobs and economic growth at global scale."

SAF can be made from a variety of sources, including waste cooking oil, animal fat or other plant oils, solid waste from homes and businesses, or forestry waste and energy crops.

IAG has pledged to invest $400m in the development of SAF over the next two decades, partnering with specialist sustainable aviation fuel developers LanzaJet and Velocys, and plotting Europe's first household waste-to-jet-fuel plant in the UK to start operations from 2025. British Airways has also struck a deal to purchase SAF from LanzaJet's US plant to power some of its flights from 2022.

With the right policy in place, IAG said that up to 14 SAF manufacturing plants could be built across the UK, which it said would create 6,500 jobs and save 3.6 million tonnes of CO2 per year.

Velocys CEO Henrik Wareborn said that SAF offered the potential to largely decarbonise flight without any modifications to existing jet engines, and that if integrated with carbon capture technologies it could even offer "negative-carbon emissions". 

"We are proud to be collaborating with an organisation who recognise the essential role SAF will play in significantly decarbonising the aviation sector by 2030 and achieving net zero emissions by 2050," he added.

The announcement follows the news earlier this week that the UK will for the first time include international aviation in its newly-announced 2035 target to reduce greenhouse gas emissions by 78 per cent from 1990 levels. A number of world leaders are also expected to travel to Glasgow via planes powered partly by green fuel for the crucial COP26 Climate Summit later this year, under plans being developed by the UK government, according to reports.

The UK's Transport Secretary, Grant Shapps, hailed IAG's "agenda-setting commitment" yesterday, which he said demonstrated "clear evidence of the progress we are making".

"These kinds of initiatives, along with our work through the Jet Zero Council, will help us rapidly accelerate towards our net zero targets as we build back better out of the pandemic," he said.

However, some environmental campaigners and experts remain wary of SAFs, questioning their ability to deliver promised emissions savings and replace global demand for aviation fuels without having a negative knock on impact on land use. As such, calls continue to grow for policymakers to take steps to curb demand for aviation, alongside measures to boost investment in new green aircraft technologies.

Climate impacts to scythe 18 per cent off global GDP by 2050, Swiss Re warns

Climate impacts to scythe 18 per cent off global GDP by 2050, Swiss Re warns

Insurance giant's stress test of 48 major economies finds climate impacts are on course to make world trillions of dollars poorer

Climate change is on course to slash up to 18 per cent off global GDP by 2050, making the world trillions of dollars poorer if mitigating action is not taken and global temperatures soar to 3.2C above pre-industrial levels by the end of the century, Swiss Re has warned.

A fresh analysis of 48 countries representing 90 per cent of the world's economy released yesterday by the insurance giant forecasts that based on current trajectories climate change will result in significant negative economic impacts by 2050, with Asian economies set to be the hardest hit by the worsening effects of rising temperatures.

China is at risk of losing nearly a quarter of its GDP by mid-century, it warns, while the US stands to lose close to 10 per cent, and Europe almost 11 per cent, according to the analysis.

In contrast, the report calculated that if Paris Agreement goals to limit average temperature rise to well below 2C are met, the global economy would likely still see a four per cent reduction in GDP by 2050.

The estimates are the result of a stress-test conducted by Swiss Re to examine how 48 major economies would be impacted by the ongoing effects of climate change under four different temperature scenarios, ranging from 3.2C down to below 2C.

But the analysis also sets out the benefits of investing in a net zero economy, estimating that adding just 10 per cent to the existing $6.3tr of annual global infrastructure investments could limit average global temperature rises to below 2C - just a fraction of the expected loss of global GDP that would result from not acting to decarbonise the economy.

As such, Swiss Re reiterated that climate change posed the biggest long term threat to the global economy, and that far more decisive action and higher sums of both private and public investment were urgently needed to deliver on net zero targets in line with the climate goals of the Paris Agreement.

"Climate risk affects every society, every company and every individual," said Thierry Léger, the firm's chief underwriting officer and chairman of Swiss Re Institute. "By 2050, the world population will grow to almost 10 billion people, especially in regions most impacted by climate change. So, we must act now to mitigate the risks and to reach net zero targets. Equally, as our recent biodiversity index shows, nature and ecosystem services provide huge economic benefits but are under intense threat. That's why climate change and biodiversity loss are twin challenges that we need to tackle as a global community to maintain a healthy economy and a sustainable future."

The insurance giant also evaluated each of the 48 countries' expected vulnerability to extreme dry and wet weather conditions as a result of climate change, which it said delivered similar conclusions from the GDP impact analysis.

Malaysia, Thailand, India, the Philippines, and Indonesia were found to be the most vulnerable to growing climate impacts, while advanced economies in the northern hemisphere - such as the US, Canada, Switzerland and Germany - were found to be the least vulnerable.

Swiss Re said mitigating climate change required a "whole menu of measures", such as carbon pricing policies, incentives to drive investment in credible nature-based carbon offsetting solutions, international alignment on taxonomy rules for green investments, and widespread climate risk disclosures from major firms.

Jérôme Haegeli, Swiss Re's chief economist, said climate change was a systemic risk that could only be addressed globally, but that "so far, too little is being done".

"Transparency and disclosure of embedded net zero efforts by governments and the private sector alike are crucial," he said. "Only if public and private sectors pull together will the transition to a low-carbon economy be possible. Global cooperation to facilitate financial flows to vulnerable economies is essential. We have an opportunity to correct the course now and construct a world that will be greener, more sustainable and more resilient."

Climate Leaders Summit: US, Canada, and Japan unveil enhanced 2030 climate plans, as China hints at coal phase down

Climate Leaders Summit: US, Canada, and Japan unveil enhanced 2030 climate plans, as China hints at coal phase down

First day of climate summit hosted by US offers up a number of enhanced climate targets from world leaders as Prime Minister Johnson insists he is not a 'bunny hugger'

British Prime Minister Boris Johnson hymned the need to boost climate finance for developing countries, tackle biodiversity loss, and 'build back better' from the pandemic as he took to the virtual podium of the Climate Leaders Summit this afternoon, offering a characteristically optimistic rallying call to world leaders on a day when a number of leading economies unveil enhanced climate goals.

Forty leaders attended today's White House-hosted summit, including Brazil's President Jair Bolsonaro, Russian President Vladimir Putin, and Chinese President Xi Jinping, as US President Joe Biden undertook his first major act of climate diplomacy ahead of this year's crucial COP26 UN Climate Summit.

The President opened the two-day meeting by confirming heavily-trailed plans to reduce the US' emissions by between 50 and 52 per cent on 2005 levels by 2030 and called on other countries to step up their ambition ahead of the vital Glasgow Summit this autumn.

"The steps our countries take between now and [COP26 Climate Summit in] Glasgow will set the world up for success," he said, adding that if action is taken now "we will breathe easier literally and figuratively"

While the new US target is weaker the emissions goals embraced by the UK and EU, it marks a significant step up for the nation that is expected to unleash much-needed green policies and clean investments across the US over the coming years. Biden repeatedly stressed how the strategy was part of his wider infrastructure and jobs plans, promising that pursuit of net zero emissions would boost US competitiveness and enhance lives and livelihoods across the country.

He confirmed the US would double it climate finance commitments by 2024 relative to the average level during the second term of former President Barack Obama's administration, and triple funding for adaptation projects.

As he took to the stage, Johnson highlighted the UK's new target of delivering a 78 per cent emission reduction on 1990 levels by 2035 and impressed the need for nations to meet their Paris Agreement commitment to deliver $100bn a year in climate finance to developing countries.

Echoing earlier comments from the Biden, Johnson emphasised climate action could drive significant economic growth and jobs, as he confounded delegates with an obscure reference to how climate action had nothing to do with "bunny hugging" and could unlock myriad economic opportunities. Espousing his personal philosophy, he highlighted how the UK had slashed its emissions in recent decades, while growing its economy. "Cake have eat, is my message to you," he told world leaders.

"It's vital for all of us to show that this is not all about some expensive politically correct green act of ‘bunny hugging' or however you want to put it," he said of climate action. "Nothing wrong with 'bunny hugging' but you know what I'm driving at. This is about growth and jobs and the President [Biden] was absolutely right to stress that.

"I want to leave you with the thought that we can build back better from this pandemic by building back greener," the Prime Minister added. "Don't forget that the UK has been able to cut our own CO2 emissions by about 42 per cent on 1990 levels and we've seen our economy grow by 73 per cent, you can do both at once."

Chinese President Xi Jinping did not unveil any fresh targets for the world's biggest emitter, but confirmed for the first time that the country would actively phase down coal consumption in the latter half of this decade, a move that was welcomed by commentators as providing an important signal domestically.

"We will strictly control coal fired power generation projects," Xi said. "We will strictly limit the increase in coal consumption over the 14th five-year plan period and phase it down in the 15th five-year plan period [2026-2030]." 

Meanwhile, hopes that Japan and Canada might unveil plans to slash their emissions by 50 per cent by the end of the decade were dashed this afternoon, when both countries unveiled targets that fall short of delivering the emissions reductions in line with a 1.5C future.

Just ahead of the conference, Japan announced it would work to cut emissions by 46 to 50 per cent compared to 2013 levels. While a significant step up from its previous goal of 26 per cent, Greenpeace Japan's executive director slammed it as a "paltry move" when compared to the decarbonisation programmes of the EU, UK, and US.

Canadian Prime Minister Justin Trudeau, meanwhile, highlighted the importance of "listening to climate science" as he unveiled plans for the country to slash emissions by 40 to 45 per cent by the end of this decade against 2005 levels.

Again, while the new target marks a significant step up from Canada's previous goal of 30 per cent, campaigners have warned it falls far short of delivering the emissions reductions required to deliver on the goals of the Paris Agreement. Canada is the fourth largest producer of oil in the world and has a long history of missing national climate targets, and as such campaigners have called on the federal government to pass strong legislation to help meet the new targets. Trudeau has also come under fire from campaigners for unveiling no new climate finance commitments.

Other notable developments today saw a pledge from South Korea to stop financing coal power overseas, a move that will leave China and Japan as the last two major overseas coal funders, and an uncharacteristically subdued speech from Brazilian President Jair Bolsanaro that was been met with scepticism by environmental campaigners. The right-wing, populist president set out an improved 2050 goal for carbon neutrality and pointed to a commitment made last week to eliminate illegal deforestation by 2030. He also pledged to double the funds available for enforcement measures to tackle deforestation in the Amazon, in a surprising turnaround for a leader who has been slammed internationally for defunding the agencies that tackle deforestation and mining.

"I cannot agree more that we must be ambitious on the climate agenda," he said. "I have determined that Brazil's carbon neutrality be achieved by 2050, bringing forward by 10 years our previous commitment."

While it remains to be seen whether the President intends to put in place a policy environment to deliver on these aims the speech does mark a new rhetorical direction for the Brazilian leader, who has long favoured climate denial talking points.

The various updated national climate goals were accompanied by a raft of new corporate net zero strategies, with the UN backed Race to Zero campaign announcing this week that over 2,100 businesses globally, including many of the world's largest and most powerful firms, have now set ambitious net zero targets.

However, Swedish climate activist Greta Thunburg delivered a characteristically acerbic take on the discussions. In a video published to Twitter this morning, she condemned national climate targets being touted by leaders at the summit as "insufficient", arguing they did not align with climate science.

"The gap between our so-called climate targets and the overall, current bet available science should no longer be possible to ignore," she said. "There are several decaeds missing. This gap of awareness, action and time is the biggest elephant that has ever found itself in any room."

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