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Major climate breakthroughs we should all know about

Sam Gill Principal Climate Change Consultant
Sam Gill

Sam is part of the Global Climate Change team at SLR. He works with clients to assist them in understanding the risks and opportunities associated with climate change, as well as to provide strategic advice on Task Force on Climate-related Financial Disclosures (TCFD) reporting requirements.

After beginning his career at Google, Sam held the position of CEO at Engaged Tracking Foundation - a not-for-profit organisation which ranked the world’s largest companies by greenhouse gas emissions. He subsequently, co-founded Engaged Tracking, an advisory firm providing carbon emissions data and climate risk analytics to the financial services industry. During his time at Engaged Tracking, Sam worked with institutional investors to help them identify, understand and manage their climate risk exposure.

10/06/2021

In case you missed them, there have been several major climate breakthroughs in the last few weeks, the significance of which cannot be understated. Indeed, this period may be looked back on as an historical turning point in humanity’s race against time to get its house in order before it becomes a ‘hothouse’.

Firstly, the Biden administration announced a ‘whole of government’ approach to focusing minds on the issue of addressing climate change. The Executive Order - which follows the US’ re-entry to the Paris Climate Agreement and an announcement of a 50% reduction in greenhouse gas emissions by 2030 - contains directives to various federal regulators to take actions to address climate-related financial risk in five different broad areas. These are government-wide strategy; coordination among financial regulators; Department of Labour actions to safeguard worker life savings and pensions; federal lending, underwriting, and procurement; and the federal budget.

This is arguably one of the most comprehensive applications of the thinking underpinning the landmark recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by any government. Specifically, the Biden administration is compelling government to consider the impacts of climate change through a financial lens, which was precisely the intention of the TCFD. It also boosts a wider trend amongst businesses, investors and governments, which is the convergence of climate change risk management and future planning around the TCFD as a standardised ‘meta framework’.

For those who may be less familiar, the TCFD framework considers:

  • Transitions Risks
    • Policy & legal, technology, market, and reputation risks resulting from the transformation of the global economy as it decarbonises at an accelerating rate.
  • Physical Risks
    • Acute risks resulting from the increasing frequency and intensity of extreme weather events that can lead to disruption and damage.
    • Chronic risks resulting from the long-term changes in temperature, precipitation etc.
  • Opportunities and resiliency measures
    • There will be myriad opportunities for businesses and organisation who steal a march on their competitors and plan for the future. As Benjamin Franklin said, “failing to prepare is preparing to fail”.

With this Executive Order, we can expect the TCFD to become the de-facto standard for considering climate change risks and opportunities from now on.

The second series of pivotal events concerns the fossil fuel industry, and may perhaps be viewed as a crucial turning point in constraining the ability of the industry to emit climate-changing greenhouse gases. Three of the top 10 largest fossil fuel companies, Chevron, ExxonMobil and Shell were forced by shareholders, boards, and a Dutch court to cut emissions.

An activist hedge fund, Engine No. 1, staged a coup at Exxon Mobile forcing the replacement of two Exxon board members with its own candidates to place the company on a greener path. Chevron’s shareholders voted against the board in favour of a proposal to force the company to cut its carbon emissions.

Meanwhile a Dutch court ruled that Shell must cut its emissions by 45% within the next 10 years. The court held that Shell’s current policy of merely reducing the “carbon intensity” of its products by 20% by 2030, and aiming to reach net zero by 2050, would contribute to climate impacts that endanger the human rights of the plaintiffs. It found that Shell’s current plans were not specific enough, which has implications on any company with a large carbon footprint setting carbon reduction targets.

This ruling is likely to have major implications globally, with cases likely to be brought in other  jurisdictions. It fits into a wider trend of a growing numbers of legal cases being brought against governments and companies for a failure to take proportionate action relative to the threat of global warming.

SLR supports companies in developing climate change strategies aligned to the TCFD framework and setting robust carbon reduction targets, please get in touch if you would like to learn more.

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