Economy

Europe readies major new climate rules next week; plus a green oil tanker?

By David Callaway, Callaway Climate Insights

Tropical Storm Elsa made landfall along the North Florida Gulf Coast midday Wednesday with maximum sustained winds estimated at 65 mph. The National Hurricane Center says storm surge, heavy rainfall, and wind hit the Florida peninsula and a Tropical Storm Watch was issued for portions of the Mid-Atlantic coast.

As with most everything else climate change this summer, Europe has stolen a lead on the U.S.; this time in fighting global financial instability.

While U.S. lawmakers, primarily Republican, voice concerns about the Federal Reserve’s toe-dipping with greenhouse gas emission disclosures on Wall Street, the European Central Bank jumped in with both feet earlier today. The ECB said it would add climate change impact to its core policy decisions going forward, putting to rest any debate about whether a central bank should be involved in the issue.

ECB President Christine Lagarde said this will manifest itself in the central bank’s regulation of corporate bond purchases, which as Callaway Climate Insights has noted, have taken a decidedly green turn this year. The declaration comes a week before the European Union is set to unveil a major new set of carbon-cutting regulations, including a potential carbon border tax.

This won’t do anything to stop the debate in the U.S. about the Fed’s role, but the Biden Administration would welcome a more climate-involved Fed. As for financial markets, we’re watching today the negative impact on markets of global Covid deaths surpassing four million — and rising. A new report in one of The Lancet publications this morning estimates that climate change — through extreme heat — is responsible for more than five million deaths a year.

If that’s isn’t a financial threat worth watching, we don’t know what is.

More insights below. . . .

ZEUS: Climate intelligence forecasting with Cervest’s Iggy Bassi

. . . . While running a farming business in Ghana a decade ago, Iggy Bassi noticed that while local farmers blamed the gods for bad harvests, predicting future climate impact with science might create better results, writes David Callaway. Earthscan, a new tool developed by Bassi’s Cervest, allows anyone from farmers to global hotel chains and real estate portfolios to measure expected impact on their properties from several different client scenarios, such as business as usual, or peak emissions. Read why investors such as Marc Benioff and Chris Sacca are backing Cervest as it prepares to come to market. . . .

Read the full ZEUS column

Hulbert: How the ESG surge may ultimately work against green stocks

. . . . Green stocks? Brown stocks? The only sure thing in the new ESG world for investors may be bank and asset manager stocks, writes Mark Hulbert. A new study out of Chicago’s Booth school and UPenn’s Wharton turns up surprising reasons for the current momentum behind green stocks and the poor performance of the brown, mostly fossil fuel stocks, and predicts what might happen when underlying results catch up with the hype. . . .

Read the full column

Thursday’s subscriber insights: Rupert Murdoch’s new climate business?

. . . . Can weather be fair and balanced? That’s the question raising eyebrows this week after Rupert Murdoch’s News Corp. (NWSA) said it would launch a weather news channel. Murdoch, who is one of my former bosses, has made a name for himself as a climate doubter/denier. But there’s no doubting the money in extreme weather, as evidenced by the success of the Weather Channel. And millions have been lost betting against Rupert over the decades. This is going to be good. Read more here. . . .

. . . . Another consortium of global banks launched another private carbon offset market this week, seeking to take advantage of a lack of any major global platform. Give the banks credit for going where the money is heading, but with all the regional carbon trading exchanges growing, this market is getting crowded. Read more here. . .

. . . . Just a week after our interview with Citi’s Val Smith, where she noted the bank was seeing a surge this year in sustainability-linked bonds, as opposed to loans, new numbers are out showing SLBs have already passed last year’s record sales. Bond issues surpassed $90 billion through May, according to BloombergNEF. Still small by global bond standards, but clearly a trend worth watching. . . .

. . . . Could climate change spark a trade war? While Europe struggles with the potential fallout from its idea to tax carbon at the borders, a more pressing struggle is developing between the U.S., Canada and Mexico, where the NAFTA partners are at odds over Manuel Lopez Obrador’s plans to turn up the heat by going all in on fossil fuels. As there is no other mechanism for getting Mexico to conform, other than polite negotiation, the two northern partners might have to take more drastic measures. Read more here. . . .

. . . . The European invasion of renewable energy projects in the U.S. this year isn’t just for offshore wind and electric vehicles anymore. Earlier this week, Swedish investment firm EQT Partners purchased Cypress Creek Renewables, a large solar developer based in California, from a group of private equity investors who flipped it for about $80 million. . . .

. . . . A green oil tanker? Carbon offsets are starting to get silly as well as crowded. A new European task force announced Thursday will be the latest to try to tackle the proliferation of greenwashing around the carbon markets, especially by fossil fuel companies. Read more here. . . .

EU notebook: Europe fights greenwashing claims on bonds; plus Germany leads revolt against nuclear energy

. . . . A new European Commission proposal to clean the “greenwashing” reputation from the green bond industry is gaining strength in Brussels but recently hit a small publicity bump when it emerged the EC has not followed its own self-described “gold standard” rules itself in an upcoming financing, writes Daniel Byrne from Dublin. Plus, Germany is leading a band of central European countries in a revolt against the plan to include nuclear energy in Europe’s green finance taxonomy. And the largest electrolyzer in Europe has just started up in Germany. . . .

Read the full EU notebook

Editor’s picks: China’s biggest offshore wind farm; Gates-backed hydrogen startup; BlackRock climate fund raises $250 million

China has completed its largest offshore wind farm in the Yellow Sea after turbines off the coast of Rudong county in the eastern province of Jiangsu were finished last week. The wind farm is expected to generate a massive amount of renewable energy, and officials say they aim for it to reduce CO₂ emissions by about 1.6 million tons.

Gates-backed startup working on hydrogen-natural gas project

A startup backed by Bill Gates’ clean-energy fund plans to launch a pilot project by the end of 2022 that will be capable of cutting CO₂ emissions from hydrogen production while still using natural gas, Corey Paul writes for S&P Global Market Intelligence. California-based C-Zero Inc., is working to commercialize a technology that splits methane into hydrogen and carbon by moving it through a mixture of molten salts. Paul notes that one advantage of this process, known as pyrolysis, is that the carbon extracted from the methane is in solid form, which makes it possible to avoid the challenges associated with injecting the gas CO₂ underground to sequester it. Another is that pyrolysis can slash emissions while accommodating the use of existing natural gas infrastructure.

BlackRock raises $250 million for emerging markets climate fund

BlackRock (BLK) said Thursday it has secured more than $250 million in commitments from a consortium of global institutional investors, governments and philanthropies for the Climate Finance Partnership, to invest in climate infrastructure across emerging markets. The partnership will invest in renewable power generation, energy storage solutions, and electrified transportation services and other activities related to the transition to a low-carbon economy. Its goal is to raise at least $500 million, the company said. The consortium includes the governments of France, Germany, Japan, and other philanthropies and institutional investors.

Words to live by . . . .

“You will forgive me for not having a lot of patience when some of my colleagues in the Senate tell me that we can’t afford to act on climate change. Really? The question that we must be asking, as loudly as possible, is how we can afford not to act?” — Sen. Bernie Sanders.

Free Callaway Climate Insights Newsletter