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Year of the climate shareholder begins; China's carbon trading launch set; the snow in Spain

By David Callaway, Callaway Climate Insights

The results from 2020 — record heat, record flooding, record wildfires — are still being calculated, but as the photo above indicates, 2021 is going to be anything but a return to normal. Twenty inches of snow in Madrid, a national blackout in Pakistan, tropical cyclones in China; natural and man-made disasters roll on.

Against that backdrop, researcher Rhodium Group is out with a “good news” report this week that showed emissions, at least in the U.S., fell 10% last year to their lowest levels since the Buffalo Bills last won a playoff game (25 years). Declines in driving and flying — thanks to Covid — were the primary reason for the drop, which took U.S. emissions to 21.5% below 2005 levels, bringing us into compliance with President Barack Obama’s pledge five years ago to be 17% below by 2020.

Rhodium and scientists were quick to note that once a vaccinated public gets back on the road again, these gains may evaporate. But hey, let’s celebrate the moment. It may have taken a pandemic to show us it could be done. But we got there. As we gear up for a momentous year of climate challenges in 2021, small victories are better than just rolling from one disaster to the next.

In climate finance, those victories are likely to come in the form of more successful shareholder resolutions, backed by institutional shareholders. As 2020 was the year of the corporate climate pledge, 2021 will be the year shareholders finally reach the voting threshold of forcing real change.

More insights below. . . .

. . . . Pakistan’s nationwide blackout Saturday night — its second in three years and third in six years counting a terrorist attack on a power line — highlights the vulnerability of centralized electricity grids and ancient transmission systems as usage soars. Other countries, such as South Africa, also suffer from dilapidated systems that can’t keep up with demand, while sabotage remains a major concern. Even in the U.S., in our own South, 30- to 40-year-old communications and power equipment is ending its lifespan, making blackouts and Internet outages for millions more likely as hurricanes increase in numbers and intensity.

Rising heat in many parts of the world is going to jack up electricity demand dramatically in coming years. Investing in decentralized microgrids, and other new forms of distribution, as well as battery storage, will be priorities for many third-world nations and opportunities for providers in those renewable industries, as well as their investors. . . .

. . . . Investment group ShareAction, which unsuccessfully went after Barclays (BCS) last year with a resolution asking it to set targets for reducing its fossil fuel investments, came out swinging this week with a new resolution, this time against HSBC Plc (HSBC). The group of asset managers, representing $2.4 trillion in assets, introduced the resolution for the British bank’s annual general meeting later this year. Last year’s attempt against Barclays garnered a quarter of shareholder votes. With COP26 scheduled in Glasgow in November, all eyes will be on Britain and British institutions to lead the way on climate commitments this year. HSBC has already committed to slashing emissions in line with Paris Agreement targets of 2050, but the shareholders want more targeted action in the near term. . . .

. . . . As the climate world awaits China’s blueprint for achieving carbon neutrality in its five-year plan this spring, it got a taste of what to expect from the world’s largest polluter this week when China announced a launch date for its new carbon trading project. More than 2,000 thermal power groups are listed on the market, representing about 40% of China’s emissions, and trading will begin next month. The announcement is a giant step forward but is not expected to do much to lower emissions in the near term as there is no cap on emissions, unlike in the European carbon trading scheme. China’s coal companies will have incentive to come in under production limits so they can make money selling any offsets, but there are no real penalties for not meeting limits or going over, other than having to buy some offsets. Still, in the quest to develop a global carbon market, a key region has just moved a step closer. . . .

. . . . A study by Ceres on asset manager voting patterns for shareholder climate initiatives in 2020 turned up some surprising results. Three firms out of 50 tracked voted in favor of all climate proposals last year: BNP Paribas, Sun Life, and NN Investment Partners. BNP is making a name for itself at the top of a lot of these lists lately. The majority of them voted at least half the time in favor, while some of the biggest companies — Fidelity, BlackRock (BLK), State Street (STT), Vanguard, and Franklin Templeton — voted in favor less than a third of the time. And finally, for reasons known only to themselves, Dodge & Cox supported none of the proposals last year. . . .

Data driven: A race we must win

Rare and valuable ocean climate data is being transmitted live from yacht Seaexplorer – Yacht Club de Monaco during the Vendée Globe, the famous single-handed, non-stop, round-the-world yacht race. At the same time as competing in one of the toughest ocean races in the world, German skipper Boris Herrmann is also furthering the scientific community’s knowledge on ocean climate change, Sail-World reports. Dr. Stefan Raimund, the team’s partner scientific consultant, said, “It is always exciting to see scientific data coming in from a race boat! … It is an incredible data set, especially the data from the remote South Atlantic — this is very valuable for us. This area is a blank spot on the map of CO₂ observations and makes [the] input so important for the scientific community.”

Climate change has caused billions of dollars in flood damages

In a new study, Stanford researchers report that intensifying precipitation contributed one-third of the financial costs of flooding in the United States over the past three decades, totaling almost $75 billion of the estimated $199 billion in flood damages from 1988 to 2017. The research, published Jan. 11 in the journal Proceedings of the National Academy of Sciences, helps to resolve a long-standing debate about the role of climate change in the rising costs of flooding and provides new insight into the financial costs of global warming overall. A report in Phys.org quotes lead author Frances Davenport, a Ph.D. student in Earth system science at Stanford’s School of Earth, Energy & Environmental Sciences (Stanford Earth), as saying: “The fact that extreme precipitation has been increasing and will likely increase in the future is well known, but what effect that has had on financial damages has been uncertain. Our analysis allows us to isolate how much of those changes in precipitation translate to changes in the cost of flooding, both now and in the future.”

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