• Gustavo Bernal Torres

EU's Green Deal, China's Carbon Market, Strategic Asset Allocation, and Xinjiang

Source: Pixabay

Here are 5 ESG insights you might have missed this week:

A European Green Deal-

  • All 27 EU Member States committed to turning the EU into the first climate neutral continent by 2050. They pledged to reduce emissions by at least 55% by 2030, compared to 1990 levels.

  • The European Commission adopted a package of proposals to make the EU's climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.

  • With this week's proposals, the Commission is presenting the legislative tools to deliver on the targets agreed in the European Climate Law and fundamentally transform our economy and society for a fair, green and prosperous future. With the proposals, the Commission is presenting the legislative tools to deliver on the targets agreed in the European Climate Law and fundamentally transform its economy and society for a fair, green and prosperous future.

  • Source: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en#highlights

China’s Giant Carbon Market to Start Trading This Week-

  • China’s national carbon market, which will become the world’s largest emissions trading system, will initially cover more than 2,200 companies in China’s power sector.

  • The program was announced more than three years ago, and takes over from regional pilot projects that have been around even longer. This year it will cover power companies that account for about half of the country’s and 14% of the world’s energy-related emissions. China’s market will eventually grow to encompass more industries, such as steel- and cement-makers.

  • The market works fairly simply. The Chinese government gives every power plant the right to a certain amount of pollution in a given year. Pollute less than that, and you can sell excess pollution rights, or allowances. If you want to pollute more, you have to buy extra allowances.

  • Source: https://www.bloomberg.com/news/articles/2021-07-13/china-s-giant-carbon-market-to-finally-begin-trading-this-week

Planetary Risk: Mapping Climate Pathways To Macro And Strategic Asset Allocation-

  • From Fidelity International, how climate change, and the drive to reduce carbon emissions, must be incorporated into long term capital market assumptions for complete picture of returns.

  • Macroeconomic projections at the core of long-term capital market assumptions must therefore incorporate both physical climate risks and policy transition risks. Only then will investors have a more complete picture of returns in the 21st century.

  • In our view, an effective response will require putting a price on carbon emissions, which have been both a free and fundamental part of economic growth for more than a century and a half. As carbon prices rise, this will contribute to inflation rising meaningfully from baseline levels.

  • The science on climate change is sobering. We believe that mainstream long-term macroeconomic projections, and consequently consensus capital market assumptions used by the investment industry, underplay both the magnitude and geographical dispersion of climate change impacts on key macroeconomic variables such growth and inflation.

  • Source: https://fidelityinternational.com/editorial/article/planetary-risk-mapping-climate-pathways-to-macro-and-strategic-asset-allocation-a2eb08-en5/

U.S. Senate Passes Bill To Ban All Products From China's Xinjiang-

  • The latest effort in Washington to punish Beijing for what U.S. officials say is an ongoing genocide against Uyghurs and other Muslim groups.

  • The Uyghur Forced Labor Prevention Act would create a "rebuttable presumption" assuming goods manufactured in Xinjiang are made with forced labor and therefore banned under the 1930 Tariff Act, unless otherwise certified by U.S. authorities.

  • It would be up to importers to prove otherwise. The bill will now move to the House. Businesses with supply chains or investments in Xinjiang already risked violating American law.

  • Source: https://www.reuters.com/world/us-senate-passes-bill-ban-all-products-chinas-xinjiang-2021-07-15/

Two Dozen Charts Map The Trajectory Of Sustainable Finance, Food, Energy And Mobility-

  • ImpactAlpha dug through the 200 sources in this year’s Generation IM Sustainability Trends Report to pick two dozen trends shaping the sustainability revolution.

  • “This year the penny dropped,” says Generation’s Lila Preston, as the confluence of crises thrust long-term sustainability trends into the consciousness of consumers and onto the agenda of policymakers.

  • This year’s report charts the capital allocations and commitments, falling cost curves and technological innovation, and customer demand and social awareness driving the shift.

  • Source (Registration required): https://impactalpha.com/two-dozen-charts-map-the-trajectory-of-sustainable-finance-food-energy-and-mobility/

One more thing: From The New York Times- "A Battle Between a Great City and a Great Lake". An interesting read on how the climate crisis haunts Chicago’s future.

Find the article here: https://www.nytimes.com/interactive/2021/07/07/climate/chicago-river-lake-michigan.html

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