Gustavo Bernal Torres
Methane, ESG Buzzword, NY Fed, Bond Syndication, and the Amazon
Here are 5 ESG insights you might have missed this week:
1. US Oil States Brace for Biden Methane Rule-
The Biden administration is set to release a major crackdown on oil and gas methane emissions in the coming weeks.
Small oil and gas operators say the coming methane rules from EPA could have an outsize impact on the low-producing wells that are their lifeblood, and trade groups and companies have filed comments with the agency asking for a carve-out to protect those sites.
The forthcoming rules are also expected to be received differently in states like Texas and North Dakota, where efforts to cut methane have largely been voluntary. That contrasts to states like Colorado and New Mexico, where Gov. Michelle Lujan Grisham (D) has tasked state agencies to craft what would be the tightest methane controls in the nation.
Link to Source: https://www.eenews.net/articles/oil-states-brace-for-biden-methane-rule/
2. Curbing Methane Emissions: How Five Industries Can Counter a Major Climate Threat-
Methane accounts for about one-third of global warming. New McKinsey research shows how five industries can cut emissions with proven technologies and at a reasonable cost.
The bad news is that methane emissions have risen by about 25 percent in the past 20 years. The current trajectory is far off the 2 percent annual decline that would be required to meet the 1.5°C or 2°C warming objectives of the Paris Agreement. However, there are reasons for cautious optimism. New McKinsey research shows that five industries could reduce global annual methane emissions by 20 percent by 2030 and 46 percent by 2050—enough for a significant shift toward a 1.5°C warming pathway. What’s more, these reductions could be achieved largely with established technologies and at a reasonable cost.
The five industries, which together account for 98 percent of humanity’s methane emissions, are agriculture, oil and gas, coal mining, solid-waste management, and wastewater management.
Link to Source: https://www.mckinsey.com/business-functions/sustainability/our-insights/curbing-methane-emissions-how-five-industries-can-counter-a-major-climate-threat
3. Fund Managers Start Axing ESG Buzzword as Greenwash Rules Bite-
Some of Europe’s biggest asset managers are starting to drop a once-ubiquitous ESG label from their company filings amid concern that regulators will no longer tolerate vague descriptions of environmental, social and governance investing.
Money managers including Allianz and DWS have either stopped using the catch-all term “ESG integrated” in their public documents or are playing down its relevance in interactions with investors, according to people familiar with the matter who asked not to be identified discussing internal changes. They said the language choice followed new European disclosure rules.
It’s the latest sign that Europe’s landmark anti-greenwash rulebook is reining in an industry that ballooned to more than $35 trillion last year. The Sustainable Finance Disclosure Regulation was enforced in March, but already in the lead-up to its arrival, European investment managers stripped the ESG label off $2 trillion in assets in anticipation of stricter rules.
Link to Source: https://www.bloomberg.com/news/articles/2021-09-29/fund-managers-start-axing-esg-buzzword-as-greenwash-rules-bite
4. New York Fed Researchers Develop Climate Stress Test for Banks-
Researchers at the New York Federal Reserve Bank have developed an approach to measuring banks' exposures to climate-related risks, a possible early step toward assessing whether financial institutions have enough capital on hand to withstand them.
The publication Friday of a paper describing the new methodology may mark an early step toward an eventual "climate stress test" for U.S. banks. It's an approach already used by other global central banks but that has drawn intense criticism from U.S. Republican lawmakers who say that monitoring for such risk goes beyond the central bank's remit.
The paper, titled simply "Climate Stress Testing," outlines for the first time exactly how the Fed could go about checking the vulnerability of banks and the financial system broadly to shocks as the nation moves to limit emissions of heat-trapping carbon dioxide.
Link to Source: https://www.reuters.com/business/sustainable-business/new-york-fed-researchers-develop-climate-stress-test-banks-2021-09-24/
5. Net Green/Fossil Bond Syndication League Tables-
New piece from the Anthropocene Fixed Income Institute: Net green/fossil bond syndication league tables.
The report provides a ranking of banks based on fossil fee revenues only, not accounting for potential green revenue generation on the other side. Arguably, it is different for a bank to have 10% fossil fee revenues, when the remainder (90%) is green, compared to if there are no green efforts at all. In order to gauge this, this note considers the net fossil (green bonds minus fossil bonds) syndication fees as a % of total syndication fees.
At the top of the ranking are European banks Deutsche Bank, BNP, and UBS.
Link to Source: https://anthropocenefii.org/afii-the-box#00bf8952-e9e5-41af-96a8-160c555ca8a0
One more thing: A video from Bloomberg on the great Amazonian land grab. A great example of the interconnectedness of environmental and social factors.
Find the recordings here: https://www.youtube.com/watch?v=49gmIhTg3ws
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