Gustavo Bernal Torres
Carbon Arbitrage, ESG Topology, Singapore, McKinsey on Finance, and Cow Burps
Here are 5 ESG insights you might have missed this week:
1. The Great Carbon Arbitrage-
A new study from the International Monetary Fund measures the economic benefits from phasing out coal globally.
The study measures the gains from phasing out coal as the social cost of carbon times the quantity of avoided emissions. By comparing the present value of the benefits from avoided emissions against the present value of costs of ending coal plus the costs of replacing it with renewable energy, our baseline estimate is that the world can realize a net gain of 77.89 trillion USD.
This represents around 1.2% of current world GDP every year until 2100. The net benefits from ending coal are so large that renewed efforts, carbon pricing, and other financing policies we discuss, should be pursued.
Link to Source: https://www.imf.org/en/Publications/WP/Issues/2022/05/31/The-Great-Carbon-Arbitrage-518464
2. MAS' Information Papers on Environmental Risk Management-
The information papers on environmental risk management for banks, insurers and asset managers provide an overview of the progress made in implementing the MAS Guidelines on Environmental Risk Management.
MAS recognises that FIs are at varying stages of putting in place the relevant risk management processes. FIs should refer to the industry practices shared in the paper, and assess the applicability of the practices to their efforts to bolster their resilience to environmental risk in a way that is commensurate to their size, nature of activities and risk profile. Particular attention should be paid to areas where further work is required, as highlighted in the papers.
FIs must push ahead to set tangible targets to address environmental risk with urgency and ambition. MAS will continue to partner FIs to accelerate their efforts in translating their environmental risk strategy and risk appetite into concrete milestones and tangible targets for action. Helping stakeholders understand potential business and risk implications through relevant disclosures and education should also be a key area of focus.
Link to Source: https://www.mas.gov.sg/publications/monographs-or-information-paper/2022/information-papers-on-environmental-risk-management
3. The Topology Of Hate For ESG-
From an arcane acronym whose words were known only by a few, ESG has become a complex and hotly contested topic.
Its complexity suggests the need for invoking, or at least analogizing, to some principles of the mathematical branch of topology. Prof. Eccles has done so by explaining the topological space comprised of four sets: (1) Sustainability Taliban, (2) Sustainability Flat Earthers, (3) Sustainability Advocates (which includes the subset of Sustainability Opportunists), and (4) Sustainability Pragmatists.
Link to Source: https://www.forbes.com/sites/bobeccles/2022/06/03/the-topology-of-hate-for-esg/?sh=1d88ff0d1b0a
4. Reflections on 20 Years of McKinsey on Finance—and Three Challenges Ahead-
Revolutionary innovations, brilliant ideas, and climate imperatives will change everything—except the fundamentals of finance and economics.
What will the next 20 years bring? One ignores the likelihood of immense changes at one’s peril. We don’t have a crystal ball. But we do have a compass: long-term value creation. We’ve studied, been challenged about, sharpened our thinking on, and ultimately reinforced our appreciation of core economic and financial principles, particularly as they apply through very uncertain times.
Companies that seek to create value from less carbon-intensive businesses will need a competitive advantage; simply having capital to invest or reallocate will not be enough.
Link to Source: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/reflections-on-20-years-of-mckinsey-on-finance-and-three-challenges-ahead
5. New Zealand Announces World-First Plan to Tax Cow and Sheep Burps-
New Zealand has announced a plan to tax livestock burps in an effort to curb the country's gas emissions.
Methane emissions from animals is a well-known issue. Cows alone are responsible for about 40% of those planet-warming gases globally — mainly through their burps. UC Davis scientist Ermias Kebreab is something of a cow whisperer who has spent two decades studying the greenhouse gas contributions of hoofed animals. "If you tell me how much your animal is consuming, I can tell you pretty closely to the actual emissions using mathematical models," he said.
Past measures to tax farmers have met strong resistance, but New Zealand's climate change minister James Shaw thinks it is a good start. A final decision on New Zealand's plan is expected by the end of the year.
Link to Source: https://www.npr.org/2022/06/09/1104014587/new-zealand-announces-world-first-plan-to-tax-cow-and-sheep-burps
One more thing: A cool new tool from Google showing how the Earth is changing in near real-time using satellite data collected every 2 to 5 days.
Find the tool here: https://www.dynamicworld.app/
Do share your comments or the content you think our community should not miss!