Gustavo Bernal Torres
Russia Invades Ukraine, Carbon Taxes in Singapore, and Green Hydrogen in India
Here are 5 ESG insights you might have missed this week:
1. The Economic Consequences of the War in Ukraine-
Expect higher inflation, lower growth and some disruption to financial markets.
Start with the commodity shock. As well as being the dominant supplier of gas to Europe, Russia is one of the world’s largest oil producers and a key supplier of industrial metals such as nickel, aluminium and palladium. Both Russia and Ukraine are major wheat exporters, while Russia and Belarus (a Russian proxy) are big in potash, an input into fertilisers. The prices of these commodities have been rising this year and are now likely to rise further. Amid reports of explosions across Ukraine, the price of Brent oil breached $100 per barrel on the morning of February 24th and European gas prices rose by 30%.
The second shock relates to tech and the global financial system. While the trade in natural resources is an area of mutual dependency between the West and Russia, in finance and tech the balance of economic power is more one-sided. America is thus likely to put much tougher Huawei-style sanctions on Russian tech firms, limiting their access to cutting-edge semiconductors and software, and also blacklist Russia’s largest two banks, Sberbank and VTB, or seek to cut Russia off from the SWIFT messaging system that is used for cross-border bank transfers.
Link to Source (Free registration required): https://www.economist.com/finance-and-economics/2022/02/25/the-economic-consequences-of-the-war-in-ukraine
2. Russia Invades Ukraine and Europe Buys More Gas. Here’s Why-
In the hours after the invasion of Ukraine, there were calls for Europe to punish Russia by ending energy purchases. But the immediate response of European energy companies was to buy more natural gas, much of it transported through Ukraine’s pipeline network.
Europe’s first war of the 21st century has highlighted its dependence on Russian energy supplies. A third of gas demand is met through pipelines from Siberian gas fields, giving state-run Gazprom billions in revenue every year. Cutting off those supplies would cause gas prices to skyrocket and threaten power cuts, an unpalatable prospect for governments that are already grappling with the contribution of higher energy prices to surging inflation. Oil and gas were exempted from the package of sanctions announced by the U.S. and European Union on Thursday.
Energy independence with renewables anyone?
Link to Sources: https://www.bloomberg.com/news/articles/2022-02-24/european-energy-firms-rush-to-buy-russian-gas-even-after-attack & https://www.bloomberg.com/news/articles/2022-02-25/russian-attacks-continue-ahead-of-nato-summit-ukraine-update
3. Singapore's Carbon Tax Could Increase To $80 Per Tonne Of Emissions By 2030-
The carbon tax hike will be done in phases to give businesses more certainty.
The carbon tax rate in Singapore will be increased from the current $5 per tonne of emissions to between $50 and $80 by 2030, a move that will help the nation reach new, more ambitious climate goals.
Singapore's carbon tax applies to all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year. This covers 30 to 40 large emitters such as oil refineries and power generation plants, which contribute 80 per cent of Singapore's greenhouse gas emissions.
Link to Source: https://www.straitstimes.com/singapore/budget-2022-singapores-carbon-tax-could-increase-to-80-per-tonne-of-emissions-by-2030-in-accelerated-net-zero-emissions-bid
4. India Plans To Produce 5 Mln Tonnes Of Green Hydrogen By 2030-
The incentives announced are the first part of India's national hydrogen policy.
India will set up separate manufacturing zones, waive inter-state power transmission charges for 25 years and provide priority connectivity to electric grids to green hydrogen and ammonia producers in a bid to incentivise production, the federal power ministry said.
The five million tonnes production target is half of that of the European Union, which plans to produce 10 million tonnes of hydrogen from renewable energy by 2030.
Link to Source: https://www.reuters.com/business/energy/india-plans-produce-5-mln-tonnes-green-hydrogen-by-2030-2022-02-17/
5. Morningstar Has Cut 27% of the European Funds on its ‘Sustainable’ List-
‘The sheer level of reclassification shows the scale of greenwashing that still exists’
The research house slashed the list of European funds it recognizes as sustainable by 27%, cutting more than 1,600, with combined assets of $1.2tn, in a mass reclassification over the fourth quarter.
The move follows the analysis of additional documentation provided by funds since the implementation of the EU Sustainable Finance Disclosure Regulation (SFDR) rules in March 2021 and underlines how confusing it is for investors to identify genuinely sustainable products.
Link to Source: https://citywireusa.com/professional-buyer/news/morningstar-culls-more-than-1000-dubious-european-esg-funds/a2379266
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