FoE(HK) Green Finance Blog 香港地球之友綠色金融網誌

Green Finance Advisor of Friends of the Earth (HK)

Continuing to burn fossil fuels threatens human well-being and the stability of much of life on Earth, with the chance of avoiding the most severe impacts moving rapidly out of reach, according to a report released Monday by United Nations-backed climate scientists. The Intergovernmental Panel on Climate Change (IPCC)’s latest AR6 synthesis report: Climate Change 2023 is over 8000 pages long.

“This report is a clarion call to massively fast-track climate efforts by every country and every sector and on every timeframe,” said UN Secretary General António Guterres in a statement alongside the release by the Intergovernmental Panel on Climate Change. “In short, our world needs climate action on all fronts — everything, everywhere, all at once.”

Key takeaways for readers of FOE Green Finance blog:

• Human-induced global warming of 1.1°C has spurred changes to the Earth’s climate that are unprecedented in recent human history. Greenhouse gas emissions generated by human activity have unequivocally caused global warming, and emissions have continued to rise, with some countries and groups contributing far more than others.
• Although policies to mitigate climate change have expanded, it’s likely that the world will exceed 1.5°C of warming “in the near term.” The world must cut greenhouse gas emissions to 60% below 2019 levels by 2035.
• “Widespread and rapid” changes to planetary systems have already taken place, their impacts disproportionately affecting the world’s at-risk populations. More than 3 billion people are highly vulnerable to climate change.
• Climate adaptation has advanced, but not enough. Current levels of funding are insufficient. Increased warming will make adaptation harder.
• The world must rapidly shift away from burning fossil fuels — the number one cause of the climate crisis.
• We also need urgent, systemwide transformations to secure a net-zero, climate-resilient future
• Carbon removal is now essential to limit global temperature rise to 1.5°C. Limiting warming to 1.5°C or 2°C will require deep emissions cuts across the economy this decade. If the world overshoots 1.5°C, that level could be brought down again by ending emissions and deploying carbon removal, but carbon removal brings additional concerns.

Meanwhile, the world’s top two annual emitters are still expanding that infrastructure: China approved more coal projects than other nations combined in 2022 while the US just approved a new oil drilling project in Alaska. The US is the largest historical emitter.

香港地球之友綠色金融顧問

溫室效應是近年人類的最重大議題，基本上世上大部分科學家已達成了一個共識，就是近年地球溫度上升，主要是由於人類使用過量石化能源而產生的排放引起。地球的氣溫，如對比工業革命前上升超過攝氏2度，我們就會陷入危機，所以我們必須盡辦法控制氣溫上升，對比工業革命前不能超過攝氏2度，最好不超過攝氏1.5度。

好了，大家有共識後，當然要談如何來承擔責任。在談如何來承擔責任前，我們必須建立計算碳排放的方法，知道每一個企業或每一個人的活動如何產生碳排放，產生多少碳排放，我們才能計劃如何減排。所以我們自97年京都協議開始，就制定了計算方法。企業排放計算法，我們分為範圍一，範圍二及範圍三。範圍一是直接燃燒排放，例如工廠的鍋爐直接使用煤或油，汽車直接使用氣油，或工廠的飯堂直接使用煤氣來煮食所產生的排放，我們都稱為範圍一。範圍二是間接排放，簡單說就是電力公司供應電力給你，由電力公司直接燃燒，但你是使用者，我們稱為範圍二。範圍三是供應鏈的間接排放，包括服務供應，例如你搭飛機，航空公司提供服務，你坐飛機的排放，我們稱為範圍三。

但範圍三遠不止服務供應。供應鏈的排放，也可以包括產品供應，原材料供應。想像一下你桌上的電腦，它的生產過程可能是上千個部件的組合，而上千個部件的組合，也可能經由數個供應安裝層級才到最後的生產工廠，所以現時企業對範圍三的披露仍是十分初步。大部分企業都沒有認真觸及這個問題，甚至是迴避這個問題。世上主要ESG 的標準，也沒有詳盡的方法去處理這個問題。我們不需要環保知識，單單以常識來看就可以估計，範圍三的排放可能遠比範圍一及範圍二多，但現時我們似乎對這個問題有點束手無策，甚至努力迴避。

在巴黎協議下，每個國家獨自承諾自己的責任承擔。到現時為止，已有一百四十多個國家公佈了減排目標，例如中國承諾2030年碳達峰，2060年碳中和。但如果我們連準確的計算和披露方法都無法做到，我們如何準確定下碳達峰碳中和？沒有精確的範圍三，我們現時的披露其實與裝飾品無異。

近年我們的大數據、AI 已開始掌握到所有供應鏈的數據。範圍三的披露雖然困難, 但絕非不可能的目標。

Check out the above calendar for the fantastic green finance events for Mar 2023! Interested to join and know more about the events? Click the links below for details:

以上一圖看清2023年3月精彩的綠色金融活動！如欲參加及了解活動詳情，歡迎瀏覽以下網址:

[1] GRESB Inside ESG: Navigating TCFD Requirements in Asia

[2] Scaling up Sustainable Finance in Asia

[3] 4th UN South Asia Forum on Business and Human Rights

[4] Technology for Change Asia

[5] ESG data for sovereign bonds: the what, the why and the how

[6] ADB Southeast Asia Development Symposium 2023: Imagining a Net Zero ASEAN

[7] Sustainable Finance Forum: Walking the ESG Talk

【意見交流園地】Kyle Chung

企業談 ESG 談得火熱，但過往 ESG 的 E（環境）很多時側重氣候變化，ESG 儼然僅為「CSG」（C 即 Climate 氣候）。無可否認，氣候風險和及應對氣候變化措施是最受關注的議題，多國證監機構逐漸加強氣候披露的要求和規範，最常見是參考「氣候相關財務披露工作組」（TCFD）的披露建議，協助企業評估和披露氣候變化對企業未來營運的影響。環境保護則有不同面向，例如防止塑膠污染及維持生態多樣性等。另一極具份量的「自然相關財務披露工作組」（TNFD）在去年也發佈了自願性自然相關財務披露草稿。

「自然相關財務披露工作組」（TNFD）是以市場為主導的匯報框架諮詢小組。通過改進報告與自然相關的資訊，令金融機構和公司能夠將與自然相關的風險和機會納入戰略規劃、風險管理和資產配置決策。TNFD 於 2020 年 7 月宣佈組建，由保育森林學術倡議組織 Global Canopy、聯合國發展署（UNDP）、聯合國環境保護署財務倡議組織（UNEP FI）以及世界自然基金會（WWF）共同指導。2021 年 6 月，TNFD 正式啟動，得到金融機構、企業、政府和民間各界支持，例如 G7 財長和「G20 可持續金融路線圖」，已認可 TNFD 在自然和生態多樣性量度與匯報工作方面的領導地位。

自然與企業有甚麼關係？

日前發佈的 TNFD 披露框架草稿，介定了有關「自然」的基本概念和定義：自然是由陸地、海洋、淡水和大氣四個領域組成；而機構及成員，同時依賴和影響著「自然資本」。

所謂自然資本，是把環境資源和生態提供的利處（即「生態系統服務」，人從生態系統中直接或間接獲取的商品及服務，例如食物、原材料、潔淨空氣的能力等）視作資產。生物多樣性則是自然的基本特徵 ，對維持自然資本至關重要。

對於企業而言，面對自然的風險和機會，包括「實體」、「過渡」和「系統」三方面。實體風險方面，一例是企業的供應鏈或會直接因水資源短缺而中斷；過渡風險方面，企業或要面對政府因應環境污染所實施的嚴格生產限制；系統風險則是來自整個生態系統崩潰的風險，例如一個物種消失，或會觸發連鎖反應，影響到其他物種和人類社會的安危。

意識到自然與企業營運息息相關後，企業就需要釐清和披露其面對的風險和機會，方能作有效管理，也有助引導市場資金到對自然友善的企業。TNFD 草擬的披露框架參考了 TCFD 的四大領域，即管治、策略、風險管理、指標與目標，以便企業和市場參與者適應。

對自然的影響，該如何量度？

然而，自然相關的影響比氣候影響更難量度。氣候風險披露可根據溫室氣體協議定義的範圍 1、2 和 3 作報告，碳排放量可以二氧化碳排放當量來量度，並以碳噸為單位，但有關「自然」方面的相應指標則仍未確立。例如，生物多樣性數據並不如量度碳排放般簡單，不同地區存在的物種數量、不同水域中的化學物質數量，可以相差甚遠。不同的量度指標亦會使企業作出不同決策，假設一家企業要轉換森林作農地，森林甲有數百項物種，但只有一種瀕危；森林乙擁多個瀕危物種，物種數量卻比森林甲少；那麼採用側重生物多樣豐富程度，或採用側重保護瀕危物種的指標，會影響企業選擇開伐哪一個森林。

此外，TNFD 的初稿強調，企業營運位置是評估自然相關風險和機會的關鍵元素，因應資產和經營活動的所在，生物群落和生態系統各有不同，企業對生態的影響和來自生態環境的風險也有所不同。同樣的用水量在一個地區或能夠運作良好，在其他地區卻可以帶來災難影響。但對於金融機構，其重點便不在機構的所在地，而是要了解機構的投資、貸款和證券所在位置來評估風險和機會。

雖然 TNFD 的背景極具份量，但按目前所公佈的時間表，匯報建議定稿最早亦要在 2023 年 9 月才出台，此前會再發佈 3 份建議初稿予持份者參考。而 TNFD 為自願性披露的參考建議，發佈正式建議之後仍需各金融市場的監管機構制定相應強制披露要求。例如在氣候披露方面，香港證監會成立的「綠色和可持續金融跨機構督導小組」擬於 2025 年或之前，強制實施符合 TCFD 建議的氣候相關信息披露。比氣候披露更難處理的自然相關披露，要進入強制披露階段，或需時不短。

*原文刊登於CUP媒體。本文章更新於2023年3月10日 。

Green Finance Advisor of Friends of the Earth (HK)

In previous blogs published with the organization, the fact that companies with higher ESG scores have benefitted from cheaper financing and lower risk premium has been pointed out on several occasion. This differentiation was most marked since the 2010s and has continued since throughout the pandemic and in the new higher interest rate environment, especially with the increasing availability of ESG investment vehicles, both passive and active, as well as regulatory and investor adoption of ESG standards as part of the investment process. The encourage results can be seen recapped in the following chart, showing the bottom fourth and fifth quintile of companies ranked by their environmental and social headlines, have underperformed their peers over the past 11 years.

This may be difficult to picture in terms of the impact capital markets has in the need for Green Capex especially when critics argue that green investing should be the responsibility of government. The following chart shows that $0.9tn of the $2.8tn needed in Green Capex is met by the private sector comprising of both public and private companies.

Source: IEA, OECD, McKinsey, FactSet, Preqin, Goldman Sachs Global Investment Research

Thus, the continued application of ESG criteria in investing by both the investor and the regulatory, and the further fine tuning and improvement of current frameworks are making a significant contribution of 32% towards investing in our green future.

However, as we enter 2023 after a difficult year for capital markets in 2022, many investors’ top of mind concern may not be investing in a green future, but rather how to invest in an environment of higher interest rates where deposits pay almost 5% and to avoid risks and drawdowns in a potentially recessionary scenario.

It is at this juncture that we should remind ourselves a few principles. First, green investing was never about short-term returns. Focusing on annual returns would defeat the goal of nurturing loss-making but promising companies with the right technology to tackle climate change. Indeed, even the typical structure of a venture capital fund with its 10-year life would be considered too short for investing in game changing green technologies such as nuclear fusion. We should in fact think of these investments with a timeframe of over 15 years to give these nascent technologies enough time to germinate, a philosophy that is advocated by the Breakthrough Energy Ventures, an investment vehicle backed by some of the most prominent wealthy philanthropists in the world.

Second, even though many of these green related companies may not be profitable in the near term, the market has rewarded growth in the past, take for example Tesla, which has enjoyed some of its best stock performance well before it was a profitable company. This is all the more important in a higher interest rate environment, where the required rate of return is higher for an investor to take on equity risk. For instance, a utility company with dividends of 4% per annum will struggle to attract capital allocation will likely not perform well in this higher interest rate environment as investors can merely allocate capital to risk-free deposits at 5% without having the equity risk of the utility company. On the other hand, a nascent green company that has a promising technology with revenue growing at 15% but yet to be profitable will likely perform better given the future expected revenue growth and the eventual decrease in cost as the technology becomes more mature, is more widely adopted, and as economies of scale increases.

Thus, all in all, despite the apparent headwind of a higher interest rate environment poses to ESG investing, going into 2023 and beyond, investing in companies both public and private with good ESG scores remains one of the most compelling investment theses for investors.

Reference:

[1] Singer, B., Bingham, D. R., Tylenda, E., Corbett, B., Jones, E., Wu, M. H., Chinello, E., Meyer, M., Kim, K., Venugopal, V., Chen, G., Aggarwal, R., 10 Predictions for Sustainable Investing in 2023, Goldman Sachs Global International Research