A bit rich: business groups want urgent climate action, after resisting it for 30 years



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Marc Hudson, Keele University

Australia has seen the latest extraordinary twist in its climate soap opera. An alliance of business and environment groups declared the nation is “woefully unprepared” for climate change and urgent action is needed.

And yesterday, Australian Industry Group – one of the alliance members – called on the federal government to spend at least A$3.3 billion on renewable energy over the next decade.




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The alliance, known as the Australian Climate Roundtable, formed in 2015. It comprises ten business and environmental bodies, including the Business Council of Australia, National Farmers Federation and the Australian Council of Trade Unions (ACTU).

Last week, the group stated:

There is no systemic government response (federal, state and local) to build resilience to climate risks. Action is piecemeal; uncoordinated; does not engage business, private sector investment, unions, workers in affected industries, community sector and communities; and does not match the scale of the threat climate change represents to the Australian economy, environment and society.

This is ironic, since many of the statement’s signatories spent decades fiercely resisting moves towards sane climate policy. Let’s look back at a few pivotal moments.

Preventing an early carbon tax

The Business Council of Australia (BCA) was a leading player against the Hawke Government’s Ecologically Sustainable Development process, which was initiated to get green groups “in the tent” on environmental policy. The BCA also fought to prevent then environment minister Ros Kelly bring in a carbon tax – one of the ways Australia could have moved to its goal of 20% carbon dioxide reduction by 2005.

And the BCA, alongside the Australian Mining Industry Council (now known as the Minerals Council of Australia), was a main driver in setting up the Australian Industry Greenhouse Network (AIGN).




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Don’t let the name fool you – the network co-ordinated the fossil fuel extraction sector and other groups determined to scupper strong climate and energy policy. It made sure Australia made neither strong international commitments to emissions reductions nor passed domestic legislation which would affect the profitable status quo.

Its first major victory was to destroy and prevent a modest carbon tax in 1994-95, proposed by Keating Government environment minister John Faulkner. Profits from the tax would have funded research and development of renewable energy.

Questionable funding and support

The Australian Aluminium Council is also in the roundtable. This organisation used to be the most militant of the “greenhouse mafia
organisations – as dubbed in a 2006 ABC Four Corners investigation.

The council funded and promoted the work of the Australian Bureau of Agricultural and Resource Economics (ABARE), whose “MEGABARE” economic model was, at the time, used to generate reports which were a go-to for Liberal and National Party politicians wanting to argue climate action would spell economic catastrophe.

In 1997, the Australian Conservation Foundation (another member of the climate roundtable) complained to the federal parliamentary Ombudsman about fossil fuel groups funding ABARE, saying this gave organisations such as Shell Australia a seat on its board. The ensuing Ombudsman’s report in 1998 largely backed these complaints. ABARE agreed with or considered many of the Ombudsman’s recommendations.

Meanwhile, Australian Industry Group was part of the concerted opposition to the Rudd government’s Carbon Pollution Reduction Scheme. In response to the July 2008 Green Paper on emissions trading, it complained:

businesses accounting for well over 10% of national production and around one million jobs will be affected by significant cost increases.

Australian economist Ross Garnaut was among many at the time to lambast this complaint, calling it “pervasive vested-interest pressure on the policy process.”




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Back in July 2014, the Business Council of Australia and Innes Willox (head of the Australian Industry Group) both welcomed the outcome of then prime minister Tony Abbott’s policy vandalism: the repeal of the Gillard government’s carbon price. The policy wasn’t perfect, but it was an important step in the right direction.

In doing so, Australia squandered the opportunity to become a renewable energy superpower. With its solar, wind and geothermal resources, its scientists and technology base, Australia could have been world-beaters and world-savers. Now, it’s just a quarry with a palpable end of its customer base for thermal coal.

What is to be done?

Given the build-up of carbon dioxide in the atmosphere, the global pandemic and the devastating fires of Black Summer, it would be forgivable to despair.

It shouldn’t have been the case that business groups only acted when the problem became undeniable and started to affect profits.




Read more:
Carbon pricing: it’s a proven way to reduce emissions but everyone’s too scared to mention it


Somehow we must recapture the energy, determination and even the optimism of the period from 2006 to 2008 when it seemed Australia “got” climate change and the need to take rapid and radical action.

This time, we must do it better. Decision-makers should not look solely to the business sector for guidance on climate policy – the community, and the broader public good, should be at the centre.The Conversation

Marc Hudson, Research Associate in Social Movements, Keele University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Businesses think they’re on top of carbon risk, but tourism destinations have barely a clue



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Tourism accounts for 8% of global emissions, much of it from planes.
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Susanne Becken, Griffith University

The directors of most Australian companies are well aware of the impact of carbon emissions, not only on the environment but also on their own firms as emissions-intensive industries get lumbered with taxes and regulations designed to change their behaviour.

Many are getting out of emissions-intensive activities ahead of time.

But, with honourable exceptions, Australia’s tourism industry (and the Australian authorities that support it) is rolling on as if it’s business as usual.

This could be because tourism isn’t a single industry – it is a composite, made up of many industries that together create an experience, none of which take responsibility for the whole thing.

But tourism is a huge contributor to emissions, accounting for 8% of emissions worldwide and climbing as tourism grows faster than the economies it contributes to.




Read more:
The carbon footprint of tourism revealed (it’s bigger than we thought)


Tourism operators are aiming for even faster growth, most of them apparently oblivious to clear evidence about what their industry is doing and the risks it is buying more heavily into.

If tourism destinations were companies…

If Australian tourist destinations were companies they would be likely to discuss the risks to their operating models from higher taxes, higher oil prices, extra regulation, and changes in consumer preferences.

Aviation is one of the biggest tourism-related emitters, with the regions that depend on air travel heavily exposed.

But at present the destination-specific carbon footprints from aviation are not recorded, making it difficult for destinations to assess the risks.

A recent paper published in Tourism Management has attempted to fill the gap, publishing nine indicators for every airport in the world.

The biggest emitter in terms of departing passengers is Los Angeles International Airport, producing 765 kilo-tonnes of CO₂ in just one month; January 2017.

When taking into account passenger volumes, one of the airports with the highest emissions per traveller is Buenos Aires. The average person departing that airport emits 391 kilograms of CO₂ and travels a distance of 5,651 km.

The analysis used Brisbane as one of four case studies.

Most of the journeys to Brisbane are long.

Brisbane’s share of itineraries under 400 km is very low at 0.7% (compared with destinations such as Copenhagen which has 9.1%). That indicates a relatively low potential to survive carbon risk by pivoting to public transport or electric planes, as Norway is planning to.

The average distance travelled from Brisbane is 2,852 km, a span exceeded by Auckland (4,561 km) but few other places.

As it happens, Brisbane Airport is working hard to minimise its on-the-ground environmental impact, but that’s not where its greatest threats come from.




Read more:
Airline emissions and the case for a carbon tax on flight tickets


The indicators suggest that the destinations at most risk are islands, and those “off the beaten track” – the kind of destinations that tourism operators are increasingly keen to develop.

Queensland’s Outback Tourism Infrastructure Fund was established to do exactly that. It would be well advised to shift its focus to products that will survive even under scenarios of extreme decarbonisation.

They could include low-carbon transport systems and infrastructure, and a switch to domestic rather than international tourists.

Experience-based travel, slow travel and staycations are likely to become the future of tourism as holidaymakers continue to enjoy the things that tourism has always delivered, but without travelling as much and without burning as much carbon to do it.

An industry concerned about its future would start transforming now.




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Sustainable shopping: is it possible to fly sustainably?


The Conversation


Susanne Becken, Professor of Sustainable Tourism and Director, Griffith Institute for Tourism, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

From back office to boardroom: accountants step up in climate risk management



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To properly consider climate risks for their business, directors need the financial expertise of accountants.
StockLite/Shutterstock

Jayanthi Kumarasiri, RMIT University; Christine Jubb, Swinburne University of Technology, and Keith Houghton, Australian National University

The implications of climate change risks for corporate stakeholders are often poorly understood. Possibly least understood within this group is the role of those with financial expertise. We investigated and have produced a working paper on factors that influence accountants’ involvement in managing climate change risk in Australia.

Companies have been under greater pressure to disclose their exposure to risks of climate change since the 2014 G20 meeting in Australia. This created the Taskforce on Climate Change-Related Financial Risk Disclosure (TCFD. Its recommended disclosures were issued in June 2017.

In a speech this month, Australian Securities and Investments Commissioner John Price reinforced these recommendations. He made clear climate risk is an ASIC priority. Directors who fail to properly consider and disclose climate risks could face lawsuits, he warned.




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So where do accountants come into this?

It can be argued that those with financial expertise, such as accountants, have the tools to provide crucial information to management on potential risks embedded in climate change.

Previous research found accountants had a limited role in assessing climate change risk. However, our comparative study reveals shifts in climate management towards those with financial expertise.

ASIC commissioner John Price’s warning that directors must consider climate risks is a pointer to accountants’ role in quantifying those risks.
Lisa Creffield/Youtube

A principal conclusion from our research is that, together with engineers and other technical experts on climate change, those with financial expertise are significantly more intertwined in assessing and mitigating the risk than before.

The study involved semi-structured interviews with managers directly involved in emissions management for some of the largest Australian companies. These took place before and after the 2014 repeal of the carbon tax. In 2013, we interviewed 39 managers across 18 companies. In 2016 it was 14 managers and 11 companies.




Read more:
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The key finding from the 2013 interviews was that engineers and environmental specialists dominated emissions management. Those with financial expertise had minimal involvement. Many interviewees claimed that, because of the complexity and technicalities, only professionals with engineering or environmental science backgrounds had the relevant expertise:

Because it’s quite a technical thing … it’s not just a number. You need to understand what’s behind the number, and why it’s there.

Importantly, in that period, one financial professional leading a team in the field asserted that accountants, as risk management experts, could bring significant value to their companies:

I think that accountants have a lot of credibility … because when it comes to emissions … I think I can put forward the business case of why it’s important … I think, that means … it’s better received within the company than if I was … an engineer or an environmental scientist.

Both financial and non-financial experts shared this view. One sustainability professional explained how a limited financial understanding leads to an inability to appropriately use techniques common in finance, such as target setting and performance evaluation.

Well, I think if you had the accounting knowledge … it [the target] would be far more accurate, and probably a lot higher than what we’ve set.

Australia’s carbon tax was gone from July 2014. Emissions have risen every year since. At December 2017, emissions were up 1.5% compared to 2016.

With our commitment to the Paris climate agreement, one might have expected companies to more urgently reduce emissions. In general, though, the second round of interviews reveals that companies’ emissions management (and momentum towards urgent action) has significantly diminished.




Read more:
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Financial expertise now coming to the fore

However, the involvement of those with financial expertise in climate change risk management has increased. Many viewed this as positive and potentially useful for boardrooms.

Whether it was the carbon tax that brought finance team attention, or organisational learning, more recent interviews found evidence of greater acceptance of climate change as a financial (and other) material risk. The ASIC commissioner’s speech advocating TCFD-type disclosures suggests the issue is not merely one of eco-efficiency, but one of commercial substance of relevance to company directors.

From the interview data, one possible explanation for increased collaboration between technical and financial expertise is greater acceptance of climate change issues as material risks to companies:

Management of carbon is fundamentally a risk-management exercise … It is a material risk … if we don’t think about the long-term risks … and what are the strategies that we need to mitigate…

The best way to present … climate-related information to … management … is in the risk-management process [including] … in terms of reputational risk, commercial risk, strategic risk … it’s all risk.

Barriers to collaboration between technical and financial experts still exist. These include geographic co-location and some accountants being unable to step outside traditional roles.

The ConversationWith regulators’ increased interest in measurement and disclosure of climate change risk, the landscape is changing again. We anticipate better integration of the assessment and mitigation of climate change risk with strengthened expertise being brought to bear. This includes greater involvement from the technical expert on the ground through to the boardroom.

Jayanthi Kumarasiri, Lecturer in Accounting, RMIT University; Christine Jubb, Professor of Accounting, Associate Director Centre for Transformative Innovation, Swinburne University of Technology, and Keith Houghton, Emeritus Professor, Australian National University

This article was originally published on The Conversation. Read the original article.

Why we can’t rely on corporations to save us from climate change



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Managers’ short term incentives mean they can’t follow through on grand climate change programs.
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Christopher Wright, University of Sydney and Daniel Nyberg, University of Newcastle

While businesses have been principal agents in increasing greenhouse gas emissions, they are also seen by many as crucial to tackling climate change.

However, our research shows how corporations’ ambitious pro-climate proposals are systematically degraded by criticism from shareholders, media, governments, other corporations and managers.

This “market critique” reveals the underlying tension between the demands of tackling climate change, and the more basic business imperatives of profit and shareholder value. Managers operate within increasingly short time frames and demanding performance metrics, due to quarterly and semi-annual reporting, and the shrinking tenure of executives.

Our research involved detailed analysis of five major Australian corporations over ten years, from 2005 to 2015. During this period, climate change became a central issue in political and economic debate, giving rise to a range of risks and opportunities for business.

Each of the companies we studied acted at the leading edge of this issue. However, despite operating in different industries (banking, media, insurance, manufacturing and energy) we found a common pattern in which initial statements of climate leadership degenerated over time into more mundane business concerns.

Our study revealed three phases to this transformation.

1. Climate change as a business opportunity

In this first phase, senior executives present tackling climate change as a strategic business decision.

This is epitomised by British entrepreneur Richard Branson, who has claimed that “our only hope to stop climate change is for industry to make money from it”.

The managers in our study associated climate change with words like “innovation”, “opportunity”, “leadership” and “win-win outcomes”. At the same time they ruled out more negative or threatening associations, such as “regulation” or “sacrifice”.

For example, in outlining why his company had embraced the climate issue, the global sustainability manager of one of the world’s largest industrial conglomerates told us:

We’re eliminating the false choice between great economics and the environment. We’re looking for products that will have a positive and powerful impact on the environment and on the economy.

2. Localising climate engagement

These statements of intent are open to criticism from customers, employees, the media and competitors, especially with respect to the substance and relevance of corporate climate action.

Thus, in the second phase, managers sought to make their proposals more concrete through eco-efficiency practices (such as reducing energy consumption, retrofitting lighting, and using renewable energy), “green” products and services, and promoting the need for climate action.

Notably, these are often supplemented with measures of corporate worth to demonstrate a “business case” for climate action (for instance, savings from reduced energy consumption, increased employee satisfaction and engagement, or improved sales figures from green products and services).

Importantly, companies also sought to communicate the benefits of these measures to employees through corporate culture change initiatives, as well as to customers, clients, NGOs and political parties.

As the environment manager at the global media company we studied outlined, these practices were central to creating a climate-conscious culture in his organization:

That inspires others and it gets things done. It’s a fantastic tool. It’s how behavioural change happens on sites.

3. Normalisation and business as usual

Over time, however, climate initiatives attracted renewed criticism from other business groups, shareholders, the media, and politicians.

For instance, the increasingly heated political debate over carbon pricing forced many companies to rethink their public stance on climate change.

As a senior manager at one of the country’s major banks explained:

How we deal with sensitivities within the organisation about taking what can be seen as a partisan position in a highly political environment … that’s the challenge at the moment.

And so, in the third phase we found that climate change initiatives were wound back and market concerns prioritised.

At this stage, the temporary compromise between market and social/environmental discourses was broken and corporate executives sought to realign climate initiatives with the goal of maximising shareholder value.

For example, new chief executives were promoted who advocated “back to basics” strategies. Meanwhile, climate change initiatives were diluted and relegated to broader and less specific “sustainability” and “resilience” programs.

One of our case study companies is a large insurance company. While initially very progressive on the need for climate change action, this changed after a reversal in its financial situation and a change of leadership.

As a senior manager explained:

Look, that was all a nice thing to have in good times but now we’re in hard times. We get back to core stuff.

Where next from here?

These case studies, on top of our previous research, show why corporations are particularly unsuited to tackling a challenge like climate change.

Businesses operate on short-term objectives of profit maximisation and shareholder return. But avoiding dangerous climate change requires the radical decarbonisation of energy, transportation and manufacturing on a scale that is historically unprecedented and probably incompatible with economic growth.

This means going beyond the comfortable assumptions of corporate self-regulation and “market solutions”, and instead accepting regulatory restrictions on carbon emissions and fossil fuel extraction.

It also requires a reconsideration of corporate purpose and the dominance of short-term shareholder value as the pre-eminent criteria in assessing business performance. Alternative models of corporate governance, such as B corporations, offer pathways that better acknowledge environmental and social concerns.

The ConversationIn an era in which neoliberalism still dominates political imaginations around the world, our research shows the folly of depending on corporations and markets to address climate change.

Christopher Wright, Professor of Organisational Studies, University of Sydney and Daniel Nyberg, Professor of Management, Newcastle Business School, University of Newcastle

This article was originally published on The Conversation. Read the original article.

What ethical business can do to help make ecocities a reality



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Soft Landing recycles the materials of mattresses that otherwise get dumped in landfill.
Alan Stanton/flickr, CC BY-SA

Katherine Gibson, Western Sydney University

This is one of a series of articles to coincide with the 2017 Ecocity World Summit in Melbourne.


Cities have always been eco(nomic)cities but rarely eco(logical)cities. Today, growing inequality and environmental degradation undermine the very conditions of life as we have known it. Continuing business and urbanisation as usual will make this problem worse.

Economic growth must become synonymous with ecological and social sustainability. If we forget this we are doomed. Cities, where more than half of the world’s people live, must lead the way.

Many city dwellers are heeding the call to change ways of being and reshape livelihoods. They are modifying their behaviours as much as they can to reduce, reuse and recycle.

They are becoming renewable energy producers in the face of a political system that as yet, in Australia at least, refuses to help very much. They are reducing car use and are interested in sourcing food more locally.

But citizens can only so do much. One hope for our cities, identified in my research, is that more and more businesses put ecological and social sustainability at the core of their performance model.

Companies that lead the way

Companies like commercial carpet tile manufacturer Interface Carpets did this a generation ago when it abandoned the linear “take-make-waste” model of production. Instead, it embraced a commitment to eliminating any negative impact on the environment.

With the input of an “eco dream team” made up of pragmatic philosophers and biomimicry experts, the company adopted a visionary plan, “Mission Zero”.

Carpet takes over 50 years to break down in landfill.
WasteZero

The Interface business was redesigned along circular economy lines to eliminate oil from the production of synthetic carpet tiles. This achievement will be largely completed by Interface’s target year 2020. At the same time, the business has eliminated waste, is powered by 100% renewable energy and uses efficient transportation.

But environmental wellbeing is not all Interface is committed to. Social equity is also a company goal.

Interface’s Netherlands plant is pioneering collaboration with a social enterprise that employs people at a distance from the labour market. This enterprise is organising the cleaning and reuse of carpet tiles, large proportions of which are replaced before their product expiry date.

Interface’s Minto plant, on the outskirts of Sydney, has taken the corporate lead internationally to refashion the “factory as a forest” as part of the new Climate Take Back strategy.

The goal is not only to reduce the negative impact on the environment but to have a positive impact through restorative action. How this will be done is still to be determined, but it is objectives like Mission Zero that have driven innovation in the past.

The Australian social enterprise Soft Landing first established just north of Wollongong provides jobs for people experiencing disadvantage. They disassemble and recycle the materials of mattresses that otherwise get dumped in landfill.

Just like Interface, Soft Landing is exploring new interdependencies between for-profit firms with a commitment to environmental sustainability and for-purpose social enterprise.

Having worked with key industry partners over many years, Soft Landing is co-ordinating a product stewardship scheme that enrols firms in voluntarily adopting sustainability protocols for mattress making and unmaking.

Mattresses are a problem waste stream, and this initiative will help roll out Soft Landing’s innovative “waste to wages” model, significantly reducing landfill while also creating jobs.

A carpet manufacturer and mattress recycler are showing the way toward repairing and restoring the social and environmental fabric, and pushing policy along as they do so. This is jobs and growth in a new register. If they can do it, so can others.

Now for the construction sector…

Now we need the urban building sector to take notice and attend to the context in which carpet and mattresses are housed.

Rather than catering to demand for the cheapest housing that conforms to the most basic of BASIX, we need to see some leadership with housing that truly contributes to environmental and social restoration and repair.

Housing developers could race to the top by experimenting with:

Interface and Soft Landing are successful businesses that show what can happen when commitments to building a better world become central to their brand. If we can’t rely on our politicians to listen to the warnings of the Anthropocene, we can at least turn to ethically attuned business to help make ecological cities a reality.

Working with a reparative ecological approach and a commitment to socio-economic inclusion, everyone can be part of a solution. Overcoming inequality and environmental degradation is key to ensuring that ecocities are not another excuse for business as usual in a new guise.


The ConversationYou can read other articles in the series here. The Ecocity World Summit is being hosted by the University of Melbourne, Western Sydney University, the Victorian government and the City of Melbourne in Melbourne from July 12-14.

Katherine Gibson, Professor of Economic Geography, Institute for Culture and Society, Western Sydney University

This article was originally published on The Conversation. Read the original article.

As big business goes green, green bonds ready for takeoff


Usman W. Chohan, UNSW Australia

The climate summit in Paris has shown that global big business is now also on board with the transition to a low-carbon economy.

However, the most promising instruments in finance for promoting green investing, particularly green bonds, have been around for almost a decade now, starting with the European Investment Bank (EIB) Climate Awareness Bond in 2007.

Why haven’t green bonds entered the mainstream of finance, and what is holding them back?

To be clear, the rise of green bonds has been dramatic: whereas issuances amounted to only US$4 billion in 2010, they were nearly ten times that amount by 2014, representing US$37 billion in new issuance volume. However, green bonds haven’t yet achieved a critical mass because their growth stems from a small base, given that global fixed income constitutes US$80 trillion in outstanding value.

An important factor constraining the wider proliferation of green bonds is the fact that their issuance is still relegated to a few large players. The largest emitters of green bonds remain the large multilateral development institutions which collectively accounted for almost half (44%) of new issuances in 2014, while the corporate sector accounted for another one-third of the total.

The World Bank alone has conducted 100 green bond transactions in 18 different currencies that cumulatively represent more than US$8.5 billion.

Having such a concentrated base of issuers is insufficient for a wider introduction of green financial instruments, and new institutional players, particularly private sector entrants, are required to enlarge the green bond market.

Looking back, an overarching reason for limited private sector participation in green bonds was that “green credentials” were less important in past corporate cultures. However, with the cultural shift taking place as seen at COP21, more entities are expected to “green-up” their business models.

It is important to note that, because green bonds are properly certified as climate-friendly financial instruments, they only represent a portion of a larger, more loosely defined “climate-aligned” bond market.

While not officially labelled as “green” bonds according to environmental rubrics this market accounts for more than US$600 billion.

The green bond market also suffers from a lack of project diversity. For the broader “climate-aligned bond market” that includes green bonds, the two largest segments are transport (nearly 70%) and energy (another 20%), but transport is almost entirely rail networks backed by state entities. Only 10% of the “climate-aligned” market covers the remaining construction, agriculture, waste management, and water categories.

It is heartening to see that developing countries have taken the lead in issuing “climate-aligned” securities (not necessarily certified as green bonds), with China alone accounting for 33% (US$164 billion) of the climate-aligned issuances. India (US$15 billion), Brazil (US$3 billion), and South Africa (US$1 billion) are also among the emerging markets engaging in the climate-aligned capital raising process.

In Australia, the scope for green bond issuances is extremely promising, but in the context of the overall Australian A$1.5 trillion bond market, green bonds still reflect a minute portion of the issuances, and the country has generally lagged behind in its adoption. This is partly due to regulatory uncertainty and political hostility. However, there’s actually a strong interest in green bonds in Australia, as the 2015 green bond issuance of A$600 million by ANZ bank and this South Australian A$200 million wind farm project evidently show.

In fact, most of the major Australian banks, including NAB, Westpac, and ANZ are dipping their toes in the space. To facilitate stronger growth in Australia, however, non-bank financial institutions will also need to be part of the equation, which is why it is encouraging that sectors such as the property market are turning to green bond vehicles for raising capital.

The outlook on market volume growth for green bonds is overwhelmingly positive. Some forecasts are suggesting the green bond market will treble again this year as it did in 2014, touching US$100 billion. Given the growth and engagement on the “greening” of finance, green finance could soon become mainstream.

The Conversation

Usman W. Chohan, Consultant, World Bank Institute (previous); Doctoral Candidate, Economics, Fiscal Policy Reform, UNSW Australia

This article was originally published on The Conversation. Read the original article.

Why is the business world suddenly clamouring for a global carbon tax?


Peter Burdon

Among the various interests at the Paris climate talks, it is arguably the voice of business that has emerged most clearly. Many business leaders are now saying that if the world is intent on reducing greenhouse gas emissions, there must be a worldwide price on carbon and a framework for linking the 55 schemes that exist in areas such as China, the European Union, and California.

Momentum has been building since May, when six of Europe’s largest oil and gas companies, including Royal Dutch Shell and BP, issued a letter calling for global carbon pricing system. That month, leaders from 59 international companies also signed a statement calling for carbon pricing to feature in the Paris agreement.

Advocacy has continued during the Paris negotiations. For example, Patrick Pouyanné, chief executive of French oil and gas giant Total, argued that the shift from coal to gas “will not happen without a carbon price”. He suggested that a price of US$20-$50 in Europe was required (well above the current price).

Oleg Deripaska, president of the world’s largest aluminium producer Rusal, put the issue in stronger terms, describing the idea of voluntary national emissions commitments (upon which the Paris agreement largely hinges) as “balderdash”.

Asked what success would look like from the Paris negotiations, Deripaska replied:

A success [for most people] would be lunch at a nice French banquette with foie gras and oysters. But no, seriously, it is carbon tax or die.

Carbon tax on the menu?

It is not clear whether a carbon price will figure in the Paris agreement. But it is important to consider what is motivating some of the world’s highest-emitting companies to advocate for a carbon price. And what other, perhaps more intrusive plans for tackling climate change would be taken off the table?

Businesses have a stronger presence at COP21 than at any previous climate negotiation. They know which way the wind is blowing and realise that governments might require painful and complex interventions to reduce emissions. Moves are afoot to decarbonise the world economy some time after 2050 (see Article 3 of the latest draft text, and there has been strong advocacy for a moratorium on new coal mines.

Helge Lund, chief executive of British oil multinational BG Group, argues that a carbon price reduces government intervention and attempts at “pick[ing] winners in terms of energy technologies.” Instead, he argues: “the market will dictate the most efficient solution”.

Forecasts from the International Energy Agency suggest that fossil fuels (including coal) will provide the bulk of energy demand for developing countries going into the future. Companies intend to meet that demand. Thus, Shell can simultaneously advocate putting a price on carbon and make plans to drill in the Arctic where production will not begin until 2030.

While that might sound perverse, there is actually nothing inconsistent about those two positions.

One way for energy companies to maintain economic growth in a carbon-priced economy is to shift investments gradually away from coal and oil, and towards gas. That is why Shell has paid US$70 billion for the BG Group.

Of course gas might come under similar pressure in time, but as the Financial Times has reported:

…oil companies’ skills and assets mean that finding and extracting gas is a short and natural step. Moving into renewable energy is a much bigger leap.

This can be seen in the many examples where energy companies have struggled to develop other forms of energy, such as BP’s ill-starred attempt to brand itself as “beyond petroleum” and invest US$8 billion over ten years in renewable energy. The company has since backtracked on that goal, has left the solar market, and has no plans to expand its onshore wind investments.

Beyond markets

Of the 185 countries that have submitted climate targets ahead of the Paris talks, more than 80 have referenced market mechanisms.

Clearly, a price on carbon is going to play a role in attempts to tackle climate change. This is a good thing but it is not sufficient and must not become a distraction from other serious interventions.

Recent research confirms that we do not have time to wait for energy companies to transition at their own pace from fossil fuels to renewable energy. For example, last week Kevin Anderson from the Tyndall Centre for Climate Change Research published a paper in Nature Geoscience which argued:

The carbon budgets associated with a 2℃ threshold demand profound changes to the consumption and production of energy … the IPCC’s 1,000 gigatonne budget requires an end to all carbon emissions from energy systems by 2050.

A carbon budget consistent with 2℃ (let alone 1.5℃) requires a dramatic reversal in energy consumption and emissions growth. Governments should treat overtures from business with caution, even if businesses are making the right moves. They need to ensure that these moves are made at a speed that suits the climate, rather than just business.

The Conversation

Peter Burdon, Senior lecturer, Adelaide Law School

This article was originally published on The Conversation. Read the original article.

The earth has moved: big business’s radical climate shift is now unstoppable


Clive Hamilton

The most surprising revelation here at the Paris climate conference has been the astonishing shift in the world of investors over the past 12 months. There is now unprecedented momentum towards participating in the transition to a low-carbon economy, and the view at the “big end” of the conference is that a strong agreement will provide an extra shove. It’s unstoppable now.

It’s not that investors and chief executives have had an ethical epiphany about climate change; it’s just that they can see where the world is headed, and it makes sense to be part of it rather than being stuck in the economy of the 20th century. As US Secretary of State John Kerry said yesterday: “While we’ve been debating, … the clean energy sector has been growing at an incredible rate.”

Contrast that with Australia, for instance, where the attitude of the business community has always been “we don’t want to be at the forefront of global action”. The old fossil fuel companies still have the dominant voice in the public debate and in the policy process. It may take another year for what’s happening across the world to sink in, but the complaint will increasingly become “we don’t want to be left behind”.

So what are the dimensions of this shift in business and investor sentiment? I wrote last week about how investors are running ahead of governments, as shown for example by the quiet revolution in the growth of green bonds, and by the Montreal Carbon Pledge under which large investors have committed to measuring and reporting on the carbon footprint of their portfolios. In a little over a year, this pledge has been signed by investors controlling more than US$10 trillion in assets.

More immediate abatement action is to be found in the so-called Science Based Targets initiative, under which 114 large corporations have pledged to reduce their emissions in a way consistent with the 2℃ objective. Big corporations including Ikea, Coca-Cola, Dell, General Mills, Kellogg, NRG Energy, Procter & Gamble, Sony and Wal-Mart have already signed up and are implementing plans.

Dell, for example, has pledged to reduce emissions from its facilities and logistics operations by 50% by 2020 (relative to 2011 levels), and to reduce the energy intensity of its product portfolio by 80% by 2020.

These corporations have not decided that principles should outweigh profits; they have decided that, looking over the next several years, sustaining profitability requires that they shift to low-emission energy. One factor weighing on corporate minds is exposure to risk in energy markets, which are likely to be more volatile and uncertain partly because of the growing challenge posed to fossil energy.

Central bankers are now anxious that a rapid, structural shift in energy markets and the destruction of asset-value in some of the world’s biggest companies may disrupt the global financial system. As I reported, the governor of the Bank of England Mark Carney speaks of the need for an “orderly transition” to a zero-carbon economy.

This unprecedented business commitment feeds into, and is partially stimulated by, the Lima-Paris Action Agenda, which wound up yesterday and must be considered one of the standout successes of COP21. The number of mayors, governors, chief executives and investment managers who have arrived here to declare publicly their commitment has been unparalleled.

Yes, the message of this conference is that something big has shifted in the world.

The Conversation

Clive Hamilton, Professor of Public Ethics, Centre For Applied Philosophy & Public Ethics (CAPPE)

This article was originally published on The Conversation. Read the original article.

Business big hitters highlight the huge growth in climate risk management


Clive Hamilton

“Investors are running ahead of governments.”

This is arguably the most striking and encouraging statement heard so far at the Paris climate conference. It was made in a remarkable speech at a forum on private financing by Martin Skancke, chair of Principles for Responsible Investment (PRI), the world’s largest network of investors.

To drive home the point, he referred to the Montreal Carbon Pledge, which in a little over a year has been signed by 120 investors who control more than US$10 trillion in assets (these guys speak in trillions, rather than billions).

It is true that the investors are committing only to measure and disclose the carbon footprint of their portfolios. But it’s also true that “what gets measured gets managed” – which in this case means, once it’s measured you have to manage it.

Another panellist at the forum referred to “the quiet revolution” in green investment, including huge growth in green bonds, expected to be more than US$40 billion this year. The aim is to expand it to US$900 billion. ING France chief executive Karien van Gennip described how her bank’s recent offering of green bonds was seven times oversubscribed within 48 hours.

Shaun Tarbuck, head of the world’s biggest insurance federation, spoke of “a new paradigm” in the business world, emphasizing that these are not just political statements. Even China has developed a strategy for greening its financial system.

Although Bill Gates’ billionaires’ initiative has all the sex appeal and attracted the media attention, the real force in bringing about the transition to low-carbon energy economies will come from private and institutional investors. Not only do they control vastly more cash than the billionaires but they are changing the structure of energy economies now, rather than gambling on “breakthrough technologies” that will not have an appreciable impact for 20 or 30 years, when it will already be too late.

Sea change

The sea change in the global investment community has occurred only in the past 12 months. The signs have all been there, not the least of which is the recognition by the G20 group of major economies that climate change represents a threat to the stability of the global financial system.

Last April, G20 finance ministers and central bank governors asked the Financial Stability Board (FSB) of the world’s central banks to prepare a report on climate risk, to be considered at its next meeting in China. This is a big deal; it’s the system, not individual corporations, that is now seen to be at risk.

The FSB is chaired by Bank of England governor Mark Carney, who in September created huge waves in the global financial sector with a speech to insurers warning of serious risks to investors from climate change (a warning met with squeals from the fossil fuel industry).

On Friday, at a side event at the conference, Carney listed the types of risk to which financial markets are exposed, including direct risks due to massive insurance payouts after climate disasters, and liability risks for directors should corporations be sued.

But he put most stress on the exposure of capital providers to an “abrupt transition” to a low-energy economy, due to future sudden changes in policy or sentiment. Investors have a fiduciary responsibility to prepare. He may have been thinking of a sharp write-down in fossil fuel asset values as the issue of unburnable coal gathers momentum. Carney wants a market structure that will bring about “an ordered transition” to a zero-carbon economy.

Carney was joined at the event by Michael Bloomberg, who will chair the new FSB taskforce. The businessman and former New York City mayor stressed that corporations have to think about their future financial liabilities from carbon emissions, noting that GE has been ordered to clean up the Hudson River, 20 years after it finished polluting it. No one saw that coming.

Business versus politics

At the same time that Carney and Bloomberg were speaking about climate risks in the financial sector, Laurent Fabius, the president of the conference, was giving a briefing on progress in the negotiations. Two things stood out about the audiences for the competing events. Carney-Bloomberg attracted a bigger crowd and most were wearing dark blue suits. At no previous UN climate summit would a leading central banker have turned up, to have his words copied down by men and women in business attire.

Drew a crowd: Michael Bloomberg
EPA/Ian Langsdon

Today, if you read the business press, climate change is no longer treated as if it were happening in some other world of no interest to investors. So whether the final agreement to come out of the formal negotiations next Friday is strong or weak, the importance of it is the signal it is sending to investors.

The unmistakable message is that the world is changing: the major economies are beginning the transition to low-carbon energy systems, and if you are not planning for it you are not doing your job. It’s taken them a long time, but investors now get it. The issue is not whether they care about climate change, but whether they are properly managing risk in a changing world.

Mark Carney pointed out that the 185 national climate targets on the table for this conference contain real information about where governments and the world are headed, and that it is legitimate for investors to ask companies “what’s your strategy for net zero (emissions)?”

When asked about Republican presidential candidates, Bloomberg was scathing, dismissing their debates as “Kabuki theatre”. He said that he keeps one of the four TV screens by his desk tuned to Fox News. Fox recently spent a whole day expressing outrage at Obama’s climate change efforts, but not one of the talking heads was from business. “No business person could get away with it,” he said.

The Conversation

Clive Hamilton, Professor of Public Ethics, Centre For Applied Philosophy & Public Ethics (CAPPE)

This article was originally published on The Conversation. Read the original article.

A simple greenwash detection tip: check what the firm puts on its homepage


Stephen Garnett, Charles Darwin University; Kerstin Zander, Charles Darwin University, and Michael Lawes, Charles Darwin University

Several Australian businesses last week committed to tackling climate change, as the attention turns to next month’s crucial United Nations climate negotiations in Paris.

It is a welcome step, because many businesses (and other large organisations) will need to change their behaviour in fundamental ways if the current widespread talk of sustainability is be more than just rhetoric.

Many organisations appear to recognise this trend and take pains to advertise their “corporate social responsibility” (CSR) – a catch-all term that can cover a wide range of social, conservation and sustainability initiatives.

But has their behaviour really changed? Or is CSR, as some people suggest, often little more than greenwashing – designed to look good while changing little?

We attempted to answer this question by looking at two sources that might be more revealing of companies’ true priorities: their corporate mission statements, and their website homepages.

Mission statements underpin business planning and usually emerge from intense self-reflection about an organisation’s aspirations. Corporate web pages, in contrast, generally aim to engender confidence in customers, thereby attracting revenue. As such, website homepages can tell you how much organisations really feel they will benefit from having a sustainability message.

Our study, published this month in Conservation Biology, looked at 150 of the world’s largest organisations, including resource companies, retailers, government development agencies, conservation groups, and aid organisations. We studied their mission statements and homepages, as well as how their mission statements have changed since the 1990s.

Patchy progress

Our results show progress, albeit patchy and hesitant. Perhaps surprisingly, the biggest change was among the big miners and oil companies, with a growing number of these resource companies recognising that their mining operations are under threat if they fail to keep local communities happy. While their claims of sustainability remain hard to corroborate, at least more now publicly aspire to greater community concern.

The link between sustainable practice and core business aspirations is more distant for retailers – and it shows. Most retailers’ websites are crowded with eyecatching pointers to the latest bargains. No matter that the very cheapness of these products forces producers to cut social and environmental corners, cutting down forests and displacing indigenous people so that German coffee drinkers or US hardware store customers can enjoy lower prices.

Curiously, while virtually every commercial organisation we examined does practice some form of CSR, few boast prominently about their achievements. Reports can often be found only by burrowing through the obscure recesses of corporate websites – available to the literati but not too alarming for the investing public. This perhaps calls into question the true strength of their commitment.

Practising what you preach

At least most companies do undertake CSR. While conservation non-government organisations (NGOs) may lobby for it, almost none practice it themselves – at least in a form that could be documented by our study. Curiously, it seems that donors expect such NGOs to be out lobbying or caring for the environment, rather than monitoring their own behaviour.

We also found that conservation NGOs’ websites were least likely, of the groups we assessed, to show images of empowered women or to demonstrate other aspirations for gender equity. The dominance of men in positions of power in conservation has been noted in the scientific literature, but it was surprising to find the same trait apparent in websites.

Similarly, aid agencies’ websites showed little regard for the environment, despite its critical importance for the world’s poor. Most of their websites tend to concentrate on depicting hardship through a visual code of empty bowls and unhappy women, typically with dark skin. A “donate” button is usually nearby.

Percentage of large organisations’ homepages that portray awareness of social responsibility issues (as of August 2014).
Garnett et al., Cons. Biol. (2015)

In fairness, NGOs’ missions statements were generally better than their websites at acknowledging the synergies between social and environmental issues.

Government agencies, having less urgent need of selling their wares to the public, had the broadest approach, and were more likely than NGOs to acknowledge the wider sustainability agenda.

Climate too hard?

Climate change was a notable omission from the websites and mission statements of almost all the organisations we assessed last August. Though currently more topical, at east for NGOs, perhaps it is usually just too big for any one organisation to contemplate tackling. However, equally likely is the fact that it does not attract donors or investors. Other research suggests that the mere contemplation of climate change is associated with feelings of loss, sadness and hopelessness – the last thing you want sitting next to the donate button on your website.

Large organisations think hard about their mission statements and websites. As a result they are faithful reflections of what these groups think their investors and customers will appreciate (or at least not be frightened by). If you want to see whether an organisation is really focused on avoiding harm to society or the environment, you should look critically at these core communications, and, where you can, see how they match up to promises of “corporate social responsibility”.

The Conversation

Stephen Garnett, Professor of Conservation and Sustainable Livelihoods, Charles Darwin University; Kerstin Zander, Senior Research Fellow, Charles Darwin University, and Michael Lawes, Professor, Wildlife Science, Charles Darwin University

This article was originally published on The Conversation. Read the original article.