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Three ESG bets for 2022, plus how to play the coming electric vehicle sales surge
Welcome to Callaway Climate Insights. Happy 2022 to all our subscribers.
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Good morning and Happy New Year. Anyone else have to deal with Covid in the household over the holidays?
So much can change in two weeks, so I always proceed through this first reopening week of the year with caution and let the optimism of investors for the year ahead settle while the unsolved problems of last year catch up. Still, there are some early signs the world of environmental, social and governance (ESG) investing is in for some big changes this year. Consolidation may be the name of the game.
As Marsha Vande Berg points out in her first column of 2022 below, the messy world of sustainability standards and metrics is beginning to come together, with major regulators preparing this year to adopt standards that will greatly enhance the ability of companies to report climate risk, and investors to react.
This morning’s news that S&P Global is buying The Climate Service, a four-year-old climate risk data provider, also portends the beginning of a period of acquisitions after a frantic three years of startups and VC investing as climate data continues to improve. The outlook for a demand surge in electric vehicles this coming year means a big year for components makers as well, in terms of sales and merger offers as the largest players jockey for position.
Finally, some of the corporate marketing and greenwashing tactics of the past few years are growing old and tainted, as investors become more educated about which green strategies they want to pursue and why. And that’s no small thanks to improved media climate coverage across the board, including this stunning special report by The New York Times over the weekend called Postcards from a World on Fire.
We face steep challenges to be sure, including Covid, higher inflation, higher interest rates, geopolitical risk, and worse supply chain issues. But the ESG world is growing up, and after years of talk, the biggest players are starting to lay their bets.
More insights below. . . .
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Three dynamics to watch for in ‘22 as sustainable accounting standards unite
. . . . The alphabet soup of competing sustainable standard initiatives is beginning to come together in a way that will make 2022 a pivotal year for environmental, social and governance investors, writes Marsha Vande Berg. Key will be how the European Union and the Securities and Exchange Commission in the U.S. adapt their regulatory frameworks to sustainable disclosure, with a key set of standards that can be applied in different ways. Watch for a lot of action out of London, where the new International Sustainability Standards Board (ISSB), is leading the charge on setting up global baseline measures. . . .
The $281 billion climate problem. How money laundering is fueling environmental crime
. . . . Often lost in the fight to reduce fossil fuel company emissions is the fact that as much as $281 billion in illicit profits from harmful and illegal timber logging, waste dumping and other environmental crimes are committed each year. In a special Op-Ed for Callaway Climate Insights this week, Dr. Marcus Pleyer, president of the Financial Action Task Force (FATF), argues that governments looking to reduce global warming need to put resources to fighting the crimes that are behind much more of it then they think, including in their own backyards. . . .
Tuesday’s subscriber insights: Tesla’s record deliveries raise battery mineral mining issue
. . . . Tesla (TSLA) shares surged on news that Elon Musk’s electric vehicle giant generated record deliveries of more than 308,000 vehicles in the fourth quarter, kicking off what could be a milestone year for EVs in 2022. But the surge in demand will raise the profile of a major issue with electric batteries — the mining of the minerals needed to build them. Read more here. . . .
. . . . Investors in fossil fuel companies will pay close attention this spring to the annual meeting schedule, to see if last year’s stunning victory of Engine No. 1 in securing three seats on ExxonMobil’s (XOM) board was a fluke or heralds a new era in climate change activism among shareholders. Starting with Royal Dutch Shell (RDS.A). Read more here. . . .
. . . . With all due respect to Tesla’s (TSLA) record Q4 deliveries, and Lucid’s (LCID) surging stock price, the one company most electric vehicle enthusiasts will be watching this year is Ford Motor (F), whose shares have doubled in the past three months and currently sit at a 21-year high, thanks to record orders for its more affordable F-150 Lightning electric pickup truck. Read more here. . . .
. . . . Europe was always going to cave on classifying nuclear and natural gas as green investments, despite the rhetoric. The EU political math supports it. But geopolitical tensions around natural gas, i.e. Russia, and the fault line on nuclear between Germany and France are only going to continue to grow. The U.S. and China will be watching closely. Read more here. . . .
Editor’s picks: Air-mass clash, breakthroughs in space-based solar power, and Denmark’s green travel plans
New breakthroughs in space-based solar power
Recent tests of a solar panel prototype may have demonstrated breakthrough technology in the effort to harness solar energy from space. E&E News reports the prototype, called a “sandwich tile” by researchers, was able to harness intense solar radiation found in outer space and then convert it into radio frequency energy that could be beamed back to Earth. The project is called the Arachne mission and is a joint effort by the Air Force Research Laboratory and Northrop Grumman Corp. (NOC). According to the report, it’s researching the possibility of harnessing solar energy through space-based panels and then "beaming" the power back to Earth through wireless technology. The Air Force Research Laboratory awarded Northrop Grumman more than $100 million for the project.
Denmark aims for fossil-fuel free domestic flights by 2030
Denmark’s Prime Minister Mette Frederiksen said in a new year’s address that the country's domestic flights should be fossil-fuel free by 2030. According to a report from the BBC, however, she acknowledged that the solutions are not yet in place to achieve that goal. Denmark is aiming for a 70% cut in overall carbon emissions by 2030, compared to 1990 levels. “To travel is to live and therefore we fly,” said Frederiksen, announcing her plan. The report also notes that Airbus has announced plans to develop hydrogen-fueled planes that could be in use by 2035, while Sweden also has plans to make its domestic flights fossil fuel-free by 2030 and hopes to make international flights green by 2045. Meanwhile, France is considering a ban on domestic flights where the same journey could be made by train in under two-and-a-half hours.
Data driven: 30 years of deforestation and forest growth, by country
In a special visual titled Mapped: 30 Years of Deforestation and Forest Growth, by Country, Niccolo Conte reports for Visual Capitalist on where deforestation is happening and which countries are growing their forests. Over the past three decades, 43% of countries saw a net reduction in their forest area, 38% gained forest area and 19% had no overall change. According to the report, since 1990, the world has lost more than 4% of its forests, or 685,300 square miles of forest area — an area roughly equal to half of India. Brazil, home to the Amazon rainforest, had the largest total area of deforestation, losing 355,000 square miles of forest.