Skillful disclosure helps leaders to tackle responsible strategy

Policy Pulse - 17 December 2019 - Daniela Costea

Urgent changes are needed to meet the goals of the Paris Agreement, “decarbonizing” the economy by 2050.

However, considering the demographic trends, global urbanization and economic stability, setting a carbon-free policy in the very near future can be more an aspiration than a target for certain countries. While major emitters should reach net-zero greenhouse gas emissions by 2050, developing countries have historically contributed little to greenhouse gas emissions but most developing states require carbon-intensive investments to reduce poverty.

Industrialization, while it is important for the economic growth and development of a society, can also be harmful to the environment.  Climate change may affect the business in a number of ways, so in response we must adapt the business to climate change. This implies quantitative analysis of company’s portfolio, as well as qualitative scenario analysis, assessing the risks and opportunities associated with climate change.

How to integrate climate-related information within existing reporting practices

The reporting landscape is evolving. There is a continuous development of climate-related reporting, in addition to wider sustainability reporting.

Reporting for climate change is diversified, with many requirements, having different purposes and different audiences which bring complexity.

The Corporate Reporting Dialogue (CRD) - is a platform that brings together few organizations (e.g. GRI, IIRC, CDSB, CDP) focusing on alignment across the reporting frameworks and standards.

In June 2017, the Task Force on Climate-related Financial Disclosures (TCFD) presented its recommendations concerning climate-related information. This is a general reporting framework for all types of organizations.

The Task Force structured its recommendations around a matrix with four areas:

• Governance

• Strategy

• Key indicators (metrics and targets)

• Scenarios planning for the future (risk management)

Source: 2019 Status Report - Recommendations of the Task Force on Climate related Financial Disclosures.

These disclosures are important for decision-making purposes and certainly the materiality is a key element.

The disclosure of climate-related financial information is growing, already adopted by many companies- yet the process must be accelerated. Implementing the TCFD recommendations is a true journey, below are some key takeaways with significant potential to set global reporting precedents.

Key takeaways (+/-):

Source: Based on 2019 Status Report - Recommendations of the Task Force on Climate related Financial Disclosures.

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About the author: Daniela Costea has extensive experience in reporting, strategy and finance. Her passion is to help pioneer the integration of sustainability to improve decision making.

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure. 

#TCFD #climatechange #climatechangereporting #sustainability #CSR #Organizations #Innovation #Recommendationsforleaders #climatereporting #sustainabilityreporting #ESG #SDGs #Davos

Next wave of opportunities for climate action are in agriculture and forestry

Policy Pulse - 15 August 2019 - George Anjaparidze

Last week, the International Panel on Climate Change (IPCC) released a report on land. Highlighting that land is a critical resource. The report indicates that about 23% of all human-caused greenhouse gas (GHG) emissions are attributed to land, or those related to agriculture, forestry and other land uses. However, agriculture and forestry are even more important to climate policy than their relative share of global GHG emissions. The next wave of opportunities for scaling-up climate action are in agriculture and forestry.[i]

Achieving the current targets communicated through Nationally Determined Contributions (NDCs) implies reducing the 2030 GHG emissions trajectory by 4.8 Gt CO2e or about 8%.[ii] Countries can largely achieve this trajectory by focusing on win-win solutions, where GHG abatement measures create cost savings. Within the basket of such cost-effective measures, agriculture and forestry can contribute about 11% of all GHG abatement potential. However, if countries start raising the level of ambition, they will increasingly need to rely on agriculture and forestry. A more “ambitious NDC” scenario that targets reducing the 2030 GHG emissions trajectory by 9.6 Gt CO2e or about 16%, would result in 49% of all cost-effective abatement potential to be in agriculture and forestry (see chart above). In fact, nearly 70% of all additional cost-effective abatement measures, beyond those in the NDC scenario, would be in the agriculture and forestry sector.

Even the more “ambitious NDC” scenario, presented above, falls short of the effort needed to limit global warming to 1.5° to 2°C. The “1.5° to 2°C” scenario would imply reducing the 2030 GHG emissions trajectory by 27 Gt CO2e or about 44%. Under this scenario, agriculture and forestry would also be a major source of abatement potential, with over 33% of all cost-effective abatement measures.

Targeting agriculture and forestry for GHG emission reductions is also attractive because approaches used generally rely on proven technology and are relatively less capital intensive.[iii] This means that these measures are more conducive to be taken up in developing countries and can more rapidly be deployed at scale. In many cases, there are also significant co-benefits that could be generated beyond climate change mitigation.

The IPCC report on land concludes that, despite human activity, this sector managed to on net remove 6 Gt CO2e from the atmosphere between 2007 and 2016. Increasing international support for mitigation measures in agriculture and forestry, channeled through development banks and others, can serve as a catalyst to realizing potential opportunities. Companies involved in producing agricultural products and managing large areas of land would stand to benefit from this additional support. The world as a whole would also benefit. Agriculture and forestry offer an opportunity to scale-up action on climate change by leveraging a natural advantage.

[i]SeeMcKinsey analysisof global GHG abatement costs (version 2.1).

[ii]See earlier analysis from Veritas Global Paris Agreement: the inconvenient gap between ambition and reality

[iii]SeeMcKinsey analysisof global GHG abatement costs (version 2.0).

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economicsand infrastructure. 

#climateaction #climatechange #forestry #agriculture #economics

Carbon offsets – bigger bang for the buck

Policy Pulse - 1 August 2019 - George Anjaparidze

Only 7 weeks remain until the UN Climate Action Summit. The Summit aims to address the urgent need to boost ambition and accelerate action to implement the Paris Agreement on climate change (See our post Paris Agreement: the inconvenient gap between ambition and reality). In addition to scaling-up finance and action, the Summit needs to improve the political acceptance of using international collaboration for achieving emission reductions.

The World Bank estimates that international collaboration (the use of offsetting, emission trading and other market-based measures) will lower 2030 mitigation costs by 32%. By 2050, international collaboration will lower mitigation costs by 54% (See chart). Widely used global standards, such as the Gold Standard, offer certification mechanisms that ensure projects that reduce carbon emissions offer the highest levels of environmental integrity and also contribute to sustainable development.

The 2019 World Bank report on State and Trends of Carbon Pricing, highlights the continued uptick in carbon pricing initiatives. In 2020, about 20% of global greenhouse gas will have a price signal for emitting. The price signal will range from below $1 and up to $127 per tonne of CO2 equivalent (tCO2e). These measures have delivered favorable mitigation outcomes and the progress achieved should be welcomed. However, through the use of international carbon trading, there is scope to achieve more emission reductions within the existing resource envelope. Charging companies and consumers $127 in Sweden or $96 in Switzerland per tCO2e is much more costly compared to supporting mitigation actions in developing countries.

Much higher global environmental benefits could be delivered within the current resource envelope if abatement potential in developing countries is more actively incentivized and supported. For example, through crediting of carbon emission reductions, international emission trading and using revenues raised through carbon taxes to support further actions in developing countries. The biggest opportunity is in developing Asia. McKinsey estimates that about half of all global cost-effective abatement by 2030 is in this region, put differently, 70% of all cost-effective abatement opportunities in developing countries are in developing Asia. This is also broadly consistent with the experience under the Clean Development Mechanism of the Kyoto Protocol, where about 85% of the emission reductions were generated from projects located in Asia.

GHGs are global pollutants. Their concentration in the atmosphere contributes to climate change. Where they are emitted has no bearing on where the impacts of global warming are felt. This means that from a climate change perspective it does not matter in which jurisdiction GHG emissions are reduced. This is very different from most other forms of pollution where impacts are more localized.

One key metric for defining success will be if the UN Climate Action Summit achieves greater political acceptance of using mechanisms such as carbon crediting, offsetting and other forms of international collaboration.

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economicsand infrastructure. 

#climatechange #ParisAgreement #climatesummit #carbon #carbontrading #economics