sustainable investment
Sustainability watch: carbon removal, aviation emissions, and battery recycling
Our selection of sustainability news from May includes ambitious new environmental legislation in Europe, as well as examples of companies engaging with renewable energy investment and targets for zero packaging waste.
The European Parliament approved a new law aimed at bringing down methane emissions in the energy sector in May. Meanwhile, Europe reportedly saw a decline in greenhouse gas emissions in the last three months of 2022, in an encouraging sign of the bloc’s progress on meeting climate goals.
Company names are provided for information purposes only – these businesses are not necessarily held in our portfolio or among investment recommendations.1
The EIB Group (European Investment Bank and European Investment Fund) and Santander have signed a new synthetic securitisation transaction to support the financing of energy efficiency investments in Portugal, including the construction of new nearly-zero-emissions buildings and the renovation of existing residential properties in line with sustainable standards. The transaction will facilitate new green and sustainable mortgages to individuals and companies, to invest in building renovations or new construction with high energy-efficiency standards, in compliance with the eligibility conditions defined by the EIB.
Brazil's government has created an interministerial committee to develop a framework for issuing "sustainable sovereign bonds" aiming to launch a bond later this year. These new bonds will be "instruments of public debt backed by federal government budget allocations for sustainable development," including actions and projects related to environmental and social themes, according to the Finance Ministry. While there is no specific date for the framework's release, the ministry expects the process to be completed in time for sustainable bonds to be issued later this year, it said in a statement.
The European Union’s greenhouse gas emissions tumbled at the end of last year even as the region’s economy grew, a positive signal for bloc’s efforts to meet its own climate goals. Emissions in the EU fell by 4% in the fourth quarter compared with a year earlier. Gross domestic product climbed 1.5% over the same timeframe. It’s a positive indicator as the EU works toward its target of cutting emissions by 55% by the end of the decade, and further adds to evidence that the energy crisis caused by Russia’s invasion of Ukraine hasn’t led to a short-term increase. Emissions were 6% down compared with pre-pandemic levels.
Microsoft and Danish energy provider Ørsted announced an agreement for the purchase of 2.76 million tonnes of carbon removal, marking one of the largest-ever carbon removal offtake deals by volume to date. Under the new agreement, Ørsted will capture and store biogenic carbon – emissions resulting from the combustion of biomass – generated at its Asnæs Power Station in Denmark over a period of 11 years.
The EU burned less coal this winter during the energy crisis than in previous years, according to an analysis, quashing fears that consumption of the most polluting fossil fuel would soar as countries scrambled to find substitutes for lost supplies of Russian gas. The study from energy think-tank Ember shows that between October 2022 and March 2023 coal generation fell 27 terawatt hours, or almost 11% year on year, while gas generation fell 38 terawatt hours, as consumers cut electricity consumption in response to soaring prices. Renewable energy supplies also rose, with combined wind, solar and hydroelectric output outstripping fossil fuel generation for the first time, providing 40 % of all electricity supplies.
An ambitious new law to reduce methane emissions in the energy sector was approved by the European Parliament on Tuesday May 9, despite a last-minute attempt by the far-right and conservative lawmakers to water down the regulation. EU lawmakers meeting in Strasbourg voted with 499 in favour, 73 against and 55 abstentions on a draft Methane Regulation, confirming a stance adopted in late April by the Parliament’s environment and industry committees.
|
Thematic link: The transition to a low-carbon and climate-resilient economy will require innovation, commitment and significant investment. Click here to find out more. |
|---|
Schroders announces the launch of Carbon Offset share classes. This innovation will provide clients with the choice to offset carbon emissions associated with their underlying fund holdings. Schroders will aim to ensure that the offsets purchased will equate to the Scope 1 and 2 emissions of the portfolio companies attributable to the share class. For example, if the share class holds 1% of a company, Schroders will calculate 1/100th of that company’s Scope 1 and 2 carbon emissions. Adding together all of the equivalent exposures to carbon emissions, yields an estimate of the total carbon emissions attributable to the share class.
|
Thematic link: Carbon pricing is a key enabler of the transition to a CLIC® economy. We believe an active carbon strategy can help investors capture attractive return opportunities while hedging transition risks in their portfolios. Click here for more information. |
|---|
Verizon Communications settled its fifth green bond offering of USD 1 bn, with the net proceeds expected to be allocated entirely toward renewable energy investments to accelerate the transition to greener electrical grids across the US. Verizon has now issued five green bonds for a total of USD 5 bn since 2019.
Speeding deployment of electric transmission lines needed to bring power from far-flung renewables and hastening energy-project approvals on federal lands are among the White House’s permitting reform priorities. A previous permitting overhaul effort led by Senator Joe Manchin that would have fast-tracked approval of Equitrans Midstream Corp.’s Mountain Valley Pipeline failed in the last Congress amid Republican anger over the West Virginia Democrat’s pivotal vote in favour of President Joe Biden’s landmark climate law.
|
Thematic link: Click here to find out more about the sectors that are well-placed for the renewables transition, as well as the growing investment opportunities arising from climate adaptation. |
|---|
Boeing announced it is rolling out a data modelling tool aimed at helping airlines and policymakers determine the quickest, most efficient path to reducing aviation emissions to zero by 2050. The tool, known as Cascade, allows users to adjust different variables – such as the use of sustainable fuels or electric propulsion, the replacement of older-model aircraft, operational improvements and other advanced technologies – to better understand how those factors could result in decreases to carbon emissions over time.
Glencore has plans to build Europe’s largest battery recycling plant as it seeks to grow its natural resources business on the back of the switch to electric cars. The Switzerland-based company, one of the world’s largest diversified natural resources groups with commodity trading and mining arms, is launching a joint study with Canada’s Li-Cycle into building the facility in Italy by 2027. The London-listed company, which has a 10% stake in Li-Cycle, aims to repurpose its zinc and lead smelter in Sardinia to produce lithium, nickel and cobalt, key metals used to make batteries for electric cars. Converting the 94-year-old site would extend Glencore’s control over the supply of critical raw materials needed by carmakers. It would also give the company a leading role in battery recycling, while bolstering its portfolio of copper, nickel and cobalt mines. It has already established itself as one of the world’s largest metal recyclers.
Industrial products, solutions and technologies company Honeywell announced the launch of UOP eFining technology, a new processing solution aimed at enabling the production of sustainable aviation fuel (SAF) from captured CO2 at scale. The company also announced HIF Global as its first customer for the new technology, with the solution to be deployed at what is expected to be the world’s largest eFuels SAF facility. Sustainable aviation fuel is seen as one of the key tools to help decarbonise the aviation industry, which currently accounts for 2-3% of global greenhouse gas (GHG) emissions. SAF is generally produced from sustainable resources, like waste oils and agricultural residues, providing substantial emissions reductions relative to current fossil-based jet fuels.
|
Thematic link: To find out more about the challenges and opportunities presented by the transport revolution, click here. |
|---|
Members of European Parliament (MEPs) backed draft legislation to improve product labelling and durability and to put a stop to misleading claims. With 544 votes to 18 and 17 abstentions, plenary approved the proposal for a new directive on empowering consumers for the green transition. Its main aim is to help consumers make environmentally friendly choices and encourage companies to offer them more durable and sustainable products. Parliament’s approved negotiating mandate foresees banning the use of general environmental claims like “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” if these do not come with detailed evidence. It also aims to ban environmental claims that are based solely on carbon offsetting schemes. Other misleading practices such as making claims about the whole product if the claim is true only for one part of it or saying that a product will last a certain amount of time or can be used at a certain level of intensity if that is not true, will also be forbidden. To simplify product information, MEPs envision allowing only sustainability labels based on official certification schemes or established by public authorities to be used.
Southeast Asia-focused delivery, mobility and financial services app provider Grab announced a new sustainability commitment, with the company aiming to achieve zero packaging waste in nature by 2040. Founded in 2021, Grab serves over 500 cities in eight countries through its app enabling people to order food and groceries, send packages, hail a ride, pay for online purchases, and access lending and insurance services. The new goal was announced with the release of Grab’s 2022 ESG report. According to the report, an estimated 166,000 tonnes of packaging waste was facilitated in 2021 through the company’s food delivery platform, with plastics representing 42%, or roughly 70,000 tonnes. The report also detailed the results of a study conducted by Grab, highlighting key challenges in managing food packaging waste in its supply chain, which include a lack of commercially viable alternatives to plastic, insufficient waste management infrastructure, the use of mixed materials in packaging creating difficulties for recycling or composting, and overpackaging and overconsumption.
|
Thematic link: We believe that companies supporting the circular economy and leveraging the regenerative power of nature will be the future winners. To find out more about the circular economy as an investment opportunity, click here. |
|---|
A coalition of investors that oversee USD 10 trillion in assets has called on companies including Amazon, PepsiCo and McDonald’s to drastically reduce their reliance on plastics, saying a failure to do so exposes them to financial risks. The 183-strong group has written to 30 of the world’s biggest grocery, retail and consumer goods companies to warn that continued production of plastics poses risks to public health, biodiversity, climate change and human rights. The coalition, which includes Amundi, Legal and General Investment Management, Aviva Investors, Axa Investment Management and Rockefeller Asset Management, is the largest ever formed to put pressure on companies over plastics. It has urged the businesses, which also include Tesco, Carrefour and Danone, to phase out single-use plastics, significantly reduce material consumption and implement re-use systems for packaging.
|
Thematic link: Transitioning to a circular model for plastic represents a USD 1.2 trillion global economic opportunity. Click here for more information. |
|---|
Source
Important information
For professional investor use only
This document is issued by Lombard Odier Asset Management (Europe) Limited, authorised and regulated by the Financial Conduct Authority (the “FCA”), and entered on the FCA register with registration number 515393.
Lombard Odier Investment Managers (“LOIM”) is a trade name.
This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.
Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Source of the figures: Unless otherwise stated, figures are prepared by LOIM.
Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Asset Management (Europe) Limited prior consent. In the United Kingdom, this material is a marketing material and has been approved by Lombard Odier Asset Management (Europe) Limited which is authorized and regulated by the FCA.
© 2024 Lombard Odier IM. All rights reserved.
