sustainable investment
Sustainability watch: coastal resilience, nuclear fusion, and lithium mines
Our selection of sustainability news from June covers new research that suggests humanity has breached seven out of eight planetary boundaries, Singapore’s new carbon exchange, and an update on the first global treaty to curb plastic pollution.
The Earth Commission initiative published its findings into the safe operating limits of humanity and found that seven boundaries have now been crossed into risk zones. Meanwhile, UN member states have taken a step towards agreeing a new global treaty to combat plastic pollution.
Company names are provided for information purposes only – these businesses are not necessarily held in our portfolio or represent investment recommendations.1
Human activities have pushed seven out of eight planetary boundaries beyond their “safe and just limit” into risk zones that indicate a huge threat to our planet’s and human health, a group of the world’s most renowned scientists has found. In their study, published in the scientific journal Nature, experts looked into so-called planetary boundaries, key processes essential for sustaining life on Earth. Each one has a limit as to how much pressure it can take from humanity before it is pushed over a tipping point in which changes can no longer be reversed. The earth systems boundaries outlined in the paper, which include climate, natural ecosystem area, ecosystem functional integrity, surface water, groundwater, nitrogen, and phosphorus, are highly interconnected, meaning that breaching the safe limit for one could have a knock-on effect on the others.
The research, which was carried out by the independent international scientific assessment initiative Earth Commission, found that the “safe and just” limit for global temperature rise, 1C, had already been surpassed. Scientists behind the study argued that a rise of 1.5C, the threshold agreed upon by world leaders under the Paris Agreement, could negatively impact 200 million people and expose more than half a billion people to long-term sea level rise. Aside from that, scientists found that the level of intact ecosystems needed for the planet to thrive – anywhere between 50-60% – had also already been breached. Similarly, the use of nitrogen oxide emissions, a leading cause of water pollution, needed to be halved in order to stop the growth of harmful plant and algal blooms on surface water.
The US Commerce Department has announced it will put USD 2.6 bn toward coastal climate resilience in funds from the Inflation Reduction Act (IRA). The funds, announced on a call with the press, will include about USD 400 mn for tribal communities in support of habitat restoration, fish hatcheries and Pacific salmon, and those in the direct path of climate change. Another USD 349 mn will go specifically to climate resilience in fisheries, while another USD 60 mn will go toward climate-resilience job placement and training. The round of funding will also include USD 200 mn in improvements to the National Oceanic and Atmospheric Administration’s (NOAA) data-collection process.
The extent of area burned in California’s summer wildfires increased about fivefold from 1971 to 2021, and climate change was a major reason why, according to a new analysis. Scientists estimate the area burned in an average summer may jump as much as 50% by 2050. Wildfires worsened by greenhouse gases emitted by human activities tore through Australia in 2019 and 2020 and Siberia in 2020. The peer-reviewed research, published in the Proceedings of the National Academy of Sciences, finds that wildfires in California’s northern and central forests scorch the most area when temperatures are high and less area when it’s cooler.
|
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. |
|---|
Singapore’s new carbon exchange traded 12,000 tonnes of emissions on its first trading day as the city-state bets on the growth of an industry that has been slammed for corporate greenwashing. Chevron, Vitol, Standard Chartered and China’s CICC on June 7 traded credits on Climate Impact X, which is hoping to challenge other global exchanges run by US-based CME Group and Xpansiv in establishing a benchmark price for voluntary carbon trading. Singapore is trying to leverage its status as a business hub in Asia to be the main carbon trading platform in the region. By winning enough liquidity from international carbon traders, it hopes to become a global price setter for carbon credits and lay the groundwork for an eventual futures market. CIX, a joint venture among Singapore Exchange, state investor Temasek and banks DBS and Standard Chartered, said the initial price established for its physical carbon credits was USD 5.36 per tonne, about four times that for a similar nature-based contract at CBL, the world’s leading carbon exchange.
|
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. |
|---|
Eight US companies developing nuclear fusion energy will receive USD 46 mn in taxpayer funding to pursue pilot plants attempting to generate power from the process that fuels the sun and stars, according to the Department of Energy. Generating more energy from a fusion reaction than goes into the fusion plant to heat fuel to temperatures of more than 100 million Celsius has eluded scientists for decades. But more than 30 companies around the world are trying to generate power from fusion, which could one day help the world slash emissions linked to climate change, without producing long-lasting radioactive waste. Fusion occurs when the nuclei of two light atoms such as hydrogen, heated to extreme temperatures, fuse into one heavier nucleus releasing vast amounts of energy. The Energy Department's Milestone-Based Fusion Development Program hopes to help develop pilot-scale demonstration of fusion within a decade.
Germany and Denmark have signed an agreement to connect at least 3 GW of wind energy generation capacity on the Danish island of Bornholm to the mainland by the beginning of the 2030s, according to the German economy ministry. Under the agreement, 2 GW will be transmitted to Germany and 1.2 GW go to mainland Denmark, the statement said. The transmission system operators (TSOs) 50Hertz and Energinet - of Germany and Denmark respectively - have agreed to each bear half of the infrastructure costs of the project. Last month, leaders from seven European Union countries, including France, Germany and the Netherlands, alongside non-EU countries Norway and Britain, pledged to speed up their expansion of wind farms, develop "energy islands" - or connected renewable generation sites at sea - and work on carbon capture and renewable hydrogen projects in the region.
A large group of Total Energies shareholders has urged the French oil and gas company to speed up efforts to switch to cleaner energy at an annual meeting marked by protests and clashes between police and climate activists. More than 30% of investors supported a resolution filed by Dutch activist shareholder Follow This calling for Total to cut its emissions at a faster pace by 2030. The rebuke — significant by the common standards of annual shareholder meetings — echoes other calls pressing for faster transition plans at rivals including Shell. A similar activist motion at Total in 2020 garnered support from 17 % of investors. Shareholder meetings of Big Oil companies have become the stage for increasingly forceful climate protests both outside and inside the premises.
The US Energy Department unveiled a roadmap it says will, using hydrogen energy, enable the US to reduce its emissions by 10% in 2050, compared to 2005 levels. The strategy document calls for specifically targeting hydrogen use in key industries, including chemicals, steel, refining and heavy transportation, where the energy source can have the greatest emissions reduction impact. It also outlines a need to make hydrogen energy cheaper and to focus on regional hubs. This type of energy is formed through processes that separate hydrogen from water molecules. It can be done using a variety of fuels, including renewable energy and fossil fuels. The strategy from the Biden administration focuses specifically on hydrogen energy that’s formed using carbon-free sources, which the administration is calling clean hydrogen. However, there has been some debate as to whether — to be truly clean — hydrogen plants need to use new sources of energy or if they can take electrons currently on the grid.
Renewable energy group Orsted will invest 475 billion Danish crowns (USD 68 bn) to achieve a 2030 goal to install 50 GW of power capacity, it said in an investor update. The Danish company said the plans were fully self-funded and it expected to exceed goals set in 2021 for earnings before interest, tax, depreciation and amortisation (EBITDA) as well as for return on capital employed (ROCE). Orsted, the world's number one offshore wind farm developer by gigawatt capacity, operates 15.5 GW of renewable energy assets. Capacity of 4.9 GW is under construction and projects representing another 10.6 GW have been awarded, it said.
In the US wind and solar generated more electricity than coal through May, marking the first time renewables have outpaced the former king of American power over a five-month period. The milestone illustrates the ongoing transformation of the US power sector as the nation races to install cleaner forms of energy to reduce greenhouse gas emissions from fossil fuels. Power markets have witnessed a precipitous drop in coal-fired generation this year, driven by low natural gas prices, a mild winter and a wave of coal plant retirements. Wind and solar sources generated a combined 252 terawatt-hours through the first five months of 2023, compared with coal output of 249 TWh, EIA data shows. Hydro generated an additional 117 TWh through May.
|
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. |
|---|
Automotive giant Toyota unveiled plans to significantly expand its US electric vehicle footprint, with an announcement that it will begin assembling the first US three-row, battery electric SUV at Toyota Kentucky and invest an additional USD 2.1 bn in its North Carolina battery plant. The company’s new battery plant allocation nearly doubles Toyota’s initial USD 2.3 bn investment in the North Carolina facility announced last year as part of a USD 5 bn initiative to increase its EV battery production capacity in the US and Japan. According to Toyota, the facility will be its hub for developing and producing lithium-ion batteries for its expanding portfolio of electrified vehicles. Production at the plant is anticipated to begin in 2025.
Europe’s electric car industry received a significant fillip in its efforts to secure raw material supplies after Portuguese authorities gave a green-light to what will be one of the continent’s first large-scale lithium mines. London-listed Savannah Resources said that the Portuguese regulator has issued a positive declaration of environmental impact for its Barroso lithium mine, which has a target of producing enough lithium for 500,000 electric cars a year. Demand for lithium in Europe is predicted to surge fourfold to account for a quarter of global demand by 2030, but the region at present produces less than 1% of the world’s supply, according to Benchmark Mineral Intelligence. Obtaining permits has been a key issue holding Europe back from developing a battery raw material supply chain. The Savannah project was viewed as a test of whether the region might be about to overcome its recent history of opposition to mining.
US ride-hailing giant Uber said that customers will soon be able to track emissions avoided when choosing greener rides and have the option of shared rides in more cities to further reduce CO2 emissions. The company said customers will be able to track the amount of CO2 avoided via its Uber Green service that uses low- or zero-emission vehicles and its Comfort Electric service using electric vehicles (EVs). Uber has previously promised that all the cars used to provide rides for customers will be fully electric by 2040 and says it now has 60,000 EVs active on its platform. Uber said it will expand its 'eco-friendly routes' that use mapping algorithms to boost fuel efficiency without increasing trip times or fares around the globe this year.
Maersk has successfully secured green methanol for the maiden voyage of the world’s first methanol-enabled container vessel. Achieving this green fuel milestone is a significant step for the company and the industry’s efforts to reduce greenhouse gas emissions. Maersk has signed a deal with Dutch producer OCI Global on the delivery of green bio-methanol for the maiden journey. The 21,500 km trip from Ulsan, South Korea to Copenhagen, Denmark — more than halfway around the globe – will provide real operational experience for Maersk seafarers handling the new engines and using methanol as fuel, as the company prepares to receive a fleet of new, large ocean-going methanol-enabled ships from 2024.
General Motors will adapt its electric vehicles to Tesla’s Superchargers, following Ford Motor’s lead and all but ensuring it will become an industry standard in the US. The move by GM effectively ends any indecision among automakers and their charging network partners over which standard to use. With the three largest US-based companies joining forces, it will put pressure on other companies to ditch the industry’s previous standard, called CCS, and build out their networks using Tesla’s system.
|
Thematic link: To find out more about the challenges and opportunities presented by the transport revolution, click here. |
|---|
Researchers have released the first tally of deep ocean animals that inhabit the seabed targeted for strip mining, finding more than 5,000 species — nearly all of them unknown to science. The peer-reviewed paper published in the journal Current Biology highlights the lack of scientific knowledge about the biodiversity of the deep ocean, and arrives as the United Nations-affiliated International Seabed Authority (ISA) prepares to allow mining to commence as soon as next year. The UN Convention on the Law of the Sea established the ISA in 1994 with a mandate to manage the exploration and exploitation of the seabed in international waters while at the same time ensuring the effective protection of the marine environment. The scientists estimated there may be more than 8,000 species living in the Clarion-Clipperton Zone (CCZ), a region of the Pacific Ocean that stretches from Hawaii to Mexico. Of the 5,580 species so far detected, only 438 have been identified, according to the study.
|
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. |
|---|
Paris Mayor Anne Hidalgo said on Friday the city planned to ban single-use plastic when it holds the 2024 Olympic Games as part of efforts to tackle a global plastic pollution crisis. Visitors to temporary Olympics competition sites in the French capital will be admitted only without plastic bottles. Re-usable cups will also be used for refreshments during the Olympics marathon.
Around 170 countries agreed to develop a first draft by November of what could become the first global treaty to curb plastic pollution by the end of next year. Country delegations, NGOs and industry representatives gathered in Paris for the second round of UN talks toward a legally binding pact to halt the explosion of plastic waste, which is projected to almost triple by 2060, with around half ending up in landfill and less than a fifth recycled, according to a 2022 Organisation for Economic Co-operation and Development report. The "zero draft" text would reflect options from the wide-ranging positions of different countries by the start of the next round of talks to be held in Nairobi, Kenya, in November.
|
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.
