Hi and welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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Ian rattles insurers, right-wing rhetoric may make it worse
Hurricane Ian is an unparalleled tragedy for the people of Florida – a state where less than half of homeowners in designated floodplains have flood insurance policies. Floridians who lack coverage face financial ruin and dwindling insurance options, as even more insurers leave the state entirely.
When rebuilding begins, businesses, homeowners, and property owners may soon be disincentivized from making sustainable and resilient investments. Florida CFO Jimmy Patronis recently joined DeSantis’s bizarre, anti-free market campaign by objecting to issuers offering insurance premium incentives to policyholders who adopt “sustainability initiatives” – which would only exacerbate insurance costs piling onto a growing climate-related insurance crisis. Reach out for experts on this topic.
Yellen, Kerry push banks on net zero
Janet Yellen and John Kerry went big on net zero last week, calling in most of the major asset managers, insurers, and banks to chat about their net-zero targets and, y’know, whether they have any realistic plans to meet them. Last week Citibank and Morgan Stanley faced awkward questions about the seriousness of their climate plans and their engagement with clients working to undermine the energy transition from activists during an event hosted by Ceres.
The Fed was also getting busy, announcing that Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo will participate in a pilot climate scenario analysis on specific portfolios and business strategies – likely to include their fossil investments. Advocates are concerned the exercise will be heavy on thought and light on action.
Offsets face onset of oversight
Corporate net-zero plans are likely to require an enormous amount of offsets. Shell’s plans alone would need land up to three times the size of the Netherlands for carbon offsets – eating up a big chunk of the world’s available land for this stuff. The Commodities Futures Trading Commission is taking a hard look at carbon offset regulation, and the commentperiod on its request for information closes Friday. Advocates, led by Americans for Financial Reform and Amazon Watch, are demanding new and better standards to ensure products actually reduce emissions and a crackdown on fraud.
Bridge to ruin
A new briefing from French nonprofit Reclaim Finance exposes issues with the current boom in LNG terminal projects in Europe. These new developments will be of little help in the current energy crisis, as they will take several years to commission and build. Additional LNG terminal projects threaten the EU’s climate objectives – the combustion of the gas will lead to 4.34 gigatons of CO2 emissions by 2029, emissions that will surely blow European and global efforts to limit global temperature rises to 1.5°C, not accounting for methane leakages along the way. The harms of fossil gas remain largely undervalued by financial institutions, and existing policies often only address coal and oil.
Reports and releases
Most major financial institutions now have a coal exclusion policy. Yet somehow billions of dollars continue to flow to coal projects, including 365 units under active construction as of July 2022. Where is the money coming from? A new report Opacity and Accountability: The Hidden Financial Pipelines Supporting New Coal by Urgewald, Profundo, Reclaim Finance, and Global Energy Monitor released October 11th will answer the question. Please reach out for an embargoed copy.
New analysis from BailoutWatch shows oil and gas companies that took advantage of billions in pandemic era stimulus and tax incentives driving record profits industry-wide, raising questions over continued government subsidy of fossil fuels.
Ceres’ new report, Derivatives and Bank Climate Risk, assesses climate-related financial risks in the derivatives market and offers action steps for banks. There’s a webinar unpacking the report on November 4th. Register here.
