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.
Enjoying the newsletter and think your colleagues would too? They can sign up here! And please note this newsletter will skip next week, as most of our staff is out for Thanksgiving and post-COP.
The final word from COP27
A last minute loss and damage deal salvaged an overall disappointing COP27, as an agreement was reached to establish a long overdue finance fund. Who pays and who receives money will be decided later, but the fund aims to be up and running by COP28. While a historic step towards climate justice after a 30 year campaign by developing nations, countries failed to agree on a complete fossil fuel phase down. Developing countries also were not shown the money they’re owed, despite years of asking, as rich countries still haven’t delivered the $100 billion annually they promised by 2020.
In one of the biggest wins at COP, calls to reform the global financial architecture gained momentum, with growing pressure on multilateral development banks and international financial institutions to reform – with an emphasis on changing the system to allow developing countries easier access to cheaper credit to facilitate their energy transitions. Rich countries, including France, now support Barbados PM Mia Mottley’s Bridgetown Agenda. She will set forth a concrete proposal by February to present at the World Bank and IMF spring meetings. Debt-for-nature swaps also gained traction, with potentialdeals on the table, as countries furthered discussions on who will foot the bill against biodiversity loss.
Finally, there was limited progress on Article 6, which sets rules for carbon markets. Final text left much to be desired, lacking transparency, allowing dodgy accounting practices, backtracking on human and indigenous rights, and leaving loopholes for high-emitting industries and countries to greenwash and delay immediate emissions reductions.
ESG election losses
The red trickle didn’t sweep Republicans into control of the Senate, but calls for new regulations have kept SEC Chairman Gary Gensler in congressional crosshairs while several candidates rode anti-ESG rhetoric into state-level financial offices. The battle over sustainable investing will continue to play out in upcoming legislative sessions as a new dark money anti-ESG group is ramping up its attacks on ‘woke’ investing and with dozens of states considering astroturf anti-ESG legislation being floated by ALEC. With ESG investing soaring, red-state backlash can have real consequences.
But state-level Republican anti-ESG attacks are starting to see more blowback from the financial sector. The Kentucky Bankers Association filed suit against the state Attorney General’s ‘investigation’ into six big banks for participating in the UN Net-Zero Banking Alliance. Hypocritically, Net-Zero Banking Alliance member Wells Fargo continues to meet and mingle with the anti-ESG State Financial Officers’ Foundation (SFOF), rejecting lawmakers’ request to cut ties with the fossil fuel-funded dark money group.
A reckoning for private equity
As the stock market slides, individual investors aren’t the only ones seeing red. State pension funds, long enchanted by the supposedly higher returns promised by private equity, have also taken a beating on their private equity bets – estimated at over $1 trillion. Thanks to the web of secrecy around private equity, they may not even know the true extent of the losses, which are thought to exceed the broader stock market downturn. Taxpayers could be on the hook for any shortfall in retiree benefits as a result.
Poor, murky performance is just the latest drawback for state pension fund managers to consider when allocating public money to private equity. The industry is currently under scrutiny for having outsized investments in fossil fuels, predatory housing positions and union-busting stances – a hard thing to square when your job is to provide benefits to former union members.
Reach out if you are interested in connecting with the industry’s critics.
Offsides, offsets
There are many, manyreasons Qatar hosting the 2022 World Cup is a disgrace – including their phony promise the event would be carbon-neutral. To counter the massive emissions generated from the tournament – shaping up to be the most carbon-intensive ever – organizers FIFA and Qatar are relying on greenwashing, dodgy math, and offsets. In the process, instead of buying carbon credits from established international markets, the host country has created its own shady market by setting up the sham Global Carbon Council, which certifies credits tied to renewable energy projects that would normally fail to meet the bare minimum standards accepted globally.
Reports and releases
The Financial Stability Board and Network for Greening the Financial System released a joint initial findings and lessons report focused on climate scenario analyses.
On our radar
Ideological attacks on ESG investing defy the free market and cost taxpayers according to California Governor Gavin Newsom. Meanwhile, the Department of Labor is set to release a new rule on ESG investing in retirement plans that could be out as early as this week.
Key upcoming dates
November 30: Ceres hosts a webinar explaining its latest report on how corporate lobbying squares with climate commitments. At 1pm ET. Register here.
December 1: Standing up for Consumers: A Conversation with Director Chopra, a virtual sit down with the Director of the Consumer Financial Protection Bureau to discuss the CFPBs impact and explore the year ahead. Register here.
