Happy new year 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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Davos snow-go?
The annual meeting of the World Economic Forum begins next week in Davos, Switzerland. As financial titans and world leaders (private) jet off to the now largely snowless European town, climate change, energy, and ESG are on the agenda. These meetings have a reputation for greenwashing, let’s see if this year manages to surprise us. Here’s some of the big questions we think the attendees should be trying to answer at Davos and in 2023. Feel free to give us our own Swiss chalet.
What’s on our radar for 2023
After years of easy money, what do higher borrowing costs mean for clean energy? Can government incentives help them sidestep potential problems?
The implementation of the Inflation Reduction Act will inevitably be a big story this year. We’ll be watching who takes advantage of the sweeteners in there, in particular what happens with new green banks.
Speaking of politics, is the new Republican House really in favor of market-driven climate policy? Doesn’t look like it.
Will US-China relations thaw a little? If so, what does that mean for clean energy? As China continues to open up, we’re likely to see an easing of the supply chain crisis that’s hit clean energy and hurt deployment.
At the same time, the Inflation Reduction Act has raised tensions with the EU over their concerns that the incentives for US industry could hobble European companies. What’s the best way round this?
Fossil fuels just had one of their best years ever. Will “capital discipline” continue, or are we about to see a raft of new fossil spending that will blow the carbon budget and endanger communities around the world? Industry associations continue to lobby hard to keep drilling.
Will big money managers like BlackRock, State Street, and Vanguard pull back from climate and social commitments in the face of mounting pressure from US right wing politicians? Or will the anti-ESG attacks be seen for what they are – politically-driven stunts that’s putting people’s money at risk.
Expect a showdown at the IMF and World Bank in April. Barbados Prime Minister Mia Mottley now has major backing in her bid for substantial reform. How will global financial institutions respond?
“Biased” World Bank needs bucks
UN Secretary General António Guterres began the new year on a cheery note, calling global financial institutions “biased,” “morally corrupt”, and “conceived by a group of rich countries and naturally it basically benefits rich countries.” The World Bank is now looking at ways to both dramatically increase the capital it can offer as well as broaden its mandate, including a greater focus on climate change. Campaigners argue the bank needs to significantly increase the amount of money flowing from rich nations to developing countries, to both offset damages from climate change and wean economies off fossil fuels. Ways the bank can boost capital include enacting higher statutory lending limits, lower equity-to-loan requirements, and the use of money pledged but not paid in by member governments.
Striving to make things worse
Vivek Ramaswamy’s Strive Asset Management launched an ‘ESG Transparency Campaign’, providing retail investors with a list of ESG-related questions to ask their financial advisors, including “Do you use ESG factors in your external fund evaluation process, internal operations, or client portfolio optimization strategies?" To promote the campaign, Vivek popped onto Fox channels this weekend, arguing investors should push their wealth and 401(k) advisors to stop considering ESG altogether.
This campaign comes as Amazon and Microsoft face pressure to offer ESG retirement options. Also, the Department of Labor rule that would allow fiduciaries to consider ESG and climate factors in selecting corporate-sponsored retirement plans takes effect on Jan 30.
Jan 31:Federal Reserve Board invites public comment on proposed principles providing a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations with more than $100 million in assets
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– Tan Copsey, Katharine Poole, Steve Hargreaves & Shravya Jain-Conti
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