When climate fight gets real
Today is Saturday, June 6, the 158th day of 2020. There are 208 days left in the year.
1816: A snowstorm struck the northeastern U.S., heralding what would become known as the "Year Without a Summer."
1918: U.S. Marines suffered heavy casualties as they launched their eventually successful counteroffensive against German troops in the World War I Battle of Belleau Wood in France.
1933: The first drive-in movie theater was opened by Richard Hollingshead in Camden County, New Jersey. (The movie shown was "Wives Beware," starring Adolphe Menjou.)
1939: The first Little League game was played as Lundy Lumber defeated Lycoming Dairy 23-8 in Williamsport, Pennsylvania.
1944: During World War II, Allied forces stormed the beaches of Normandy,
France, on "D-Day" as they began the liberation of German-occupied Western
June 06, 1920
When the paper shortage causes the newspaper to suspend publication, what are we going to do about lighting the fire; for something to line the shelves in the jam cupboard; for another excuse at breakfast when one is too grouchy to converse with the wife; in the summer for a fly-swatter;
Europe.
1966: Black activist James Meredith was shot and wounded as he walked along a Mississippi highway to encourage black voter registration.
1982: Israeli forces invaded Lebanon to drive Palestine Liberation Organization fighters out of the country. (The Israelis withdrew in June 1985.)
1989: Burial services were held for Iran's spiritual leader, Ayatollah Ruhollah Khomeini.
2005: The Supreme Court ruled, 6-3, that people who smoked marijuana because their doctors recommended it to ease pain could be prosecuted for violating federal drug laws.
Ten years ago: The Vatican released a working paper which said the international community was ignoring the plight of Christians in the Middle East, and that the Israeli-Palestinian conflict, the war in Iraq and political instability in Lebanon had forced thousands to flee the region. about a substitute wrapper for little Johnny's school lunch; for a screen to conceal oneself behind, when a lady enters a crowded tramcar and rather pointedly stands in front of the seat one is occupying; about something to put under father's feet when he will insist on taking those afternoon naps on the best bedspread; for something to read?—" Life."
American Pharoah led all the way to win the Belmont Stakes by 51⁄2 lengths, becoming the first horse in 37 years to sweep the Kentucky Derby, Preakness and Belmont Stakes. Serena Williams won her third French Open title and 20th major singles trophy by beating Lucie Safarova of the Czech Republic 6-3, 6-7 (2), 6-2.
One year ago: After two days of intense criticism, Democratic presidential candidate Joe Biden reversed course and declared that he no longer supported a long-standing congressional ban on the use of federal health money to pay for abortions. World leaders including President Donald Trump and French President Emmanuel Macron gathered at the site of the D-Day landings in France to honor those who took part in the operation 75 years earlier that would help bring an Allied victory in World War II. R&B singer R. Kelly pleaded not guilty in Chicago to 11 additional sex-related charges.
Although the weather conditions on Saturday evening were anything but pleasant, Everybody's Theatre, Hastings, was packed to see Mary Pickford in "The Hoodlum" . The outstanding featureof the production was the fact that it, revealed hitherto unplumbed depths of vesatility on the part of the little star.
Mandatory disclosure of climate-related risks is becoming a thing.
At least it is for listed companies, or other enterprises of that scale, which might in the future want to raise equity capital, or debt, or carry insurance.
The Government put out a discussion document on this last October, the responses to which were strongly supportive. Policy decisions can be expected, hopefully, later this year, Climate Change Minister James Shaw told the more than 1000 people in the virtual audience of a webinar on the issue held last Thursday.
Its star attraction was Mark Carney, former governor of the Bank of England and before that the Bank of Canada, and now UN special envoy for climate action and finance. In a celebrated speech to Lloyd’s of London four years ago, Carney laid out the case for the disclosure of climate risks.
They include not only the physical risk from climate change itself, but also “transition” risks arising from emissions pricing and other policies governments may undertake to get us to a zero-carbon world and from disruptive technologies arising as the corresponding opportunities are seized.
Until companies routinely report those risks in a consistent, comprehensive and “decision-useful” way, they will not be managed and mitigated.
Carney argues that only if they have the relevant information will financial markets be able to play their role in smoothing the transition to a low-carbon future, and avoid the financial stability risks of an abrupt repricing to reflect stranded assets (like two-thirds of known reserves of fossil fuels).
Comprehensive disclosure would also improve policymakers’ ability to understand corporate readiness when drawing up carbon budgets.
The World Bank in 2018 valued future profits from oil, gas and coal at US$39 trillion, but a report released yesterday by CarbonTracker concluded that if global demand falls by 2 per cent a year in line with the Paris Agreement, and discount rates rise in line with increased risk, those future profits would collapse by nearly two-thirds to US$14 trillion.
And the International Monetary
Fund’s latest global financial stability report warns that the physical risks from climate change do not appear to be reflected in equity market valuations, and calls for mandatory disclosures on material climate change risk.
The Covid crisis teaches us that we can’t wish away systemic risks, including climate change, Carney told the webinar.
Reserve Bank governor Adrian Orr quoted The Economist: “Following the pandemic is like watching the climate crisis with your finger on the fast forward button.”
Climate change and its associated risks provided a direct challenge to financial stability, he said. “The risks are material but extremely difficult to identify, price, allocate and manage with accuracy. In the jargon, market failure is rife.”
A Reserve Bank survey last year of insurers and banks found scant evidence climate risk concerns were influencing their daily business decisions. Only 60 per cent of banks and a third of insurers disclosed climate-related information.
The others should hurry up and do so, said Orr (their regulator). The bank supports mandatory disclosure.
The framework for disclosure would be the principles-based standards and approaches developed by the Taskforce on Climate-related Financial Disclosures (TCFD) set up at the behest of the G20 in late 2015, widely regarded as best practice.
The TCFD framework is in some ways still a work in progress. Shaw said the External Reporting Board (XRB), which had a long history of developing reporting standards across a wide variety of matters, was keen to take a lead in developing climate-related reporting standards in New Zealand. The intention was that climate risk reporting would be part of normal financial reporting.
Carney said four-fifths of the top 1100 companies across the G20 provided material TCFD disclosures. “But it is not yet quite comprehensive, which is why we think it is now time for mandatory disclosure.”
Matt Whineray of the NZ Superannuation Fund asked him what companies said got in the way of using the TCFD framework properly.
Carney said it was the forwardlooking, scenario analysis aspect, when companies were used to static reporting of their liabilities and assets today.
It is akin to the stress testing approach banking regulators employ.
“There’s the one we all wish for, which would be a relatively smooth transition from where we are to net zero
[emissions]. So gradual adjustment to climate policy which brings investment responses and stable macro-economic outcomes.
“Then there’s the Minsky scenario, which is where we leave it too late and have to make a sharp adjustment. That’s when you really see trillions of dollars of stranded assets, in that second scenario.
“The third scenario is the business-asusual, do-nothing approach, when the physical risks of climate change really ramp up, with the many problems associated with that.” Shaw said 84 per cent of respondents to the Government’s discussion document agreed the TCFD framework was appropriate for New Zealand — “an astonishingly high number” — and 77 per cent supported requiring large investors and listed companies to disclose on the basis of TCFD.
The document proposed that the disclosure regime would apply, on a comply or explain why not basis, to all entities with public equity or debt, to banks, to general insurers including reinsurers, and to institutional investors and investment managers.
Some argued that private companies and government agencies should be included, given that the stock exchange intercepts relatively little of the economic life of the country.
The NZX argued that if private companies were not included, it could discourage listing and weaken New Zealand’s capital markets. It said there were about 1200 larger private companies with revenues exceeding $30 million, compared with just 70 listed companies of the same size. Five of the top eight emitters of greenhouse gases in New Zealand were not listed, it said.
Shaw has some sympathy for that view. “It makes sense from an investment perspective and a governance perspective for it to go broader. That will be one of the considerations when we get around to policy decisions later in the year.”
Carney said the United Kingdom’s Financial Conduct Authority was also consulting on comply-or-explain disclosure and the European Union was taking TCFD as the basis for a mandatory climate disclosure requirement working its way through the European legislative process.
“The Canadian Government is making TCFD mandatory for companies getting assistance on Covid recovery. There is going to be a lot more of that,” he said. Shaw said the Cabinet had not considered any similar provisions here, but he would be supportive of it.