The Canadian Institute for Climate Choices today released its timely report “Sink or Swim: Transforming Canada’s economy for a global low-carbon future” (the Report). The Report is the first of its kind in Canada and is critical in prudent planning in a rapidly changing global economy that directly affects Canadians, Canadian companies, and Canadian exports. The Report moves from qualitative transition paradigms and platitudes to quantified realities for Canadian business, workers, and communities as the world rapidly progresses in its transition to a decarbonized global economy. The key findings and recommendations of the Report follow. Findings Net zero emissions. The Report indicates growing support for net zero emissions by 2050, currently including economies representing over 60% of the world’s GDP and over 50% of global emissions, and that an ambitious low-carbon transition will cost less than inaction. We expect that number to increase dramatically at or around the upcoming UNFCCC COP26 negotiations during the first two weeks of November. Canadian exports and jobs are at risk. Approximately 70% of Canadian exports and 60% of foreign direct investment come from transition-vulnerable sectors, with over 800,000 Canadian workers in these sectors. Alberta has the highest percentage of workers in transition-vulnerable sectors whereas Ontario has the highest absolute numbers in such sectors. Transition-vulnerable sectors include: mining and mineral products; downstream and midstream oil and gas; auto manufacturing and parts; chemical, plastic, and rubber materials; airlines; oil and gas exploration and productions; and high-carbon power. Private finance. Canadian companies listed on the TSX are more exposed to transition risks than other major international stock markets and are facing a -14% market capitalization impact by 2050. Transition opportunity. Industries best positioned to profit from the transition include those associated with biofuels, batteries and storage, fuel cells, and solar and wind equipment. The Report notes…
The Taskforce on Nature-related Financial Disclosures (TNFD) recently announced the 33 “Members of the Taskforce”, including senior executives from financial institutions, corporates, and market service providers. The Taskforce is working on developing a TFND risk management and disclosure framework, to be released in 2023, for organizations to report and act on nature-related risks. The TNFD is built on seven principles/themes: (1) market usability; (2) science-based; (3) nature-related risks; (4) purpose-driven; (5) integrated and adaptive; (6) climate-nature nexus; and (7) globally inclusive. The TNFD is assisted by more than 100 institutions, including the following Canadian institutions: BMO Financial Group, CPP Investments, the Intact Centre on Climate Adaptation, Mining Association of Canada, the Nature Conservancy of Canada, and WSP Global Inc. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.
The Global Risk Institute (GRI) yesterday published a paper titled “Climate-Related Legal Risks for Financial Institutions: Executive Brief” (the “Paper”), authored by Dr. Janis Sarra with the Canada Climate Law Initiative and Resilient LLP’s Lisa DeMarco. The Paper provides an overview of the many risks now faced by the financial sector including regulatory liability, securities law litigation, fiduciary duty risk, professional indemnity insurance risk, “greenwashing” litigation, commercial contract risk, litigation against governments, and civil lawsuits. The Paper also provides “best practice tips” for financial institutions, risk managers, and board risk committees to consider and implement as a means to limit their liability and reduce their climate-related risks. These recommendations include, among others: Undertaking a high-level assessment of litigation exposure across loan and policy books, investment portfolios, and operations; Embedding management of climate-related risks as part of core business risk management; Investigating and disclosing climate-related vulnerabilities in investment portfolios; and Creating an action plan to reduce Scope 1, 2, and 3 carbon emissions as evidence of a financial institution’s due diligence in addressing climate-related financial risk. The first page of the Paper appears below. The full text of the paper is available on the Global Risk Institute website here. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.
The Intergovernmental Panel on Climate Change (IPCC) yesterday released the IPCC Working Group 1 report, “Climate Change 2021: The Physical Science Basis” (the Report), part of the Sixth Assessment Report, providing an updated assessment of the physical understanding of the current state of the climate system and climate change. The Report predicts that global temperatures are likely to continue to increase beyond the 1.5-2°C target of the Paris Agreement without widespread and steep global reductions in greenhouse gas (GHG) emissions. This bulletin summarizes the Report’s key findings. The current state of the climate. The Report reiterates that the warming of the atmosphere, oceans, and land are human-caused, with rapid changes being observed in the atmosphere, ocean, cryosphere, and biosphere. In addition, the Report confirms that anthropogenic climate change is globally affecting weather and climate extremes, with increased heatwaves, heavy precipitation, droughts, and tropical cyclones more readily attributed to human influence. Possible climate futures. According to the Report, under all emissions scenarios, global surface temperatures will continue to increase until mid-century, with temperatures predicted to exceed 1.5-2°C this century without deep reductions of GHGs. As the climate warms, changes in climate systems will become larger, increasing the frequency and intensity of hot extremes, marine heatwaves, heavy precipitation, droughts, intensity of tropical cyclones, and reductions in Arctic sea ice, snow cover, and permafrost. The Report indicates that changes in the ocean, ice sheets, and global sea levels, resulting from past and future GHG emissions, will likely be irreversible for hundreds of years. Climate information for risk assessment and regional adaptation. The Report indicates that all regions are expected to increasingly experience concurrent and multiple changes in climatic impact-drivers amplified at 2°C compared to 1.5°C, with greater increases at even higher global temperatures. The Report also indicates that even “low-likelihood” outcomes such as…
The Network for Greening the Financial System (NGFS) last week released an update to their climate scenarios which assist financial institutions with analysing climate-related risks to the economy and financial system (the Study). The NGFS is a group of 91 central banks (including the Bank of Canada, US Federal Reserve, and European Central Bank), supervisors, and observers that seek to share best practices and contribute to the development of climate risk management in the financial sector, and to mobilize mainstream finance to support the transition toward a sustainable economy. This bulletin provides a high-level summary of the Study’s key findings: Transition risks: Emission prices. The Study indicates that a price of $160/tonne CO2e will be required by 2030 to incentivise the transition to net zero by 2050. Energy investment. Greater investments in renewable energy and storage will be necessary to meet net zero goals by 2050, with substantially reduced investments in fossil fuel extraction. The Study suggests that, by 2050, renewables and biomass will account for 68% of global energy needs, with fossil fuels (coal, oil, and gas) providing close to 25%, down from approximately 80% in 2020. CO2 removal. The Study assumed low to medium availability of carbon removal technology and storage such as increasing forest cover, soil sequestration, and growing crops for bioenergy with carbon capture and storage (BECCS). The Study suggests that CO2 removal would help to accelerate decarbonization goals and lower warming outcomes but on a limited scale. Agriculture, forestry and land use. Changes in land use will be important for the pathway to net zero by 2050, including increasing forest cover and bioenergy cropland and reducing cropland for food production and pasture land. The Study notes that CO2 emissions are anticipated to decline more quickly than other greenhouse gases including N2O and CH4. Physical risks:…