Christine, one of the leading architects of Lundin’s ambitious plan to reach net zero by 2030 (the most ‘aggressive’ in the oil and gas industry), and Eric, a former Goldman Sachs banker and private investor who is currently launching a decarbonisation fund, will share critical insights on the current formidable acceleration of green investment worldwide and its widespread impact on the financial industry.
KEY TAKE-AWAY
2015 Paris Agreement saw the world ‘wake up’ to the urgency of de-carbonization. Norway was ahead of the curve with a carbon tax levied since 1991. This should now be a widespread fiscal policy. A EU border carbon tax is likely to become a reality in the near future.
The oil and gas sector is regarded as the dirtiest but only about 5% of its emissions and pollution occur at the production phase.
That said, oil is here to stay for at least two decades, therefore establishing recognized and rewardable cleaner practices for the industry are vital. Shareholder and societal pressure are making this non-negotiable. Examples include the ‘carbon clear’ certification that grades production in terms of its carbon intensity, giving downstream clients the possibility to choose ‘cleaner’ oil. More favourable interest rates for a syndicated loan linked to environmental performance indicators is another example.
In more broad terms, the financial industry has a key role to play in the race to Net Zero and de-carbonization. A close comparison can be drawn between how the quality of governance relates directly to good market performance in an ESG investment fund. A soon to be launched de-carbonization fund will use highly sophisticated software, AI and self-learning computers to scan and select over millions of sector-wide companies in the belief that good de-carbonization practices will translate into good returns.
There is growing recognition that what the markets consider as value must now be aligned with society’s values. Profit ahead of planet is less and less acceptable (NGOs and activists are increasingly effective in exerting pressure and calling out green washing). Companies and investors alike will be increasingly subject to a climate transition lens.
But in terms of regulation and conformity issues it is still a ‘jungle’ and corporate efforts are dogged by a lack of global agreement and the diversity of standards (many of which are still voluntary). TCFD (Task force on climate related performance disclosure) framework exists and will be increasingly important.
There must be a legitimate, commonly accepted price tag on natural capital. Measurement matters because what we can measure, we can monitor.
