In the Loop: Avoided emissions, climate materiality and ChatGPT

The return of avoided emissions

Source: Getty

Avoided emissions data is back on the investor agenda again. The idea is to measure the climate positives of a project, rather than the climate negatives.

It’s something that makers of wind turbines and electric transportation, for example, can point to when asked to explain increases in emissions.

Estimated annual avoided emissions also used to be commonly referred to by investors in renewable energy projects to tout their impact.

However, the concept has been out of favour for a while. Since the emissions have been “avoided”, they don’t actually exist, leaving the metric open to misuse and bad press.

Global CEOs, the G7 and now major investors are trying to change that with new rules and by creating the first standardised avoided emissions dataset – and all in the space of the last few weeks.

We’d be keen to hear more investor views on the importance of and challenges around avoided emissions – please send your thoughts our way.

The week in RI

Details emerged this week on the possible direction of the EU’s new corporate sustainability reporting rules. Sources told RI that the European Commission is considering scrapping mandatory disclosure requirements in the soon-to-be-published standards proposal, and instead all reporting would be subject to materiality assessments.

Staying with corporate reporting, RI published an interview with the GRI’s CEO, covering the pushback the impact-focused standard setter faced after appointing double-materiality advocate Carol Adams as chair of its technical standards board.

As investor pressure on oil and gas firms is ramping up, members of the UK Asset Owner Roundtable announced plans to scrutinise managers over a perceived misalignment on EU oil majors.

And one of the world’s largest investors, NBIM, revealed details on its first-ever climate proposals filed at four US companies this proxy season.

Quote of the week

“An interoperable structure between ISSB, GRI and the ESRS would a best-case scenario for all of us”

Most investors would probably agree with the GRI’s CEO Eelco van der Enden – but can it be achieved?

Living in a material world

“Climate change is real, but I do not believe it poses a serious risk to the safety and soundness of large banks or the financial stability of the United States.” That’s how US Federal Reserve governor Christopher J Waller opened his speech last Friday at an event in Madrid.

The Fed is a member of the Network for Greening the Financial System (NGFS), the climate-focused central banking group established to “study the unique and material risks that climate change poses to the financial system”, according to a European member contacted by RI.

Waller, however, stated his belief that “risks posed by climate change are not sufficiently unique or material to merit special treatment relative to others”.

Several NGFS members declined to comment on Waller’s remarks.

ChatGPT, can you structure my bond?

Second-party opinion providers and sustainability structuring advisers can breathe a sigh of relief. For the time being, their jobs are safe from the robot revolution.

RI understands that a member of the sustainable banking team at a global investment bank recently carried out an experiment asking ChatGPT to write a green financing framework. The result? “What came back was certainly not ready to go to market.”

For those looking for a slightly more practical application of AI, a month or so ago researchers from a number of universities and software company Frigg unveiled “ChatClimate”, a chatbot trained on the most recent IPCC reports to help make climate information more accessible.

While the researchers say the tool may still produce incorrect information, it strikes us as a better application of AI than trying to automate yourself out of a job!

Out and about

Tokyo here we come! Our 2023 conference season gets underway next week with RI Japan on Wednesday and Thursday.

We’ve got a great speaker line-up, including senior representatives from the Ministry of Environment, Financial Services Agency, IFRS Foundation and many more. To see the full agenda and apply for a free pass, click here.

Our editor Lucy Fitzgeorge-Parker will be chairing the conference and will be in Tokyo all week. If you’d like to connect with her, drop her a line here.

Back in Europe, RI is delighted to be a media partner for ICMA’s AGM in Paris. Our capital markets expert Dominic Webb will be attending, get in touch with him here.

Next week: Three energy giant AGMs

Next week will be a busy one for proxy voting in Europe with the annual general meetings of Shell (23 May), TotalEnergies and Glencore (26 May).

Climate proposals at each have drawn public support from big investors ahead of the meetings, but will that translate into sizeable vote tallies?

Targeting of directors has also been a theme this proxy season, and will feature again at Shell. The Universities Superannuation Scheme this week became the latest fund to say it will oppose two directors, including the oil giant’s chair.

Today’s letter was prepared by the RI editorial team.