Michael Liebreich

Worth reading twice. What I did this morning.https://twitter.com/mliebreich/status/1367919898882678786 …

So. If we can accelerate these four trends – transparently allocating emissions to the organizations causing them; integrating climate risk into financial reporting; extending carbon pricing; and focusing on net zero – we can build a truly sustainable financial system.

Where developing world countries require incentives to avoid deforestation or leave fossil fuels in the ground, these have to be provided by governments, not private players – which will no doubt be the the focus of some tough Article 6 negotiations at COP26 in Glasgow.

Oh, did I say avoided emissions were out? We'll never get to net zero that way: we’ll just end up with a net-zero (Eloi) economy, alongside an emitting (Morlock) economy – one smaller than it might have been, but still big enough to breach planetary boundaries.

Even @sciencetargets sound great - until you realize that its targets may be science-based, but its associated rules and roadmaps are not: they set arbitrary targets for Scope 3 , which, as we have seen, companies generally do not control, and they rule out any use of offsets.

Unfortunately,*none* of the currently available methodologies focuses unequivocally on the two goals of reducing controllable emissions and developing high-quality offsets which capture carbon and sequestering it permanently. Hence all these inconsistent net zero pledges.

No more. We are in a world of elimination, not rationing or "avoided emissions". Since the Paris Agreement and the @IPCC_CH October 2018 Special Report on 1.5ºC, we know that to maintain a recognizable climate, the goal must be net zero within around a single asset lifetime.

4) We all need to understand that zero emissions and carbon removal are now the only games in town. Back in 2012, the name of the game was cap and trade: no need to eliminate emissions entirely, just limit them and ration them toward sectors where reductions are most expensive.

The long-term shift of climate risk from fuzzy and voluntary ESG reports to quantified and regulated financial statements will mark a huge inflection point in the history of climate action. By the way, “accountants will save the world” is from a @MPB_WBCSD speech, Rio, 2012:

2) Accountants will save the world! Nothing will focus the minds of investors quite like climate-related impairments, and they are coming. @IFRSFoundation has issued guidance, as have @FRCnews @TheFCA the PRA and @TPRgovuk. US #GAAP lags but will converge. https://cdn.ifrs.org/-/media/feature/news/2019/november/in-brief-climate-change-nick-anderson.pdf …

Also, we can and must do a far better job of tracking emissions through the value chain. Distributed ledger technology could have been designed with a job like this in mind (as could satellite technology, sensor networks, big data and machine learning). https://www.oecd.org/finance/Blockchain-technologies-as-a-digital-enabler-for-sustainable-infrastructure-key-findings.pdf …

OK, it's 372 pages, but you weren't doing anything much tonight. They deal with emissions that are avoidable vs those that are excessive, account for who has control over decisions that drive emissions, and speak to investors, insurers, reinsurers – even advertising agencies!

What is needed is a way of allocating emissions to specific players in a value chain. Luckily, the huge brains behind the Expert Group on Climate Obligations for Corporations, 68 eminent jurists and human rights experts, have been doing just that. Read it! …https://climateprinciplesforenterprises.files.wordpress.com/2021/01/epwebpdf2.pdf …

1) Overhaul the Greenhouse Gas Protocol. It has been axiomatic since the Code of Hammurabi (1750 BC) that financial liabilities are not double counted. Tort law is all about allocating responsibility for harm. Scope 3 is more like collective punishment than an accounting system!

Does this mean we give up on sustainable finance? No! It just means that it is still undergoing its Cambrian Explosion, with major parts of its information and regulatory infrastructure still in the process of emerging. I'll finish with four promising trends / areas for action.