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News November 2002
Korea plans GHG market 
Korea plans to introduce several single-sector markets for trading greenhouse gas emissions, culminating in a single integrated market around 2012. The first stage will be the launch next year of a ‘demonstration’ market for the country’s five power utilities.
No money will change hands during the first year of this pilot scheme, says Suk-Hoon Woo, a team leader in the Center for Climate Change Mitigation Projects, within the Korea Energy Management Corporation. In 2004, however, it is intended to convert this into a real market with GHG credits being bought and sold by the five participating companies.
Corporate governance rules to hit reporting?
New corporate governance legislation in the US could discourage companies from filing information about their environmental and social performance, according to PricewaterhouseCoopers (PwC).
A requirement – contained within the Sarbanes–Oxley Act, signed into law in July – that CEOs and chief financial officers have to certify filings made to the Securities and Exchange Commission could encourage companies to restrict disclosure to only that information required by law, says Mark Browning, a senior manager in PwC’s sustainability business solutions group in London.
Insurers gear up for carbon risks
The insurance sector is gearing up to enter the carbon market, with both Swiss Re and Marsh unveiling initiatives to help transfer risks involved in generating and trading greenhouse gas (GHG) reductions.
At a conference organised by Swiss Re in Zurich last month the reinsurance giant spelt out plans for a “Delivery Guarantee Structure” for GHG credits generated by emissions reduction projects under the Kyoto Protocol on climate change.
Marsh, the world’s largest insurance broker, believes the insurance sector could take on some of these risks. It is canvassing support to set up a new insurance vehicle which will specialise in “permit delivery risk”, according to Julian Richardson, a London-based assistant vice president at the firm.
Aquila team to land with Hannover Re?
Ravi Nathan, the former head of weather risk at US energy firm Aquila, could be set to join Hannover Re, according to sources close to the deal. The German reinsurer would neither confirm nor deny the rumours. Nathan, however, says “all I can say at this juncture is that I am pursuing a number of opportunities at different stages of maturity. Nothing is final as yet”.
In September, Aquila announced that it was in talks with Citadel, a Chicago-based hedge fund, about the fund taking over part of Aquila’s energy trading group, including some of Nathan’s team. Citadel declines to comment.
Canadians battle over climate change
Canada’s draft climate change plan – including a domestic emissions trading scheme – has met with fierce opposition from provincial ministers. “Potential constitutional battles” could ensue if the federal government implements it without provincial agreement, says a source close to the government.
A joint statement from all provincial energy and environment ministers said that the federal framework on climate change “does not as yet represent an adequate Canadian approach to reducing greenhouse gases in Canada”.
Rating agency claims new approach to SRI
The parent of leading credit rating firm Fitch Ratings has set up an agency to assess companies on the management of their social and environmental risks. CoreRatings, formed on 8 October by Paris-based business services group Fimalac, offers what it claims is a new approach to rating companies against these risks.
Unlike other types of SRI analysis, CoreRatings takes a ‘risk-based’ approach to rating companies, says group CEO Alan Banks. Its methodology uses 210 indicators to measure the impact of social and environmental issues on a company’s risk premium, which is the return required by investors to hold its stocks or bonds.
Investment club offers new channel for carbon finance
A public/private investment partnership to help deliver new sources of finance to projects which reduce or avoid greenhouse gas (GHG) emissions is being prepared for launch in 2003.
The idea behind the Vienna Carbon Finance Club came from a meeting in June this year of various financial institutions involved in Joint Implementation and Clean Development Mechanism projects. These are GHG reducing projects which, under the terms of the Kyoto Protocol, can generate ‘carbon credits’ which companies or governments can use to help them comply with any GHG restrictions they may face.
ExxonMobil ‘shifting on climate change’
US oil giant ExxonMobil has softened its rhetoric on climate change, as pressure mounts from environmental organisations and reports surface that its stance may be risking long-term shareholder value.
The firm – dubbed the “world’s number one climate criminal” by Greenpeace – is also initiating ‘closed door’ meetings with green groups, marking a more conciliatory approach, according to market insiders.
Executives could lose climate change insurance cover
Company executives could find themselves losing protection against climate change-related liability claims brought by shareholders. Swiss Re has announced it will withdraw cover against such claims for senior executives of companies that fail to adopt adequate climate change policies.
Swiss Re, one of the world’s largest insurers, is targetting energy-intensive firms and large emitters of greenhouse gases. It is including questions on firms’ climate change policies in the renewal notices that it is sending out for directors’ and officers’ liability insurance.
Volumes to rocket in carbon market
This year could see five times the volume of greenhouse gas emission reductions traded compared to last year, according to a new report from PCFplus, the research arm of the World Bank’s Prototype Carbon Fund. With 24 million tonnes of carbon dioxide or equivalent (CO2e) traded by late August this year, volumes are already twice those of 2001. This year’s total could hit 60 Mt CO2e, depending on pending deals, the report finds.
However, while volume data is widely available, price data is less so, the report notes. Price data was only available for 20% of the volume traded but, based on that, the carbon market could be worth between $350 million and $500 million this year, according to the researchers.
Mitsui, CO2e in carbon tie-up
Mitsui & Co is to enter the greenhouse gas (GHG) emissions market in alliance with CO2e, a UK-based environmental broker. The Japanese trading firm has taken a $1.2 million minority stake in CO2e, and plans to set up a Tokyo-based joint-venture with the firm to broker GHG emissions and provide consultancy services.
CO2e will bring an understanding of carbon transactions and the implications for Mitsui’s clients of the continuing Kyoto Protocol climate change negotiations, says a Tokyo-based spokesman for the company, which is Japan’s second largest trading house.
‘Integrity at stake’ for SRI firms
A number of sustainability rating agencies “are pushed to give certain opinions about companies” so that their fund manager clients can include them in their portfolios, says Timo van den Brink, a senior researcher at the Free University of Amsterdam, and author of a new report examining socially responsible investment research firms.
These firms have their “integrity at stake” if they continue to bow to the pressures of fund managers, he says.