The fashion firms, supported by Ben & Jerry’s and HH Global, have signed up to source “Next Generation Solutions” to fashion fibers through an initiative led by environmental nonprofit Canopy.
The companies have agreed to purchase more than half a million tonnes of next-generation fibers, which Canopy claims has a lower carbon footprint and a reduced biodiversity impact compared to traditional textile and packaging materials.
Canopy believes the announcement, made to coincide with COP27, will help the transition to nature-positive business models.
“We are thrilled to advance this commitment with forward-looking partners who are willing to challenge the status quo and in doing so provide a breakthrough for these game-changing technologies,” Canopy’s executive director and founder Nicole Rycroft said.
“This commitment will allow us to take a historic leap closer to the $64bn of investments in sustainable alternatives needed to ensure forest conservation for our planet’s climate and biodiversity stability.”
The investment will help build up to 20 new pulp mills for Next Generation materials, as well as providing farm communities with new markets to replace the common practices of burning straw residue and landfilling materials. Canopy claims it will prevent an estimated 2.2 million tonnes of CO2 emissions compared to the production of virgin forest fiber.
Canopy notes that less than one-third of the world’s largest companies have yet to make forest-based commitments. However, research suggests that at least 50% of the world’s forests need to be conserved by 2030 to meet the Paris Agreement’s 1.5C ambition.
The signatories have also committed to ensuring their respective supply chains are free of Ancient and Endangered Forests
“At H&M Group, we are committed to becoming a circular business, in which moving towards more sustainable alternatives for our materials is crucial. Canopy has showed true leadership by bringing the fashion and regenerated cellulosic industries together with the purpose of reducing fashion’s dependency on forests,” H&M’s environmental sustainability business expert Madelene Ericsson said.
“Innovative low-carbon solutions, such as regenerated cellulosic fibers from waste textiles, microbial cellulose or agricultural residues, will play a vital role to help us reduce our impact on climate and protect forests, so no ancient and endangered forests are put at risk to make fashion. These next generation solutions and collaborations like Canopy’s help us taking strong steps towards our goal for all our materials to be either recycled or sourced in a more sustainable way by 2030.”
Imperial will work with Hitachi and Hitachi Europe to establish a joint research centre that will deliver research projects, reports and white papers on the challenges facing the net-zero transition.
The ‘Hitachi-Imperial Centre for Decarbonisation and Natural Climate Solutions’ will explore the potential scenarios and pathways of the net-zero transition, with a focus on carbon management, decarbonising energy and transport and enhancing biodiversity through nature-based solutions.
The Centre will also help train the next generation of scientists and engineers in the field. The collaboration will be delivered by senior representatives from both Imperial and Hitachi, including Professor Mary Ryan from Imperial’s Faculty of Engineering, and Dr Kazuyuki Sugimura, CTO of Hitachi Europe.
Professor Ryan said: “There is greater urgency than ever before to tackle global pollution, of which CO2 is one of the biggest sources. This joint research centre will bring together world-leading scientists and innovators in decarbonisation and climate repair to develop new technology and solutions to the climate emergency.
“Imperial and Hitachi will work closely together to make significant advances in developing cleaner energy and this new centre will accelerate our work towards a zero pollution future.”
Professor Ryan also leads Imperial’s Transition to Zero Pollution initiative, which aims to build new partnerships to help deliver a “sustainable zero pollution future”.
As for Hitachi, the company joined the United Nations Race to Zero Campaign in 2020, was a principal partner of COP26.
Hitachi set a carbon-neutrality goal for 2050 that covers the entire value chain, including production, procurement and the use of products and services. It builds on an existing commitment of making all its offices and factories carbon neutral globally by 2030.
Nature-based solutions
There are some key challenges that need to be overcome if nature-based and climate solutions are to roll out at the pace required to help decarbonisation efforts.
Estimates suggest that the current market for offsets will need to grow by at least 15-fold by 2030 and up to 160-fold by 2050, if businesses and nations approach a 1.5C pathway using offsetting to the extent currently planned for. At present, most of the market is accounted for by nature-based projects as the capacity of man-made solutions is smaller. If existing challenges are not addressed, this scaling could bear awful consequences for biodiversity, Indigenous communities and global food security.
Globally, the world is facing an $8.1trn financing gap into nature to help combat the climate crisis and ecological breakdown, according to UN reports that warn that annual investments into nature-based solutions need to increase fourfold by 2050.
The report found that current investment into nature-based solutions sits at $133bn – 0.10% of global GDP – most of which comes from public sources. However, up to $4.1trn is required by 2030, which rises to $8.1trn 2050, a four-fold increase.
Up to $203bn annually is required for forest-based solutions, with peatland and mangrove restoration also highlighted as critical solutions. Marine environment solutions such as seagrass meadows were not covered by the report but will be included in future editions.
The report also estimates that annual investments into these solutions will need to reach $536bn annually by 2050.
Singapore on Thursday (Jun 9) published the governance framework for sovereign green bonds, ahead of the first such issuance expected in the next few months.
This comes as Singapore moves to develop the green finance market and make green finance a driving force for sustainability.
The Singapore Green Bond Framework sets out guidelines for public sector green bond issuances under the Significant Infrastructure Government Loan Act 2021 (SINGA), said the Ministry of Finance (MOF) and the Monetary Authority of Singapore (MAS) in a media release.
It covers the Government’s intended use of green bond proceeds, governance structure to evaluate and select eligible projects, operational approach to manage green bond proceeds, and commitment to post-issuance allocation and impact reporting.
In addition to providing the foundation for green bonds issued by the Government, the framework will also serve as a reference for statutory boards that issue their own green bonds.
The key principles considered in the development of the framework were alignment with internationally recognised market principles and standards; stringent governance and oversight of project selection and allocation of proceeds; and technical screening to evaluate and identify green projects, MOF and MAS said.
Eligible expenditures
At Budget 2022, Finance Minister Lawrence Wong announced that the Government would issue S$35 billion of green bonds by 2030 to fund public sector green infrastructure projects.
Proceeds from these bonds, which will be issued under the new framework, will be used to finance costs associated with the Singapore Green Plan 2030, MOF and MAS said.
In turn, the eligible green projects are expected to facilitate the transition to a low-carbon economy in Singapore and contribute to the climate-related and environmental goals set out by the Singapore Government.
The categories of “eligible green expenditures” are:
Renewable energy
Energy efficiency
Green building
Clean transportation
Sustainable water and wastewater management
Pollution prevention, control and circular economy
Climate change adaptation
Biodiversity conservation and sustainable management of natural resources and land use
Fresh-out-of-the-ground produce is every chef’s dream, and here in urban Singapore, that’s usually a bit of a challenge.
But now, in the middle of the Central Business District, there’s an urban farm in the sky working with two connected restaurant concepts to bring herbs and vegetables directly through the kitchen and onto the plate.
1-Arden is a multi-concept development by 1-Group comprising Kaarla Restaurant and Bar, serving coastal Australian cuisine and helmed by chef John-Paul Fiechtner; Oumi, a modern Japanese kappo restaurant headed by chef Lamley Chua; and a 10,000 sq ft Food Forest where a multitude of edible plants are cultivated, all on CapitaSpring’s 51st floor.
In the same building, other 1-Arden concepts include Spanish-Italian-French-Portuguese bistro Sol & Luna and the cafe Bee’s Knees Urban.
(Photo: 1-Arden)
The Food Forest is overseen by 1-Arden’s head farmer, Christopher Leow of Edible Garden City. Leow works closely with Fiechtner, who is also 1-Arden’s executive chef, to grow crops that the restaurants and bar can use across the Food Forest’s five themed gardens: The Singapore Food Heritage Garden, the Wellness Garden, the Mediterranean Potager Garden, the Japanese Potager Garden and the Australian Native Garden.
Whatever’s in season or ready to be harvested on any particular day will go to the chefs for their creations. And, in return, food waste from the restaurants, such as fish trimmings and vegetable scraps, get turned into different targeted fertilisers to keep the garden lush, healthy and biodiverse.
While the fresh herbs and vegetables are used in most of the dishes, the Kaarla Closed Loop Salad showcases the best of the garden, featuring the day’s harvest of more than 20 edible leaves and flowers. You might find, for instance, red shiso, warrigal greens, hyacinth bean leaves, wild watercress or French marigold on your plate.
Kaarla Closed-Loop Salad (Photo: May Seah)
“Having a garden at our fingertips is inspiring every day,” said Fiechtner, who has worked all over the world and was previously V-Dining’s executive chef. “To go out at any time of day and pick something fresh from the garden – it’s really exciting for the guys in the kitchen to see something grow from scratch, and then to the final product that we get to serve.”
One of the things he wanted to grow was the tiger nut, a superfood from Africa dating back thousands of years, he shared. “It’s amazing for the soil, the reward in terms of yield is amazing, and the flavour suits the menu very well.”
Arden-grown Tiger Nut Ice Cream (Photo: Kaarla)
At Kaarla, he uses tiger nuts in various ways, from a curd for the salad to an ice cream to top a dessert of tiger nut nougatine, white Chitose corn, calamansi jelly and poached oranges.
As for the produce he imports from Australia, such as beef and seafood, sustainability is at the forefront as well. “We know all the producers’ names, how they harvest and how they grow,” Fiechtner said.
(Photo: Oumi)
“If not for the 1-Arden Food Forest being just steps away from Oumi, we wouldn’t have been exposed to the micro-seasons and micro-climates, and discovered the use of plants in the different stages of their life cycle,” said Lamley Chua, head of Japanese Culinary Development.
“For example, when available, we use bua long long buds in our Gyutan Yaki dish; otherwise, to lend the same citrusy flavour, we add thinly sliced bua long long leaves. Without the Food Forest, only the fruits are usually used. The Food Forest continues to inspire us every day as it’s up to our imagination what we can grow and what would thrive in the farm.”
“Potentially, what we can achieve here has no limits,” Fiechtner said.
1-Arden is at 88 Market Street, CapitaSpring #51-01. For more information, visit https://www.1-arden.sg.
Investors have had a lot to grapple with in the last few years.
The Covid-19 pandemic and a rapidly changing macroeconomic outlook have brought unprecedented risks and volatility to financial markets, while the urgency to fight climate change has become one of the biggest challenges facing governments and industries.
These developments highlight the importance of “sustainable wealth”, which HSBC Premier describes as growing assets not just for the short term, but for the years and generations to come. To achieve that, investment portfolios must be able to stand the test of time.
Many investors are now rethinking their approach to investing, and seeking new ways to future-proof their portfolios as they look to build long-lasting wealth. More than ever before, investors are exploring new sustainability-themed investments.
“Employing ESG (Environmental, Social and Governance) factors is a must,” says Mr James Cheo, Chief Investment Officer, South-east Asia at HSBC Global Private Banking and Wealth. ESG refers to a set of criteria that investors commonly use to evaluate the impact of a company’s activities before making an investment decision.
“This will not only reduce the risk when it comes to investing, but also improve the resilience of your portfolio over the long run. That’s because the quality companies that you choose to invest in tend to deliver stronger, more sustainable earnings.”
It also allows investors to support the global movement towards a more sustainable and equitable future. The trend of aligning one’s values with investment decisions is taking off, especially among younger investors.
A survey by HSBC Global Asset Management last year found that over 82 per cent of investors in mainland China, Hong Kong, Singapore and the United Kingdom rate sustainable, environmental and ethical issues as “quite” or “very important” to their investments. In Singapore, that figure stands at 80 per cent.
But the investors estimated that on average, they explicitly consider ESG factors for only around 28 per cent of their current investments, according to the survey. That reveals a gap between investors’ intentions and their actions.
To help investors bridge the gap, HSBC has made sustainable financing and investment a priority. The bank has more than 150 years of experience navigating a constantly changing world, and it sees the transition to a net zero economy as a major opportunity for investors.
Mr James Cheo, Chief Investment Officer, South-east Asia at HSBC Global Private Banking and Wealth. PHOTO: HSBC
“Sustainability is at the core of what we do. It’s extremely important and central to our discussion when it comes to investment decisions,” says Mr Cheo.
“It is a journey and there will be challenges along the way. Ultimately, our role is to help our clients through this transition. We believe that every portfolio should and can be sustainable, with ESG at its core,” he adds.
Opportunities in ESG investing
Investors surveyed by HSBC Global Asset Management cite a lack of suitable investment products, and not wanting to limit their choices, as major barriers to sustainable investing.
But Mr Cheo says sustainable investment opportunities have increased tremendously in the last few years as more investors – especially those in Asia – become interested in the space, and the market for ESG products mature.
“Investors should start to take that first step to be invested,” Mr Cheo says. He suggests incrementally increasing one’s ESG investments “because that’s going to be a very important pillar to investing, especially in the years ahead”.
Integrating ESG considerations into your investment decisions will help create a more resilient portfolio that will stand the test of time. PHOTO: HSBC
He shares three broad themes that would offer investment opportunities in the years to come:
Energy transition: An increasing number of governments and industries have made net zero carbon emissions pledges, and the transition to a low-carbon future is set to involve major reconfigurations in the way industries and society function.
Winners from this megatrend are companies that successfully adapt to the transition. Producers of low-carbon or renewable energy, as well as those developing new technology that help the world in the transition, will also benefit.
In Asia, China’s ambition to reach net zero emissions by 2060 will herald a green revolution with significant investments aimed at increasing the use of clean energy, promoting electric vehicles and greening supply chains.
Protecting biodiversity: A research by the World Economic Forum found that more than half of the world’s GDP is moderately or highly dependent on nature. So, damage to nature and biodiversity threatens global economic activity.
The winners in this area are companies in the circular economy, which promotes recycling and reusing products for as long as possible to reduce waste.
Social factors: The social pillar of ESG investing is receiving more attention as research shows that socially responsible companies perform better in the long term2. This is because companies with a more diverse workforce as well as those that respect human rights and focus on developing talent tend to have stronger leadership, happier employees, and more resilient operations.
Navigating economic uncertainties
Financial markets are likely to remain volatile in the coming months, given higher inflation, slowing economic growth and the likelihood of further interest rate hikes by the US Federal Reserve and other central banks.
“Such an environment requires investors to be more proactive in strengthening the resilience of their portfolios,” says Mr Cheo.
Steps that investors can take include reducing cash holdings to avoid having portfolio value eroded by inflation, and diversifying investments with a mix of stocks, bonds and alternative assets to hedge against rising inflation.
In terms of investment options, HSBC picks the US market for its economic growth prospects and those in South-east Asia, given the region’s reopening from pandemic-related closures. The bank also suggests adding income through dividend stocks and high-yielding bonds.
“Remember that time in the market is more important than timing the market, so they have to stay invested through the cycle,” says Mr Cheo.
ESG investing could help investment portfolios navigate current uncertainties and prepare for the major transition towards a greener and more equitable future.
“You have to look for quality companies that can thrive with higher prices, that can navigate a volatile environment. That’s why we think that ESG leaders are going to be one of the winners that will come out from this uncertain macro-environment,” says Mr Cheo.
But above all, investors should always pick investments that suit their risk appetite and profiles.
Approaches to sustainability-themed investments
Mr James Cheo shares that there are multiple ways to invest sustainably. Here are three of the most common approaches:
Firstly, investors can consider negative screening. This method involves excluding companies that are not aligned with investors’ values or investment objectives. For example, some investors exclude tobacco companies from their portfolios due to the harmful effects of smoking on health.
Secondly, investors can look across sectors and asset classes for companies that have high ESG scores3. ESG is a set of criteria that evaluates how a company operates in relation to environmental (such as how it uses energy or manages wastes), social (such as the treatment of workers) and governance (such as its choice of board members) factors. Companies with high ESG scores are seen as better-managed, and thus more likely to do well in the long term.
Thirdly, investors who want to achieve certain environmental or social objectives alongside financial returns can do that through a practice known as impact investing. For example, investing in research and development aimed at finding cures to diseases, or new technology to improve access to banks.
Making a difference together
HSBC is a firm believer in doing business responsibly and sustainably. It is also committed to encouraging customers to invest and live in a sustainable manner. For that, the bank has forged a global partnership with non-profit charity One Tree Planted to plant trees on behalf of clients in selected parts of Malaysia, Indonesia and India.
From now till June 30, customers who sign up for a new HSBC Premier banking account with the bank will have 10 trees planted on their behalf. For existing customers and staff of HSBC, up to 10 trees will be planted on their behalf for every ESG Unit Trust fund investment they make.
Visit www.hsbc.com.sg/esg to explore HSBC’s suite of ESG funds, which cover themes such as climate change, sustainable energy and healthcare.
Disclaimer: Customers are advised to make independent judgment with respect to any matter contained herein. This material is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. You may wish to seek advice from a financial consultant before making any investment decisions. If you choose not to do so, you should consider whether the investment is suitable for you.
Footnotes: 1, 2 HSBC Global Private Banking – January 2022 – Q1 2022 Trend Brochure 3 ESG scores are calculated by rating agencies such as MSCI, Sustainalytics (owned by Morningstar), ISS, RepRisk, Refinitiv, Bloomberg, S&P Global, and FTSE. Refer to https://sustainfi.com/impact/esg-score/
An area of forest the size of France has regrown naturally across the world in the last 20 years, a study suggests.
The restored forests have the potential to soak up the equivalent of 5.9 gigatonnes (Gt) of carbon dioxide – more than the annual emissions of the US, according to conservation groups.
A team led by WWF used satellite data to build a map of regenerated forests.
Forest regeneration involves restoring natural woodland through little or no intervention.
This ranges from doing nothing at all to planting native trees, fencing off livestock or removing invasive plants.
William Baldwin-Cantello of WWF said natural forest regeneration is often “cheaper, richer in carbon and better for biodiversity than actively planted forests”.
But he said regeneration cannot be taken for granted – “to avoid dangerous climate change we must both halt deforestation and restore natural forests”.
“Deforestation still claims millions of hectares every year, vastly more than is regenerated,” Mr Baldwin-Cantello said.
“To realise the potential of forests as a climate solution, we need support for regeneration in climate delivery plans and must tackle the drivers of deforestation, which in the UK means strong domestic laws to prevent our food causing deforestation overseas.”
The Atlantic Forest in Brazil gives reason for hope, the study said, with an area roughly the size of the Netherlands having regrown since 2000.
In the boreal forests of northern Mongolia, 1.2 million hectares of forest have regenerated in the last 20 years, while other regeneration hotspots include central Africa and the boreal forests of Canada.
But the researchers warned that forests across the world face “significant threats”.
Despite “encouraging signs” with forests along Brazil’s Atlantic coast, deforestation is such that the forested area needs to more than double to reach the minimal threshold for conservation, they said.
The project is a joint venture between WWF, BirdLife International and WCS, who are calling on other experts to help validate and refine their map, which they regard as “an exploratory effort”.
One of the simplest ways to remove carbon dioxide from the air is to plant trees. But scientists say the right trees must be planted in the right place if they are to be effective at reducing carbon emissions.
The planet’s ecosystems are nearing critical tipping points, with extinction rates 100-1,000 times higher than they were a century ago. Our current economic system has put natural resources under ever-increasing pressure.
As the recent UK Treasury-commissioned Dasgupta Review of the Economics of Biodiversity puts it, our economies “are embedded within Nature … not external to it.” The task now is to embed this recognition in our “contemporary conceptions of economic possibilities.”
Many businesses, recognising the perils facing the planet, are changing the way they operate. But they can’t do it all alone, and the current rules of our financial and economic system must change if we are to build an equitable, nature-positive, net-zero future.
Such changes make economic sense. Firms that take a long-term view and meet the needs of all stakeholders by prioritising environmental and social risks and opportunities over short-term gains and profitability outperform their peers in terms of revenue, earnings, investment, and job growth. Similarly, companies with strong environmental, social, and governance (ESG) policies perform better and have higher credit ratings.
According to the World Economic Forum’s 2021 Global Risks Report, four of the top five risks to our economies are environmental – including climate change and biodiversity loss. Human-driven nature loss, its links to the spread of diseases such as COVID-19, and the estimated $300 billion annual cost of natural disasters caused by ecosystem disruption and climate change highlight the risks of unbridled economic growth. Thinking beyond GDP and short-term profit is therefore essential in order to restore our relationship with the planet and transform our system into a viable one.
The true risks arising from nature loss and climate change often are not accounted for or understood, including by investors. The economic cost of land degradation amounts to more than 10% of annual gross world product, and human-caused declines in ocean health are projected to cost the global economy $428 billion per year by 2050. The flip side is that shifting toward a nature-positive economy could generate $10 trillion of business opportunities and create nearly 400 million jobs.
…governments must implement ambitious policies that reflect a vision of the sustainable economy to which we aspire. Such measures could not only unlock new business opportunities but also create a level playing field and stable operating environment.
Thriving companies supporting this transition are in a true leadership position. But if a sustainably-oriented firm’s profits dip, reality hits. Investors often chase short-term profits instead of using ESG indicators as a credible proxy – alongside financial performance – to measure a company’s value. This definition of business success must change.
Consider the case of consumer goods multinational Danone. In 2020, Danone became the first listed French company to adopt the model of an entreprise à mission, or purpose-driven company, when 99% of shareholders agreed to embed sustainability into the firm’s governance structure. This year, the company came under increasing pressure from activist shareholders – including from those in the 1% who opposed the new model – owing to what they regard as the firm’s “prolonged period of underperformance.” While Danone’s share price has underperformed those of its rivals, the company is not in the red. Nonetheless, in March it announced the departure of Chairman and CEO Emmanuel Faber, who had championed the firm’s sustainable business model.
It is fair to say that not all shareholders value the same things, and the fact that investors are questioning companies’ ESG efforts can only be positive. But that should not stop advocates of a purpose-driven strategy that considers a wider range of stakeholders and their interests from seeking ways to strengthen the rules and bolster non-financial performance further. As the Dasgupta Review argued, we must “change our measures of economic success to help guide us on a more sustainable path.”
First, we need meaningful and credible ESG data alongside traditional financial reporting in order to counter accusations of greenwashing. Corporate performance indicators must embed the true value of natural, social, and human capital to reveal the full state of health of the planet, people, and profits. To that end, efforts are underway to develop a globally accepted system for corporate disclosure of both financial and sustainability information.
Second, all investors should stop investing in activities that have a highly negative impact on the climate and biodiversity, and they should call for companies in their portfolios to issue reports aligned with the Task Force on Climate-Related Financial Disclosures and the more recently established Task Force on Nature-Related Financial Disclosures. BlackRock, the world’s largest asset manager, has asked all firms in its portfolio to do this by the end of 2020, and a group of major investors worth $4.7 trillion has committed to making their portfolios zero-carbon by 2050. In addition, the US Securities and Exchange Commission recently established a Climate and ESG Task Force charged with monitoring listed companies’ conduct in these areas.
Lastly, and perhaps most important, governments must implement ambitious policies that reflect a vision of the sustainable economy to which we aspire. Such measures could not only unlock new business opportunities but also create a level playing field and stable operating environment. In the run-up to the United Nations Biodiversity Conference (COP15) scheduled to take place in China in October, more than 700 companies are urging governments to adopt policies now to reverse nature loss by 2030. And just recently, the UN adopted a landmark framework to integrate natural capital into economic reporting.
The coming post-pandemic recovery gives the world a chance to embrace such reforms. We must rewire our economic system and reward sustainable, long-term performance that goes beyond financial returns.
Paul Polman, co-founder and chair of IMAGINE & Food and Land Use Coalition. Eva Zabey is executive director of Business for Nature.
One of the world’s leading providers of krill for the aquafeed industry, Aker BioMarine, has pledged to meet net-zero carbon emissions by 2050.
One of a raft of new sustainability goals from the Norwegian company, they plan to achieve this through various means, including the use of green ammonia to power their fishing and processing vessels. They also plan to step up the use of ocean drones and flying drones, to minimise the time harvesting vessels need to spend searching for krill.
Other goals include reducing the CO2 emissions per tonne of krill oil produced by 50 percent by 2030 in their Houston production plant and increase support for AION, a newly launched circularity company that will repurpose all product and plastic waste into new products that are used in high volume, such as shopping baskets and food trays. AION is already working with customers such as McDonald’s, NorgesGruppen and Varner.
“We consider ourselves pioneers at Aker BioMarine, which for us means that we want to lead our industry in a more sustainable direction. As a company, we make no excuses when it comes to meeting our targets. We are forging a new and more planet-friendly path, tackling challenges, embracing technology, and making more sustainable choices than ever done before in our industry,” said the company’s CEO, Matts Johansen, in a press release.
At the end of February 2021, Aker BioMarine and Aker Clean Hydrogen signed an agreement and are teaming up with other key players to industrialise the production of green ammonia, in an industry first move. This will support Aker BioMarine’s mission to make the vessels completely carbon-free. For example, Aker BioMarine’s newest support vessel, Antarctic Provider, is equipped with the most energy efficient engine in the world, a hybrid engine that is convertible for greener fuels of the future.
Christina Ianssen, sustainability director at Aker Biomarine
“Green ammonia is the most promising sustainable fuel for the shipping industry. It is essential that the industry tests and develops solutions for ammonia on a large scale. This will make it possible not only for Aker BioMarine, but also for Norwegian suppliers and renewable companies, to be world-leading on greener solutions for a broad range of sectors,” says Christina Ianssen, sustainability manager at Aker BioMarine.
Aker BioMarine plans to have vessels that are using ammonia as fuel towards 2030, when the infrastructure for production and distribution of green ammonia is in place.
The company’s ambitions for reducing CO2 emissions are closely connected to the UN’s sustainable development goals (SDGs), specifically goal 13, which calls for urgent action to combat climate change and to slow and stop global warming. To achieve this, CO2 emissions must be reduced significantly in the near-term.
In the last ten years the company has cut its CO2 emissions per tonne of krill produced by approximately 50 percent. The goal is to redo this in the next ten years, through the implementation of analytical tools to reduce consumption of consumables and energy at the Houston manufacturing plant, reuse of energy and efficiency projects on the vessels.
Other sustainability commitments to be achieved by 2030 include:
Ensuring full circularity on all of its principal waste streams.
Making aquaculture production more efficient, by contributing to 1 billion extra servings of seafood produced annually.
Combatting lifestyle diseases by delivering 5 billion doses of health promoting nutrients annually.
Developing innovative products that play an integral role in sustainable diets and the future food system.
Decarbonising aqua and animal feed by delivering low-carbon marine ingredients.
Improving the sustainability of fisheries through contributing to data and science driven regulation and ocean management.
Maintaining unconditional Marine Stewardship Council (MSC) certification and ensure transparency in vessel operations.
“These sustainability goals support our overall purpose – to improve human and planetary health – and make this purpose even more tangible. Every single person working in Aker BioMarine is involved in achieving these goals, and we will work across the company’s entire value chain to make sure we lead the way to a net zero end,” added Johansen.
SINGAPORE – The framework to guide how and when environmental studies should be done ahead of development works is being reviewed again, to see how they can be done in a way that is sensitive to the environment, said Minister for National Development Desmond Lee.
First, a more comprehensive picture of Singapore’s nature areas and how they connect to one another will be developed.
The idea is to map out the islandwide ecosystem and connectivity to better consider how specific sites connect to nature areas, buffers and corridors.
“We will do this in a science-based manner on an islandwide scale and we’ll conduct baseline studies for specific sites to understand their ecological profile and their role in ecological connectivity,” he said.
“The findings from these studies will add to the existing data and connectivity models that my colleagues at NParks have built up over the years and help guide longer term planning.”
Second, the Ministry of National Development (MND) will review whether it is better to centralise the management of environmental impact assessment consultants instead of having individual developers manage their own.
Lastly, MND will explore the use of technology in the built environment sector and see how it can be applied to project management.
“We will learn from this incident and the discussions that have resulted. I hope that everyone, including our nature community, will continue to partner and support us in our efforts as we continually work to improve,” said Mr Lee.
On the Kranji clearance, he said that a thorough investigation will be done and the findings will be made public when ready.
“We will not hesitate to take the necessary action should any party be responsible,” he said.
A Kranji vegetated plot was cleared before a biodiversity study there was completed. ST PHOTO: KEVIN LIM
But in parallel, his ministry will continue efforts to strengthen the environmental impact assessment (EIA) framework, Mr Lee added.
The changes then had included the introduction of new biodiversity impact assessment guidelines, the enhancement of transparency of such environmental studies, as well as the roll-out of strategies to improve the planning process so developers take wildlife into consideration at an earlier stage. For instance, a course on basic ecology and the EIA process for planners from development agencies will be introduced.
“In our engagements with the nature community last year before we launched the enhancements, we had identified and discussed with them several ways to further strengthen the EIA process which we have been studying,” said Mr Lee.
“We had identified and discussed with them several ways to further strengthen the EIA process which we have been studying,” he said.
Asked if an EIA law was necessary, Mr Lee said that the requirements for the relevant studies – such as those that look at the flora and fauna of the area – are pegged to legislative gateways.
For instance, under the Planning Act, statutory permissions and conditions can be imposed for the conduct of these studies and investigations into biodiversity, said Mr Lee.
But other than through legal means, Mr Lee said there are other measures in place to improve the sensitivity of development to the environment in Singapore, citing the changes made to the EIA framework and the areas under review.
The trading of carbon credits can help companies—and the world—meet ambitious goals for reducing greenhouse-gas emissions. Here is what it would take to strengthen voluntary carbon markets so they can support climate action on a large scale.
More and more companies are pledging to help stop climate change by reducing their own greenhouse-gas emissions as much as they can. Yet many businesses find they cannot fully eliminate their emissions, or even lessen them as quickly as they might like. The challenge is especially tough for organizations that aim to achieve net-zero emissions, which means removing as much greenhouse gas from the air as they put into it. For many, it will be necessary to use carbon credits to offset emissions they can’t get rid of by other means. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF) with knowledge support from McKinsey, estimates that demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050. Overall, the market for carbon credits could be worth upward of $50 billion in 2030.
The market for carbon credits purchased voluntarily (rather than for compliance purposes) is important for other reasons, too. Voluntary carbon credits direct private financing to climate-action projects that would not otherwise get off the ground. These projects can have additional benefits such as biodiversity protection, pollution prevention, public-health improvements, and job creation. Carbon credits also support investment into the innovation required to lower the cost of emerging climate technologies. And scaled-up voluntary carbon markets would facilitate the mobilization of capital to the Global South, where there is the most potential for economical nature-based emissions-reduction projects.1
Given the demand for carbon credits that could ensue from global efforts to reduce greenhouse-gas emissions, it’s apparent that the world will need a voluntary carbon market that is large, transparent, verifiable, and environmentally robust. Today’s market, though, is fragmented and complex. Some credits have turned out to represent emissions reductions that were questionable at best. Limited pricing data make it challenging for buyers to know whether they are paying a fair price, and for suppliers to manage the risk they take on by financing and working on carbon-reduction projects without knowing how much buyers will ultimately pay for carbon credits. In this article, which is based on McKinsey’s research for a new report by the TSVCM, we look at these issues and how market participants, standard-setting organizations, financial institutions, market-infrastructure providers, and other constituencies might address them to scale up the voluntary carbon market.
Carbon credits can help companies to meet their climate-change goals
Under the 2015 Paris Agreement, nearly 200 countries have endorsed the global goal of limiting the rise in average temperatures to 2.0 degrees Celsius above preindustrial levels, and ideally 1.5 degrees. Reaching the 1.5-degree target would require that global greenhouse-gas emissions are cut by 50 percent of current levels by 2030 and reduced to net zero by 2050. More companies are aligning themselves with this agenda: in less than a year, the number of companies with net-zero pledges doubled, from 500 in 2019 to more than 1,000 in 2020.2
To meet the worldwide net-zero target, companies will need to reduce their own emissions as much as they can (while also measuring and reporting on their progress, to achieve the transparency and accountability that investors and other stakeholders increasingly want). For some companies, however, it’s prohibitively expensive to reduce emissions using today’s technologies, though the costs of those technologies might go down in time. And at some businesses, certain sources of emissions cannot be eliminated. For example, making cement at industrial scale typically involves a chemical reaction, calcination, which accounts for a large share of the cement sector’s carbon emissions. Because of these limitations, the emissions-reduction pathway to a 1.5-degree warming target effectively requires “negative emissions,” which are achieved by removing greenhouse gases from the atmosphere (Exhibit 1).
Exhibit 1
Purchasing carbon credits is one way for a company to address emissions it is unable to eliminate. Carbon credits are certificates representing quantities of greenhouse gases that have been kept out of the air or removed from it. While carbon credits have been in use for decades, the voluntary market for carbon credits has grown significantly in recent years. McKinsey estimates that in 2020, buyers retired carbon credits for some 95 million tons of carbon-dioxide equivalent (MtCO2e), which would be more than twice as much as in 2017.
As efforts to decarbonize the global economy increase, demand for voluntary carbon credits could continue to rise. Based on stated demand for carbon credits, demand projections from experts surveyed by the TSVCM, and the volume of negative emissions needed to reduce emissions in line with the 1.5-degree warming goal, McKinsey estimates that annual global demand for carbon credits could reach up to 1.5 to 2.0 gigatons of carbon dioxide (GtCO2) by 2030 and up to 7 to 13 GtCO2 by 2050 (Exhibit 2). Depending on different price scenarios and their underlying drivers, the market size in 2030 could be between $5 billion and $30 billion at the low end and more than $50 billion at the high end.3
Exhibit 2
While the increase in demand for carbon credits is significant, analysis by McKinsey indicates that demand in 2030 could be matched by the potential annual supply of carbon credits: 8 to 12 GtCO2 per year. These carbon credits would come from four categories: avoided nature loss (including deforestation); nature-based sequestration, such as reforestation; avoidance or reduction of emissions such as methane from landfills; and technology-based removal of carbon dioxide from the atmosphere.
However, several factors could make it challenging to mobilize the entire potential supply and bring it to market. The development of projects would have to ramp up at an unprecedented rate. Most of the potential supply of avoided nature loss and of nature-based sequestration is concentrated in a small number of countries. All projects come with risks, and many types could struggle to attract financing because of the long lag times between the initial investment and the eventual sale of credits. Once these challenges are accounted for, the estimated supply of carbon credits drops to 1 to 5 GtCO2 per year by 2030 (Exhibit 3).
Exhibit 3
These aren’t the only problems facing buyers and sellers of carbon credits, either. High-quality carbon credits are scarce because accounting and verification methodologies vary and because credits’ co-benefits (such as community economic development and biodiversity protection) are seldom well defined. When verifying the quality of new credits—an important step in maintaining the market’s integrity—suppliers endure long lead times. When selling those credits, suppliers face unpredictable demand and can seldom fetch economical prices. Overall, the market is characterized by low liquidity, scarce financing, inadequate risk-management services, and limited data availability.
These challenges are formidable but not insurmountable. Verification methodologies could be strengthened, and verification processes streamlined. Clearer demand signals would help give suppliers more confidence in their project plans and encourage investors and lenders to provide with financing. And all these requirements could be met through the careful development of an effective, large-scale voluntary carbon market.
Scaling up voluntary carbon markets requires a new blueprint for action
Building an effective voluntary carbon market will require concerted effort across a number of fronts. In its report, the TSVCM identified six areas, spanning the carbon-credit value chain, where action can support the scaling up of the voluntary carbon market.
Creating shared principles for defining and verifying carbon credits
Today’s voluntary carbon market lacks the liquidity necessary for efficient trading, in part because carbon credits are highly heterogeneous. Each credit has attributes associated with the underlying project, such as the type of project or the region where it was carried out. These attributes affect the price of the credit, because buyers value additional attributes differently. Overall, the inconsistency among credits means that matching an individual buyer with a corresponding supplier is a time-consuming, inefficient process transacted over the counter.
The matching of buyers and suppliers would be more efficient if all credits could be described through common features. The first set of features has to do with quality. Quality criteria, set out in “core carbon principles,” would provide a basis for verifying that carbon credits represent genuine emissions reductions. The second set of features would cover the additional attributes of the carbon credit. Standardizing those attributes in a common taxonomy would help sellers to market credits and buyers to find credits that meet their needs.
Developing contracts with standardized terms
In the voluntary carbon market, the heterogeneity of carbon credits means that credits of particular types are being traded in volumes too small to generate reliable daily price signals. Making carbon credits more uniform would consolidate trading activity around a few types of credits and also promote liquidity on exchanges.
After the establishment of the core carbon principles and standard attributes described above, exchanges could create “reference contracts” for carbon trading. Reference contracts would combine a core contract, based on the core carbon principles, with additional attributes that are defined according to a standard taxonomy and priced separately. Core contracts would make it easier for companies to do things such as purchasing large quantities of carbon credits at once: they could make bids for credits that meet certain criteria, and the market would aggregate smaller quantities of credits to match their bids.
Another benefit of reference contracts would be the development of a clear daily market price. Even after reference contracts are developed, many parties will continue to make trades over the counter (OTC). Prices for credits traded using reference contracts could establish a starting point for the negotiation of OTC trades, with other attributes priced separately.
Establishing trading and post-trade infrastructure
A resilient, flexible infrastructure would enable the voluntary carbon market to function effectively: to accommodate high-volume listing and trading of reference contracts, as well as contracts reflecting a limited, consistently defined set of additional attributes. This, in turn, would support the creation of structured finance products for project developers.
Post-trade infrastructure, comprising clearinghouses and meta-registries, is also necessary. Clearinghouses would support the development of a futures market and provide counterparty default protection. Meta-registries would provide custodian-like services for buyers and suppliers and enable the creation of standardized issuance numbers for individual projects (similar to the International Securities Identification Number, or ISIN, in capital markets).
In addition, an advanced data infrastructure would promote the transparency of reference and market data. Sophisticated and timely data are essential for all environmental and capital markets. Transparent reference and market data are not readily available now because access to data is limited and the OTC market is difficult to track. Buyers and suppliers would benefit from new reporting and analytics services that consolidate openly accessible reference data from multiple registries, through APIs.
Creating consensus about the proper use of carbon credits
A measure of skepticism attends the use of credits in decarbonization. Some observers question whether companies will extensively reduce their own emissions if they have the option to offset emissions instead. Companies would benefit from clear guidance on what would constitute an environmentally sound offsetting program as part of an overall push toward net-zero emissions. Principles for the use of carbon credits would help ensure that carbon offsetting does not preclude other efforts to mitigate emissions and does result in more carbon reductions than would take place otherwise.
Under such principles, a company would first establish its need for carbon credits by disclosing its greenhouse-gas emissions from all operations, along with its targets and plans for reducing emissions over time. To compensate for emissions from sources that it can eventually eliminate, the company might purchase and “retire” carbon credits (claiming the reductions as their own and taking the credits off the market, so that another organization can’t claim the same reductions). It could also use carbon credits to neutralize the so-called residual emissions that it wouldn’t be able to eliminate in the future.
Installing mechanisms to safeguard the market’s integrity
Concerns about the integrity of the voluntary carbon market impede its growth in several ways. First, the heterogeneous nature of credits creates potential for errors and fraud. The market’s lack of price transparency also creates the potential for money laundering.
One corrective measure would be establishing a digital process by which projects are registered and credits are verified and issued. Verification entities should be able to track a project’s impact at regular intervals, not just at the end. A digital process could lower issuance costs, shorten payment terms, accelerate credit issuance and cash flow for project developers, allow credits to be traced, and improve the credibility of corporate claims related to the use of offsets.
Other improvements would be the implementation of anti-money-laundering and know-your-customer guidelines to stop fraud, and the creation of a governance body to ensure the eligibility of market participants, supervise their conduct, and oversee the market’s functioning.
Transmitting clear signals of demand
Finding effective ways for buyers of carbon credits to signal their future demand would help encourage project developers to increase the supply of carbon credits. Long-term demand signals might arrive in the form of commitments to reduce greenhouse-gas emissions or as up-front agreements with project developers to buy carbon credits from future projects. Medium-term demand might be recorded in a registry of commitments to purchase carbon credits.
Other potential ways to promote demand signals include consistent, widely accepted guidelines for companies on accepted uses of carbon credits to offset emissions; more industry-wide collaboration, whereby consortiums of companies might align their emissions-reduction goals or set out shared goals; and better standards and infrastructure for the development and sale of consumer-oriented carbon credits.
Limiting the rise of global temperatures to 1.5 degrees Celsius will require a rapid, drastic reduction in net greenhouse-gas emissions. While companies and other organizations can achieve much of the necessary reduction by adopting new technologies, energy sources, and operating practices, many will need to use carbon credits to supplement their own abatement efforts to achieve net-zero emissions. A robust, effective voluntary market for carbon credits would make it easier for companies to locate trustworthy sources of carbon credits and complete the transactions for them. Just as important, such a market would be able to transmit signals of buyers’ demand, which would in turn encourage sellers to increase supplies of credits. By enabling more carbon offsetting to take place, a voluntary carbon market would support progress toward a low-carbon future.
