Key notes from the webinar with James Thornton (Client Earth) Webinar 24/11/20 for The Crowd’s Green Recovery Festival

A survey of many chief economists around the globe asked ‘Which investments will bring deepest impact and greatest payback?’ The results were green energy, clean R&D, natural capital, and in the developing world; improved agriculture practices. In other words, “deeply green investment.”

EU targets (climate law now in the council (final stage of ratification))

• Net carbon neutrality by 2050 with 50% reductions by 2030. So all spending coming in will in theory align with these objectives 
  • That’s an enormous ambition because that’s 1000s of pieces of legislation that have to be re-conceived in a new way, from agriculture to industry to transport and so on.
  • BUT the biggest question w the EU is always, ‘how does it work in practice?’ Often there’s a gap between setting and enforcing the terms
  • When Professor Wilson was asked ‘what do you think of communism?’ he said ‘Beautiful theory, wrong species’. In the EU we often have beautiful theories, but have they been designed for the right species??
• Chemicals. Goal now to de-toxify entire economy (eg hormone-destructing chemicals), which is hard to regulate because chemical industry have interests directly opposed to human health
• Greater access for citizen groups to challenge member states’ national climate plans 
• Nature protection law in process, with it’s ambition to make legally-binding restoration targets for Europe, including 30% of land and sea to be protected
• EU talking about planting a billion trees
• Food
  • farm to fork strategy – reduce pollution and use of chemicals – reduce pesticides by 50% by 2030 in all member countries and fertilisers by 30%
  • Increase agriculture production of all farmlands to 25% organic 
• Common Agricultural Policy reform is not going so well
  • Subsidy system needs to be re-aligned with Paris Agreement. It’s single-handedly what created industrial farming across EU. Needs deep reform. Progress here is slower. 

€750bn direct covid recovery programme for EU. But….

• Bond purchase agreement from EU central bank 
• Problem – what kind of bonds are they purchasing?? If they were green bonds, ie debt from companies producing renewable energy, then you’d have a really supportive structure
• So far they’re buying bonds in market based on how we’ve already done it, and 50% of that is based on fossil fuels
• Needs systemic change in how banks do their business

Financial commitment to Green Economy

• Germany is committing own national finance – €40bn for climate change actions, and France €31bn, in addition to EU money
• UK – committed to 2050 target but there’s no law at present demanding companies do the same thing

Bailing out industry in relation to the pandemic – a golden opportunity

I wrote a letter to PM Johnson – allow bailouts to become high leverage mechanism to become part of green economy (still awaiting a response!):

1. require reports in line with climate-related disclosure taskforce (there are guidelines, voluntary only at the moment)
2. company must commit to achieve net zero by 2050 or earlier in line with PA
3. write biz plan within year of getting bailout with goals of how to meet PA goals year by year
4. ensure executives salaries are tied to meeting those targets

Mark Carney (Governor of BoE): “if you’re a company and you’re not heavily reducing footprint by 2030 you’ll find yourself no longer a ‘good company’ quite soon”

Johnson’s 10 pt plan reads very well, incl. banning sale of combustion engines by 2030, increase in wind energy etc. There’s a small commitment to planting trees and improving insulation (we’re much worse than any other country in western europe)

• Main criticism is that it looks nice but isn’t well-funded. Downing Street says its committing to £12bn but analysis shows only 4bn is new spending. Evidence shows it needs to be at least 33bn
  • By comparison the gov is spending 100bn on HS2, and France (€31bn) and Germany (€40bn) much more

China’s Green Economy

Client Earth has been in Beijing since 2014 working closely with gov to help speed up attempts to clean up pollution, working with supreme people’s court. Training judges and prosecutors. Since 2016 the prosecutors have brought more than 100,000 environmental cases!! 

• Senior officials completely understand that it’s in the enlightened self interest of China to clean up their pollution etc 
• The scale and pace of it is much larger than what’s going on in the West. They have more to do but the will and action is there to catch up

President Xi in Sept made a surprise speech in UN that ‘all countries need to cooperate in having a green Covid recovery, and committing China to carbon neutrality before 2060. Important because China is world’s largest carbon emitter and also because they tend to ‘under-promise and over-perform.’ Shortly after that Japan followed and South Korea

Countervailing forces in China

• the economic recovery has lead to the possibility of new coal fired power stations. There are already 1000 and there are plans for 250. However plans are now shifting towards green solutions.
• The expectations are that there will be great diminution in next (14th) five year plan in coal use

China has a big global ‘Belt & Road initiative’, linking 100 countries in deeper economic way:

• This is the largest infrastructure project in human history, and how that money is spent will depend on whether we meet PA or not. If it all goes the wrong way (brown energy, roads and ports in wrong places) we have no chance. But spent in the right way, and it becomes an enormous green recovery project, it could be very exciting. 
• However it wasn’t designed to do that! It was designed years ago as uncoordinated investments with no thought on green vs brown energy.
• Client Earth is arguing that there needs to be a central authority that looks at proposed projects and rates them as to whether they’re environmentally acceptable or not. And the ministry of env in china has taken it on as their project and I’m one of 100s of western advisors on this 
• Traffic light sys – project comes up for funding and it gets appropriate coloured light depending on climate and biodiversity conditions – funnelling funding towards green infrastructure 

Enforcing ideas and obligations

• It’s difficult at EU level
• Within member states it’s much easier
• One of the thing you want to look at is the subsidies and making sure they come from green investment
• In UK we’re arguing for transparency 
• One good thing happening in UK is the Pensions bill which i think will go through, requiring all pension funds to meet climate disclosure norms for taskforce – pensions industry will have to do that disclosure which will send enormous amounts of info into the market and allow investors to move towards green companies

Relationship between EU and China

In the relationship between EU and China is a political sweetspot. Both deeply committed to doing something about climate change. The good news is that they want to talk to talk to one another – there is a programme facilitating dialogues between them. Now imagine Biden comes in and forms a three way partnership! If that happens I don’t doubt we can have a very rapid change into much greener future 

Q&A with audience

What sense of where blockages are in UK gov? Where can pressure be most effectively applied? What can corporates get involved beyond annual reporting? 

• Treasury tends to block good env plans, so tell Rishi Sunak that world economists say that Green Investment is the best investment they could be making! 
• When we sued UK gov on air pollution we found Treasury’s reluctance to invest even though 40,000 ppl/year are dying 
• Also, Corporates can look at biz plan and see what you need to do to write a PA aligned biz plan

Is there a strategy for getting banks to do things the right way?

• Christian Lagarde (President of EU central bank) – is saying she wants to do things the right way
• One option is to articulate legal options which they must follow
• Central banks are organs of countries, and those countries have all signed on to the PA…