Sustainability Newsletter Edition 17

Woman Photographing Trees Against Sky

The information you need to make your sustainability ambitions a reality

In this edition


Canada’s consumption rates amongst highest globally – circular transition is urgent

The Council of Canadian Academies recently released a report to explore the circular economy and how it can be applied to Canada. Written by an Expert Panel and sponsored by Environmental and Climate Change Canada, the report highlights the relevant factors, current states, challenges and opportunities, and key levers of change Canadian industries, governments and businesses face towards a circular economy transition.

The Circular Economy, defined in the report, is an alternative to the dominant linear economic model of “take-make-use-waste,” and a systemic approach to production and consumption for living within planetary boundaries that conserves material resources, reduces energy and water use, and generates less waste and pollution.

Currently, Canada’s consumption rates of materials, energy, and water are among the highest in the world, with 73% of waste ending up in landfills or incinerated, much of which still holds value. In addition, the report estimated the circularity rate of Canada is 6.1%, compared to 11.5% for EU countries. Maintaining this rate for the next 20 years would lead to a 40% increase in total waste, total resource use and total emissions.

A transition towards a circular economy will help Canada to meet existing policy goals and climate agenda, create sustainable links, while enabling economic productivity through more informed and efficient ways of design, production, and consumption.

Circularity rates infographic
Source: CCA Turning Point Report

Stay tuned for the upcoming CIBC Sustainability Circular Economy Roundtable on March 1, 2022, where more on the opportunities to advance circularity in Canada will be discussed.
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The aviation initiatives to combat climate change

The aviation industry is a hard-to-abate sector where reducing emissions is challenging without the development of breakthrough technologies and innovations. Aviation contributes approximately 2-3% to average global CO2 emissions annually. However, this figure could rise to 20% by 2050 if no climate action is taken. Due to these concerns, 10 of the global airline leaders along with Boston Consulting Group (BCG), created the Aviation Climate Taskforce (ACT) – a non-profit organization focused on critical medium-term solutions, such as synthetic fuel and direct air capture. Read more here

In a separate development, on November 12th, the International Civil Aviation Organization (ICAO) Council approved the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) Sustainability Criteria for sustainable aviation fuels (SAFs). The goals of the criteria are to:

  • Reduce GHG emissions compared to fossil jet fuel on a lifecycle basis.
  • Protect ecosystems and natural resources.
  • Present zero risks to human rights, food security, or local economies.  
  • Promote the achievement of the UN Sustainable Development Goals (SDGs).

CORSIA – an aviation focused carbon offset and carbon reduction scheme – was affected by the Article 6 updates that occurred during COP26. Credits created under the Article 6.4 program that are intended to be transferred to another country for application to their Nationally Determined Contributions (NDCs) or for other “mitigation outcomes” such as CORSIA require the host country to “authorize” them, and corresponding adjustments to be made by both parties. 

Read more here

Stay tuned for the upcoming episode of the Sustainability Agenda where CIBC’s Dominique Barker will speak with Andrew Chen of the Centre for Climate-Aligned Finance to discuss potential ways the aviation industry can decarbonize.

 

Ocean sinks – seagrass and permafrost

According to Project Drawdown, 17% of carbon absorbed from the atmosphere is from coastal and ocean sinks – meaning preserving our ocean ecosystems is critical in decarbonizing the world’s emissions.

Ocean sinks come in various forms including:

  • Seagrass: A research paper determined that seagrass ecosystems could store as much as 19.9 billion tonnes of organic carbon. By using more conservative approaches, estimates for seagrass carbon pool – systems that have the capacity to take in and release carbon – lies between 4.2 and 8.4 billion tonnes of carbon. That represents a lot of carbon storage.
  • Permafrost: The consensus for the arctic permafrost carbon feedback is that it can release between 10 to 500 gigatons of GHG if the global temperature continues to rise. When converted to CO2 equivalent, this would bring an increase in atmospheric CO2 between 1% and 60%. However, according to scientists, Örjan Gustafsson and Jorien Vonk, this scenario is based on overly simplistic assumptions without taking into account the role that interplays between large-scale carbon and water cycles in the arctic permafrost carbon feedback.
 

Microsoft Azure partners with organizations to establish functional global carbon markets

According to the most recent IPCC report, there is no pathway to net-zero by 2050 without carbon removals. The US alone is estimated to need to remove the equivalent of one-third of its annual emissions by 2050 every year. The good news is that the carbon management industry is attracting significant investment dollars towards research and innovation. On the other hand, there is still much work needed to establish functional global carbon markets.

Currently, there is no single ecosystem that exists for transacting carbon credits, but rather many siloed systems that can be difficult to navigate thus creating friction in the development of markets. Additionally, these systems were originally built to document credits for carbon avoidance, not removals. Therefore, the data and processes used for removals will need an upgrade in order to identify this new type of carbon credit. Microsoft Azure has begun to address the challenge in order to drive clarity, quality, and innovation within the carbon markets. Microsoft has partnered with various organizations – including Project Carbon, a collaboration between CIBC, Banco Itaú, National Australia Bank and NatWest Group, to connect buyers and sellers of quality carbon credits onto a voluntary carbon market – in order to identify the most critical scenarios to work on.

Early results showcase possible routes to:

  • A significant increase in the supply of carbon removal credits from a wide variety of projects across different geographies.
  • Decrease the cost of creating credits by automating and digitizing the lifecycle.
  • Speed up the time to market and increase incentive to produce credits.
  • Ensure the quality of credits produced using data standards to allow credits from many different sources to be easily understood, sorted, compared, and priced, thereby creating market liquidity.

Read more

 

The SBTi corporate net-zero standard – Decarbonization of 90-95% by 2050

The Science-Based Targets initiative (SBTi) recently developed the first global science-based corporate net-zero standard for companies to set net-zero targets.

The four key elements of the net-zero standard framework are:

  1. To set near-term SBTs: Five to ten year emission reduction targets in line with 1.5°C pathways.
  2. To set long-term SBTs: Targets to reduce emissions to a residual level (that is, decarbonization of 90-95%) in line with 1.5°C scenarios by no later than 2050.
  3. Beyond value chain mitigation: Companies should take action to mitigate emissions beyond their value chains (that is, purchasing high quality jurisdictional REDD+ credits or investing in direct air capture and geologic storage).
  4. Neutralization of residual emissions: GHG emissions must be counterbalanced through permanent removal and storage when a company has achieved their long-term Science Based Targets.

Through this corporate standard, companies are required to achieve decarbonization of 90-95% before 2050. At that point, a company must neutralize any limited residual emissions – which cannot exceed 5-10% of a company’s emissions depending on the sector – that are not possible to cut. Neutralization activities can take the form of technological removals (that is direct air capture with geological storage) and/or nature-based solutions (i.e. reforestation).

 

Oxford’s GHG removal hub – helping the UK with its goal to remove 100 Million tonnes of CO2 by 2050

Going “net negative” through CO2 removal is needed to meet the Paris Agreement. Therefore, the UK’s net-zero target includes directly removing 100 million tonnes of CO2 from the atmosphere each year by 2050, after eliminating emissions from electricity, surface transportation, manufacturing, and heating and cooling of buildings. To put this into perspective, 100 million tonnes of CO2 is equivalent to the emissions emitted from the surface transportation industry in the UK – the largest emitting sector.

The creation of a carbon management industry is needed within 30 years with the majority of projects to occur in rural areas, where land can be restored, and on the coasts where CO2 can be piped and stored. With interest in CO2 removal rapidly growing in response to its urgency to fight climate change, Oxford is leading a new UK Research and Innovation (UKRI)-backed Greenhouse Gas Removal (GGR) Hub consisting of five demonstration projects in the UK. The Hub’s aim is to:

  • Identify and evaluate different removal techniques, and support those with great promise;
  • Provide solutions for economic, social and political factors which influence deployment; and
  • Foster a bigger and more capable community of removal research in the UK

Read more

 

Global carbon markets’ role to achieve net-zero

On November 10th, the Institute of International Finance (IIF) hosted an event to expand on the recent IIF report published in October, around the vital role of global carbon markets on achieving net-zero and its implication for financial institutions, businesses and policymakers.

A few takeaways from the event:

  • Integrity Council for Voluntary Carbon Markets (IC-VCM) plans to establish a global benchmark for carbon credit quality – Core Carbon Principals (CCPs) – with key features: (1) based on realistic and credible baselines (2) monitored, reported and verified (3) permanent – the way in which carbon storage is done and how long it lasts is a vital part on the pricing of an associated credit (4) leakage has to be accounted for and minimized (5) additionality – a high quality credit is generated from emission reductions that are in addition to what would happen without a particular offset program (6) credits can only be counted once. This mandate is to ensure the voluntary carbon markets serve its primary purpose of reducing and removing GHG emissions and accelerating the transition to net-zero.
  • Carbon pricing currently covers 21% of global GHG emissions but has the potential to reach over 50% of global emissions by 2030 as new markets are created in developed and emerging economies, and voluntary net-zero commitments expand at the national and corporate level.
  • Carbon pricing is often looked at as a cost that a company has to bear but instead, carbon pricing should be looked at as an opportunity to create a new industry – Carbon Management – in which the voluntary carbon market will play a critical role to accomplish this objective.

Catch the event replay here

 

The 2022 Ford F-150 lightning EV approaching 200,000 reservations

The 2022 Ford F-150 Lightning EV Pickup is set for release in the next year and demand for these vehicles have skyrocketed past the company’s expectations. Jim Fairly, Ford’s CEO, recently revealed the new F-150 is approaching close to 200,000 reservations with over 80% of those reservations expected to convert to sales. For context, Tesla took 15 years to achieve a similar target (founded in 2003, Tesla sold its 200,000th electric vehicle in 2018).

According to the United States Environmental Protection Agency, a typical passenger vehicle emits 4.6 metric tons of CO2 per year through tailpipe emissions. Consumers have started to become more climate conscious with their everyday activities which is evident in the recent surge in electric vehicle demand.

Read more

 

Fortescue signs memoranda of understandings with Indigenous Nations in Canada

Fortescue Metals Group’s green energy subsidiary – Fortescue Future Industries (FFI) – has signed Memoranda of Understandings (MoUs) with three Indigenous Nations in Canada including the Lheidli T’enneh First Nation in British Columbia; members of the Homeguard Cree First Nations in northern Manitoba; and the Innu Nation in Newfoundland and Labrador in order to pave the way towards green hydrogen and sustainable energy across Canada. The MoUs will provide a collaborative framework for discussions and negotiations that will determine the viability of building green hydrogen projects across Canada.

Read more

 

COP26 brief – insights from the 2-week long UN Climate Conference in Glasgow

Is the 1.5°C Target Still Alive?

The delegates representing 197 parties to the UN Framework Convention on Climate Change (UNFCCC) came to Glasgow with one task in mind: to smooth out and re-engineer the Paris Agreement enough to keep the 1.5ºC target alive.

The 2021 Nationally Determined Contributions (NDCs) were not enough to make the 1.5ºC target reachable as modelling shows that if current NDCs were met, there would be a 68% chance of temperatures rising to 1.9°C – 3.0°C, with a median value of 2.4°C.

According to the Economist, COP26 provided three ways to keep 1.5ºC alive:

  1. By changing timetables: The Glasgow pact requests that parties to the Paris Agreement increase their pledges for 2030 by 2022 instead of the original plan of 2025.
  2. By tweaking financing arrangements: In 2009 rich countries promised to mobilize $100bn of climate finance each year for poor countries by 2020 however by 2019, the annual flow had only reached $80bn.
  3. By allowing for greater multilateralism: Groups of countries, companies and cities joined hands to come up with their own climate targets focused in particular areas. Notable deals include one on phasing out coal power, greening the financial services industry, reducing methane emissions and ending deforestation.

For a fighting chance at 1.5ºC, 2030 GHG emissions need to be half of what they were in 2010 which means reducing annual emissions by the equivalent of between 23 – 27 gigatonnes of CO2. The emissions reductions promised in the new NDCs close that gap by only 4 gigatonnes.

Read more

 

What Canada did and didn’t do
Canadian officials made a flurry of announcements during COP26 including:

  • Canada signed a statement that would “end new direct public support for the international unabated fossil fuel energy sector by the end of 2022”, except in limited circumstances that are consistent with the goals of the Paris Agreement.
  • Prime Minister Justin Trudeau urged countries to agree to a global price on carbon, with Trudeau hoping to see global emissions covered by a carbon tax go from 20% to 60% by 2030.
  • Trudeau announced that Canada will impose a cap on the oil and gas sector’s emissions.
  • Canada signed a declaration to “halt and reverse forest loss and land degradation by 2030”. However, 40 countries including Canada signed a similar agreement back in 2014 with deforestation increasing by 40% since then.
  • The Global Methane Pledge at COP26 launched by the U.S, prompted Canada to confirm its support for the pledge with its commitment to reduce Canadian methane emissions from oil and gas to 75% below 2012 levels by 2030.
  • Canada made commitments related to electric vehicles including a signed Memorandum of Understanding to have 100% zero-emission new truck and bus sales by 2040 and 30% by 2030.

Read more

 

COP26 – summary, timelines and post conference projections
In summary, a podcast by the Economist – To a Lesser Degree – discussed the monumental outcomes and disappointments that were delivered from COP26, including a timeline with key landmarks from past global environmental summits and projections of what to expect from future COP conferences.

 

Sustainability across CIBC

Whether through greening your balance sheet or providing sustainability advisory services, our objective is to help our clients become global leaders in environmental stewardship and sustainability. At CIBC, we are committed to making sustainability a reality for our clients and the communities we serve.

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Publications

The Sustainability Agenda

CIBC Capital Markets’ podcast series focusing on the evolving complexities of the sustainability landscape – with a view to addressing current issues in a concise format to help you navigate and take action.

 

Chart of the day:

Drastic reduction in annual CO2 emissions (per capita) is still needed

Note: CO2 emissions are measured on a production basis, meaning they do not adjust for emissions embedded in traded goods.

Source: Our World in Data based on the Global Carbon Project

 

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Roman Dubczak
Deputy Chair
Susan Rimmer
Managing Director And Head, Global Corporate & Investment Banking
Dominique Barker
Managing Director and Head, Sustainability Advisory
Siddharth Samarth
Managing Director, Sustainable Finance
Robert Todd
Managing Director, Energy, Infrastructure & Transition
Giorgia Anton
Managing Director and Head, Research
Gayatri Desai
Managing Director, Global Corporate Banking
Adam Janikowski
Executive Director Global Investment Banking

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