NEWS

The ESG agenda and the challenge of decarbonization

Engage
August 2021

NEWS

On August 30, Clarissa Lins, founding partner of Catavento, participated in the Valor Econômico live on the challenges of reducing carbon emissions in productive processes. The debate was moderated by Vinicius Dônola and included the participation of Malu Paiva – Executive Vice President of Sustainability at Vale -, Izabella Teixeira – former Minister of Environment and Advisor to CEBRI -, Cristiana Brito – Director of Institutional Relations and Sustainability of BASF -. Below we highlight some key takeaways of the participation of Clarissa Lins.

The ESG and sustainability agenda has been increasingly present in the daily lives of business leaders, with new types of risks and business opportunities. Sustainability should work as an additional lens to rethink corporate strategy, as it broadens the vision of leadership beyond economic and financial aspects and brings to light concepts such as climate urgency, the need to promote diversity & inclusion, combating social inequality and robust governance.

Companies and the financial sector have a key role to play in supporting society in tackling pressing challenges. Despite the current issues being highly complex, companies are listed in a survey by Edelman [1] as the type of institution people trust the most (61% of respondents), ahead of governments and NGOs, for example. At the same time, companies are increasingly encouraged to act by the financial sector, which already has US$35 trillion of ESG assets under management [2], in addition to driving the issuance of sustainable debt instruments. These more than doubled between 2018 and 2020, having reached US$ 470 billion by April 2021 [3].

Regarding decarbonization, while governments of developed countries can allocate resources to drive the transition, Brazil has its particularities. Large investments in China during the last decade, notably by state-owned companies, have allowed for a reduction in costs in the photovoltaic solar energy chain by around 85% since 2010 [4]. In the US, the Biden administration announced the “EarthShots” project, which aims to encourage R&D programs and public-private partnerships to reduce the cost of low-carbon hydrogen by 80% in 10 years, reaching US$ 1/ton, and reduce the cost of large-scale electricity storage by 90% by 2030 [5]. In Brazil, on the other hand, given its fragile fiscal situation, the government is expected not to directly invest public funds, but to promote clear rules – including eventually carbon markets – that guarantee an open, competitive, and stable market to attract resources to drive the transition.

Finally, it is important not to “villanize” the carbon intensive sectors or the O&G sector, but rather to dialogue with it and provide solutions. Energy from oil, natural gas and coal currently accounts for about 80% of global energy demand [6]. Such fossil sources were and continue to be essential to guarantee the well-being of society. But it is undeniable that the energy transition to less emitting sources must accelerate, since the way we produce and notably consume energy is responsible for more than 70% of global greenhouse gas emissions [7]. In this scenario, the O&G sector has competences and expertise that will be of great value if they are used amid the transition to a low-carbon economy, such as: long-term planning, complexity management, capacity for dialogue with governments and chain management from suppliers. The exclusion of a sector that was and still is essential for our well-being does not seem to be a fair solution, especially given the different local realities and the opportunity to retrain the workforce for a decarbonized future.

 

The debate can be watched in full here. (Available in Brazilian Portuguese only)

 

[1] Edelman. Trust Barometer. 2021

[2] Global Sustainable Investment Alliance. Global Sustainable Investment Review 2020. 2021

[3] Morning Star. Sustainability-Linked Debt Instruments and Their Potential Credit Impact Through Cost of Capital. 2021

[4] IRENA. IRENA Renewable Power Generation Costs. 2021

[5] https://www.energy.gov/articles/secretary-granholm-launches-hydrogen-energy-earthshot-accelerate-breakthroughs-toward-net

[6] IEA. World Energy Outlook. 2020

[7] IEA. CO2 emissions from fossil fuel combustion. 2020

 

Foto: Diego Jimenez via unsplash

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