1.

We’ve written a lot at our Institute about how investors can use scenarios to quantify the impacts of a warming world on the value of their investments. Right now, though, we’re reading hot off the press “How Tariffs Could Impact Equity Markets: Building Scenarios,” in which my colleagues Thomas Verbraken and Abhishek Gupta combine a scenario framework with economic exposure data to help investors understand how tariffs and the specter of a global trade war could reverberate. Their analysis, which examines possible shocks from tariffs in 15 industries in the U.S., Canada, China, Japan, the U.K. and Europe, finds that companies in the auto industry would underperform the broad market across countries. They also find that companies in a range of countries and industries exposed to the U.S. — including Japan’s semiconductor industry; Germany’s pharmaceutical, semiconductor and consumer-discretionary industries; and consumer staples, technology and financial services in Canada — could all experience sharp selloffs, as could semiconductors and technology in the U.S. itself. Meanwhile, domestically oriented industries such as utilities, telecommunications and equity real-estate investment trusts generally could outperform their respective markets. There’s a table and charts to help you sift the scenario in detail.

Read here.

2.

How might society respond to a world that warms by 4°C (7.2°F)? That’s the question motivating “Adapting to a 4°C World,” a series of essays published in 2022 by a group of U.S. law professors known as the Environmental Law Collaborative. The essays explore questions for law and governing in a scenario marked by extreme heat, severe drought, devastating floods, hunger and mass migration. Among the many questions they consider: How do you design an electricity system for a future where power plants shut down because the rivers, lakes, and oceans they rely on for cooling have become too warm to function? How might the government compensate landowners in cooler, more climate-stable states for taking property to accommodate people forced by climate change to relocate from elsewhere in the country? How can a country preserve its culture and history if the physical places tied to that history are lost? What happens to the physical, emotional, and political boundaries within and between states and nations? How might cities share the provision of services or manage water rationing? You could dismiss these essays as thought exercises in dystopia. Or we could start engaging seriously with reimagining all facets of our society to cope with a much warmer planet.

Read here.

3.

Sustainable finance suffers from constant conflation of terms. Well-meaning actors talk across one other, using the same words to mean different things or meaning the same things but using different terms. The conflation creates confusion and can undermine risk management, impede coordination and lead to missed opportunities, observe the Columbia Center on Sustainable Investment’s Lisa Sachs, Denise Hearn, Matt Goldklang and Perrine Toledano in “Distinguishing Among Climate-Related Risks.” The eight-page briefing lays out in simple terms the difference among planetary risks, economic risks and financial market risks. Next time you talk about climate risk, ask yourself whether you mean that a climate-driven impact will damage the planet; destroy or devalue a public or private asset, or change an asset’s financial value. Only some types of climate risk translate into financial risk. I have a soft spot for anyone who is fighting the good fight in clarifying our terms. You’ll think more clearly for having read this report.

Read here.

4.

The proposals put forward by the Science-Based Targets initiative (SBTi) in the latest draft of its “Corporate Net-Zero Standard” have been all the talk among the 10,300+ companies that have made targets or commitments aligned with standards set by the global arbiter of corporate climate targets.  Whither Scope 3 targets, and how the heck to achieve them? The draft proposes options that may seem more feasible for companies concerned about emissions that are far from their control, such as including non-emission metrics for measuring supplier progress. It hints at openness to so-called indirect mitigation (such as unbundled certificates for low-carbon aviation fuel) to help companies more easily meet targets and proposes neutralizing residual emissions (albeit only for Scope 1) — through carbon removal credits. (Should companies be required to set interim carbon removal targets, SBTI asks?) The new standard would begin in 2027 but comments are due June 1, so get crackin’ if you have an opinion.

Read here.

5.

I recently had the pleasure of speaking with Annicent Busingye, CEO of Danish investment manager Frontier Energy’s Uganda portfolio, as part of a forthcoming series of conversations with extraordinary women leading the energy transition. I asked what she’s reading. On her bedside table is Uganda’s “Energy Transition Plan,” which tells the story of energy in a country striving to achieve universal electricity for its 50 million people this decade, up from 45% today. A country where firewood and charcoal still supply around 90% of energy needs, yet one that envisions solar providing 40% of its power by 2050. (Carbon trading to support clean cooking could help avoid 17 million metric tons of greenhouse gas emissions by 2030, the report notes.) It’s a story shaped by a warming world —where hydropower supplies the lion’s share of electricity but could be undermined by the impact of climate change on water flows. It’s a story of opportunity — one that could create an estimated 220,000 new jobs in electricity access, clean cooking and renewable energy by the end of this decade. It’s a story of finance, in which development finance institutions have financed about 80% of Uganda’s power investment compared with 10% from the private sector and the remainder from domestic state-owned enterprises. In short, it’s a microcosm of the transition unfolding globally.

Read here.