U.K.’s Fossil Fuel Flirtation | U.S. Coal Plant Closures | The Biomass Debate

Plus: Why Water Matters

Hello and welcome to the latest edition of Current Climate.

British Prime Minister Boris Johnson wrote an editorial this week outlining the need for Western economies to become independent from Russian energy supply in light of President Vladimir Putin’s invasion of Ukraine. The piece reaffirmed the need for a green energy transition but also touted nuclear energy development and British “hydrocarbons”—a term the prime minister appears to favor over its less erudite synonym, fossil fuels.

In his policy-making, Johnson has so far largely resisted the net zero-skeptic fringes of his own party—some of whom have been arguing for a Brexit-style referendum on the country’s climate targets. Yet his piece signals an openness to oil and gas exploration in the North Sea, which would be antithetical to the U.K.'s net-zero commitments, and also largely unpopular with the public, based on several previous polls’ findings. It’s a very different message from the one the International Energy Agency delivered on Friday, calling for governments to reduce oil and gas consumption by cutting speed limits on highways and encouraging flying less, driving less and working from home.

As March 22 marks World Water Day, for Climate Talks I spoke to Kirsten James, senior program director for water at nonprofit Ceres, about the renewed focus on water resources for companies’ sustainability benchmarks and action.

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The Progress

A 4,200-kilometer undersea cable link that will deliver solar-generated electricity from Down Under to Singapore received a $152 million investment boost from two Australian billionaires.

Following a rebound in 2021, coal plant closures are once again accelerating across the United States.

The Challenges

Sarah Bloom Raskin, a law professor who believes climate change risk should be considered when crafting monetary policies, withdrew from consideration for the role of the Federal Reserve’s top bank regulator after Sen. Joe Manchin (D-W. Va.) joined Republicans in opposing her nomination.

Switzerland’s increasing reliance on biomass derived from burning wood is driving a wedge between those who support it as a form of low-carbon emissions energy production and those concerned about its impact on forests, air quality and human health.

Climate Talks

As companies focus on sustainability action, they’ll need to consider more than just reducing their greenhouse gas emissions. Understanding the water resources they need and impact with their operations is key to ensuring they, and also the planet, can keep thriving. Through her work at Ceres, a nonprofit that works with investors and shareholders on tackling sustainability challenges, Kirsten James has been focused on the risks facing freshwater and agriculture systems.

Can you speak to some of the changes in corporates' attitudes to water risk that you've seen in the past two years?

We’ve seen some good progress and there's an upward trend. Seventy-one percent of the companies we benchmark now consider water risks as part of their major business planning activities, and that's up from 58% two years earlier. That said, there's still a long way to go. In particular, the report found that within agricultural supply chains, we just aren't seeing enough focus and progress. That's where we really see the largest water footprint.

Which companies are most exposed to water risk, and is this dependent more on sector, geography or a combination of factors?

Both are important factors to consider. Water risks impact the bottom line for companies, and so we've done a lot of work with institutional investors, engaging with companies, and pointing them in the right direction to better manage water. Companies should carry out assessments to understand the local water conditions before they make capital expenditures, or as they're looking to prioritize their water management activities. It is important to know what’s the situation of the local water supplies and map out where those high-risk areas are.

Some of the language around water commitments can be confusing. For instance, what does it mean to be net water positive?

There are a lot of different definitions that are floating out there. Some companies are making commitments around recharging the amount of water that they are using, but we also need to better understand the state of play in that specific water basin, where is the stress that the company is creating, and [whether] they are really offsetting their impact within that specific basin. As companies say things like “net positive,” they need to back that up with evidence-based ambitious changes to business as usual, so they're transparent about the actions they are going to take within their operations and, importantly, their supply chains. It’s really critical that these commitments include the full supply chain as well.

There needs to be a level of disclosure and transparency around what these company commitments are and how they're being backed up by actual action. We analyze a lot of public disclosures for the companies, and oftentimes there's just no information in the public realm as to what is really being done to back up those commitments. There needs to be a lot more monitoring of water resources and a lot more data that's collected and disclosed in the public sphere, so that we can assess the impact made.

How similar are the processes of assessing climate risk and water impact?

There are similarities, but also differences. [Companies need to] track their impact on water resources and the impact that the lack of availability of clean water resources is having on the business, looking at both sides of the equation. Water is local, there are local conditions that you need to factor in—are you in a high-risk basin? You need to look at your entire supply chain and where commodities are sourced—for example, are those contributing to water pollution impacts?

Climate change is acting as a threat multiplier, it poses physical risks that are manifesting in water issues, so there's definitely linkages. Getting granular about the entire supply chain and the local conditions is very important.

What are some of the best practices?

We can draw some best practices from the work of the top scoring companies in Ceres’ Feeding Ourselves Thirsty benchmark. For example, in one company, the public policy and sustainability committee of its board of directors has responsibility over water-related issues within the company—a leading best practice. One corporation has committed to source 50% of its key ingredients through regenerative agricultural methods. A third business, instead, stood out due to some of its commitments around regenerative agriculture for priority crops in high-risk watersheds.

Are there any cautionary tales?

There's definitely signs popping up all around. Some that come to mind [relate to] water issues that impact local communities. Companies looking to put capital into areas of high-water stress need to understand that there's a social license to operate. That also is the case with various regulatory issues. As regulation changes, companies need to change their practices and eliminate pollution and other impacts.

We also released some research in December taking a closer look at the meat industry and the apparel industry and the changes in company valuations due to their impacts on water resources and the cost of action. It demonstrates to investors that there can really be an impact on the bottom line if these issues aren't addressed.

Dr. Kirsten James’s answers were condensed and edited for brevity and clarity.

On The Horizon

A legal push against the Environmental Protection Agency’s ambitious new car emissions standards is unlikely to succeed.