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1. Distinguishing Among Climate Change-Related Risks

Author:
Lisa Sachs, Denise Hearn, Matt Goldklang, and Perrine Toledano
Publication Date:
02-2025
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
Understanding the diverse types of climate change-related risks is crucial for developing effective strategies to address the global climate crisis. A holistic yet disaggregated approach allows for a comprehensive view of the challenges while enabling targeted responses from various stakeholders. This document outlines three main categories of climate-related risks: planetary, economic, and financial, detailing their relevance to various stakeholders, timeframes, and potential response strategies. This short brief aims to disentangle the complex nature of risk discussions for productive discourse and appropriate risk management approaches for different stakeholders. In practice, discussions related to assessing and responding to climate change risk have conflated categories of risk, confusing discussions and undermining the effectiveness of related strategies. We hope this brief can bring clarity and rigor to analyses of risk and support constructive discussion among policymakers, financial institutions, social sector actors, and the public. We plan to follow this short briefing with a longer report including more detailed analysis, integrating feedback to these initial ideas.
Topic:
Climate Change, Finance, Economy, Investment, Risk, and Sustainability
Political Geography:
Global Focus

2. Scaling Investment in Renewable Energy Generation to Achieve Sustainable Development Goals 7 (Affordable and Clean Energy) and 13 (Climate Action) and the Paris Agreement: Roadblocks and Drivers

Author:
Mithatcan Aydos, Perrine Toledano, Martin Dietrich Brauch, Ladan Mehranvar, and Theodoros Iliopolous
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
The zero-carbon energy transition is the solution to the 2022 energy crisis and a fundamental part of the solution to the global climate crisis. Yet, there are relatively low levels of investment in renewable energy in developing countries, hindering their achievement of the Sustainable Development Goals (SDGs) and contribution to the Paris Agreement goals. In 2021, the Asia–Pacific region (excluding China) accounted for less than 8% of investments in energy transition technologies, Latin America and the Caribbean for less than 4%, and Africa and the Middle East for less than 2%. Annual investment in zero-carbon energy in developing economies other than China has stagnated since the Paris Agreement was signed in 2015. To put the world on track to reach net-zero emissions by 2050, annual capital spending on zero-carbon energy in developing countries must increase by more than seven times, to more than USD 1 trillion, by the end of the 2020s. There is therefore an urgent need to address the drivers of public and private finance for investment in renewable electricity generation, network infrastructure, and enduse sectors to meet the Paris Agreement and two complementary SDGs: ensuring access to affordable, reliable, sustainable, and modern energy for all (SDG 7); and taking urgent action to combat climate change and its impacts (SDG 13). This report sheds light on roadblocks to scaling up investments in renewables while distilling solutions from international experience and brings clarity to where international and national efforts should urgently be focused to address the deterrents of investment in renewables and enable zero-carbon energy security and prosperity.
Topic:
Climate Change, Investment, Renewable Energy, Carbon Emissions, Paris Agreement, Energy Transition, and Net Zero
Political Geography:
Global Focus

3. Finance For Zero: Redefining Financial-Sector Action to Achieve Global Climate Goals

Author:
Lisa Sachs, Nora Mardirossian, and Perrine Toledano
Publication Date:
06-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
As of 2023, the financial system is woefully misaligned with the world’s climate goals. Six times the current annual level of investment in non-fossil fuel investments is needed between 2023 and 2030 to stay on a 1.5ºC warming pathway.1 The ratio of clean-energy lending and equity underwriting by banks relative to fossil fuels needs to reach 4 to 1 by 2030, whereas for 1,142 assessed banks, the ratio was between 0.8 and 1 at the end of 2021.2 As providers, underwriters, and fiduciaries of trillions of dollars of capital flows annually, financial institutions (FIs) play a critical role in decarbonizing the economy and scaling access to clean, affordable energy. Optimally, the roles and opportunities for the financial sector should be guided by an official pathway and associated policy tools, such as carbon pricing, public finance and guarantees, strategic subsidies, sectoral regulations, and so on. Unfortunately, that policy framework to shape and guide the financial sector does not yet exist. In the absence of strong government leadership, there has been a proliferation of bottomup models, tools, metrics, methodologies, and initiatives designed to measure and evaluate the climate performance of financial institutions. While the rapid growth of these initiatives demonstrates the financial sector’s engagement, meaningful progress in realigning global finance to support climate goals has been limited. These frameworks and tools often overstate or misrepresent the extent to which they support meaningful action toward achieving climate goals, and at times rely on misaligned targets or metrics that undermine their effectiveness as tools for setting or assessing corporate commitments. Overall, existing commitments and strategies are not sufficiently aligned with the actions needed from financial sector actors to achieve climate goals. There are deep and inherent limitations to bottom-up approaches to achieving decarbonization, some that are within the capability of financial institutions to address but many that are beyond their remit. This report focuses on the things the financial sector can and should do even in the absence of a robust long-term policy framework. Part 1 of this report urges FIs and their alliances to be clear in their commitments, pledges, and communications about their climate-related objectives and corresponding strategies, their limitations, if any, and how they measure success. Current climate-related pledges, alliances, frameworks, and tools at times confuse or conflate risk mitigation with climate action, relying on targets and metrics that may not be fit for purpose. Whether intentionally or unintentionally, FIs and their alliances can misrepresent or overstate the effectiveness of their approaches in contributing to climate action. This misrepresentation can be exacerbated by the use of misleading metrics or strategies, such as selling or legally spinning off high-emitting assets or using offsets in net-zero pathways. FIs should communicate clearly and accurately about their climate-related pledges and commitments, including whether their goal is to contribute to climate action or to mitigate their own financial risk and how their business strategies will be aligned to achieve those goals. FIs should ensure that targets, metrics, and methodologies are aligned with their goals and business strategies and do not misrepresent the effectiveness of their strategies. FIs’ commitments and strategies are shaped by their financial interests and their interpretation of their fiduciary and other legal duties and obligations; because of perceived tensions between legal obligations and certain climate-oriented strategies, FIs and their alliances should provide clear, public explanations of how their interpreted fiduciary and other legal duties shape their climate-related strategies. Part 2 of this report proposes how financial institutions can and should contribute to, and not undermine, climate goals, under current policy conditions. While many of these actions are relevant for a risk-mitigating approach for FIs and their alliances, these recommendations go beyond risk mitigation in order to guide those FIs and their beneficiaries that seek to have real climate impact.
Topic:
Climate Change, Investment, Sustainability, Financial Institutions, and Financial Systems
Political Geography:
Global Focus

4. Community Benefit Sharing and Renewable Energy and Green Hydrogen Projects: Policy Guidance for Governments

Author:
Perrine Toledano, Chris Albin-Lackey, Maria Diez Andres, and Martin Dietrich Brauch
Publication Date:
09-2023
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
This report offers high-level guidance to governments that want to mandate or encourage the use of benefit-sharing arrangements in connection with renewable energy projects, including power and hydrogen generation and grid infrastructure. In the right circumstances, and if appropriately designed and governed, benefit-sharing arrangements can be a useful mechanism to ensure that project-affected communities experience positive outcomes from those projects. Such direct community benefits can play an important role in ensuring communities are treated fairly, while also building local support that can expedite project development.
Topic:
Infrastructure, Renewable Energy, Sustainability, and Benefit Sharing
Political Geography:
Global Focus

5. New Producer Contract Terms and Uncertainty: Lessons From the Recent Past

Author:
Patrick Heller, Perrine Toledano, David Mihalyi, and Tehtena Mebratu-Tsegaye
Publication Date:
03-2022
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
The petroleum industry is volatile, and governments in “new producer” countries have operated at a significant information disadvantage when negotiating with international oil companies. This challenge is growing today; new producer countries face intensifying questions around whether to offer fiscal incentives to maintain investment in the face of 1) the pandemic-induced volatility in oil prices and 2) long-term questions about the future of the industry in the face of the climate crisis and the global energy transition. This confluence of short-term and long-term uncertainty is prompting a reexamination of the narrative that once took hold in many new producer countries. The traditional story was one of linear progression from being non-producers to small levels of production to ultimately having oil and gas become a major economic contributor over the long term. This notion of progression was associated with a commonly held theory: After a country’s first major discovery, the geological risk that wells will be dry was expected to decrease. Countries could therefore shift from a position of having to grant tax breaks (and other concessions) to international investors, to taking a tougher stance in laws and negotiations for new projects going forward. In this paper we examine whether this theory has been borne out in practice and make recommendations to support new producers in their navigation of the uncertainty associated with the energy transition. Among the eight “new producer” countries, for which we analyzed a total of 26 contracts signed before and 25 contracts signed after discovery events (all occurring between 2001 and 2014), the evidence is mixed.
Topic:
Gas, Transparency, Contracts, Monitoring, Energy, and Green Transition
Political Geography:
Global Focus

6. How Much Have the Oil Supermajors Contributed to Climate Change?

Author:
Jiarui Chen, Perrine Toledano, and Martin Dietrich Brauch
Publication Date:
03-2022
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
In the 40-year period 1980–2019, annual carbon dioxide (CO2) emissions from fossil fuel combustion, including flaring, increased by more than 80%, and total emissions from those sources represented approximately 83% of anthropogenic CO2 emissions (also including cement production and land-use change) without accounting for sinks. Understanding the carbon footprint of countries and companies along the oil value chain is fundamental to outlining paths to reduced reliance on fossil fuels. However, academic analyses of carbon footprints are limited by the lack of a reliable dataset and carbon accounting method that would allow comparisons across countries and companies.
Topic:
Climate Change, Environment, Carbon Emissions, and Carbon Footprint
Political Geography:
Global Focus

7. Allocation of Climate-Related Risks in Investor–State Mining Contracts

Author:
Martin Dietrich Brauch, Perrine Toledano, and Cody Aceveda
Publication Date:
06-2022
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
As the effects of climate change continue to worsen, mining projects, the communities surrounding them, and their host states are increasingly at risk of being affected by environmental disasters, with devastating social and economic consequences. Risk allocation provisions included in investor–state mining contracts, often considered boilerplate and replicated in agreements without careful consideration or negotiation, could potentially help the parties assign responsibilities between themselves and limit their losses in those cases. However, traditional risk allocation clauses within existing mining contracts, formulated before the world acknowledged the severity of climate change, do not adequately allocate climate-related risks and impacts between states and companies.
Topic:
Climate Change, Environment, International Cooperation, United Nations, and Risk
Political Geography:
Global Focus

8. Investment Incentives: A Survey of Policies and Approaches for Sustainable Investment

Author:
Lisa Johnson and Perrine Toledano
Publication Date:
11-2022
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
In order to effectively harness public funds and leverage them to support sustainable development, governments have to be strategic in their use of capital. This means ensuring that government funds are used to help compensate for market failures that lead to the underproduction of public goods. It also means ensuring that government funds are not used to provide redundant support for private actors and subsidize environmentally or socially harmful activities. To achieve these policy objectives, governments need to be careful and deliberate in their use of investment incentives. Investment incentives, which may be defined (broadly) as nonmarket advantages used to influence the behavior of an economic actor, can represent significant costs to governments. These costs have the potential to generate various public benefits such as increased employment, development and dissemination of environmentally and socially sound technology, and other positive externalities. However, investment incentives are not often tailored or implemented in ways that ensure they produce the desired outcomes, or they do so at public costs that are less than their public benefits. Investment incentives have the potential to advance sustainable development but can also be misused, undermining their goals, and wasting public funds. This report provides an overview of investment incentives, their policy implications, and strategies for understanding and managing their costs and benefits.
Topic:
Development, Governance, Investment, and Sustainability
Political Geography:
Global Focus

9. Five Years After the Adoption of the Paris Agreement, Are Climate Change Considerations Reflected in Mining Contracts?

Author:
Tehtena Mebratu-Tsegaye, Perrine Toledano, Martin Dietrich Brauch, and Mara Greenberg
Publication Date:
07-2021
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
At the 2015 Paris Climate Change Conference, the world’s governments set an ambitious goal of limiting global temperature rise to 1.5 °C over pre-industrial levels. To meet this goal, global anthropogenic CO2 emissions must decline steadily and reach net zero by about 2050.2 The pathway to a low-carbon future requires a fundamental shift away from fossil fuels and toward clean energy technologies. This transition will be mineral-intensive: the World Bank estimates that the production of minerals could increase by more than 450% by 2050 to meet the growing demand for clean energy technologies.3 How these minerals are produced will have a lasting effect on the clean energy transition. The mining and metal sector contributes 4–7% of greenhouse gas (GHG) emissions globally.4 Without adequate regulation to incentivize climate- friendly sustainable operations, increases in mineral extraction risk increasing the sector’s carbon footprint.5 In addition, climate change acts as a risk multiplier by increasing the risk of flooding, drought, and landslides and, as such, exacerbates the negative externalities caused by poor mining practices. First and foremost, climate change considerations should be incorporated into the climate, environmental, water, forestry, energy, or mining laws of mineral-rich countries. For example, in 2016, Kenya passed a climate law that requires climate mainstreaming in all sectors.6 Guinea’s 2019 Environmental Code encourages the use of renewable energy wherever possible and mandates the environment minister to implement the National Strategy for Climate Change Adaptation.7 But the pace of legislative processes is often slow—and in countries where the legislation does not include climate change mitigation and adaptation requirements,8 countries may turn to contractual provi- sions to compel the mining sector to shift to climate- sensitive practices. This paper assesses the extent to which this is being done through an analysis of all publicly available mining contracts signed by fragile states in Africa9 after the adoption of the Paris Agreement in December 2015 that appear on ResourceContracts.org (21 contracts).10 Though the magnitude of African fragile states’ contri- bution to global GHG emissions is minimal, these states have a comparatively high degree of vulnerability to the impacts of climate change.11 In this context, governments can and should mobilize the mining sector to play a meaningful role in meeting their climate mitigation and adaptation needs and those of project-affected communities. In addition, the increased demand for critical minerals to produce renewable energy and battery solutions tends to increase investment flows into the mining sector of several of those fragile states,12 making it all the more crucial for their governments to ensure that new mining investments support each country’s sustainable development goals. Doing so, with respect to climate action, furthers both a country’s competitiveness in international markets13 and minimize the mining sector’s footprint on the country’s environment and communities. Though our analysis focuses on contracts concluded by fragile states in Africa, the policy recommendations that we draw from their analysis apply to all host governments that do not already have robust laws that operationalize mitigation and adaptation goals and are eager to leverage and strengthen the role of their mining sectors in achieving sustainable development. Our recommendations envision generating long-term savings over the life of the mines, even if some of those recommendations may in practice represent higher upfront costs for mining companies. For example, adopting renewable energy sources, though possibly more expensive at the outset, is more cost-effective than fossil fuels considering the life of a mine.14 Avoiding deforestation early on also generates savings for mining companies when the time comes to fulfill their mine closure and rehabilitation obligations. Furthermore, by supporting community efforts to build resilience to climate change, mining companies have the opportunity to meaningfully contribute to project-affected communities. Attention to climate change considerations that entail higher expenditures by mining investors at the initial stages of the operation of a mine also tend to reduce the tax revenues from mining for host governments in the short term. However, for governments, too, the long-term benefits outweigh the initial revenue reductions. As long as governments put strong progressive fiscal regimes in place,15 they will be able to reap the upside from a climate- aware, low-carbon mining sector that will be more profitable than a business-as-usual, carbon-intensive mining sector in the medium to long term.
Topic:
Climate Change, Environment, International Cooperation, and Carbon Emissions
Political Geography:
Global Focus

10. NEW TECH, NEW DEAL: Mining Policy Options in the Face of New Technology

Author:
Isabelle Ramdoo, Aaron Cosbey, Jeff Geipel, and Perrine Toledano
Publication Date:
10-2021
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
Throughout the history of mining, technological innovation has played a vital role across all cycles of mining projects. The new wave of technological adoption is a combination of evolutionary and revolutionary technologies, with an increasing focus on the latter. An acceleration in investments in disruptive technologies in recent years has seen the large-scale mining sector finally catching up with a dynamic that has already advanced in many other sectors. The reasons for this shift include more difficult geology, declining ore deposits, the need to reverse a secular decline in productivity, the need to improve safety for mine workers, a need to manage environmental impacts, and—more recently—a reaction to pressures from the COVID-19 crisis.
Topic:
Science and Technology, Mining, Automation, and Machine Learning
Political Geography:
Global Focus