The Sillion Briefing 18.10.2024
In this Briefing...
£22bn UK carbon capture – Pinchbeck leads CCC
IEA Energy Outlook 2024 – UK clean energy investment
Rio Tinto lithium buy – Fashion retailers textile recycling
COP16 Biodiversity deadline – COP29 business expectations
Government
£22bn for carbon capture from UK Government
The UK Government has pledged nearly £22bn for three projects to capture and store industrial and energy-related carbon emissions. Over 25 years, the subsidy will support two major carbon capture ‘clusters’ in Teesside and Merseyside to be in operation from 2028. It will also fund the infrastructure to transport captured carbon to deep geological storage sites in Liverpool Bay and the North Sea. Prime Minister Keir Starmer and Energy Secretary Ed Miliband have said these projects would create 4,000 jobs, attract £8bn of private investment and meet UK climate goals by removing 8.5 million tonnes of carbon emissions each year.
It's a clear attempt to inject some investor confidence in developing a controversial technology, one that some have called a lifeline for the lifespan of the fossil fuel industry. Carbon Capture, Utilisation and Storage (CCUS) is an expensive and difficult technology, which has been criticised for its commercial feasibility. As with carbon credits, the technology typically comes under fire for encouraging inaction in switching to greener processes, or for being attached to fossil fuel production to keep these energy sources carbon-viable in the longer term. The Government’s investment is a sign that support will continue for CCUS at least in the medium term, with 700 plants at some stage of development around the world.
Emma Pinchbeck to lead Climate Change Committee
Emma Pinchbeck has been announced as the new chair of the Climate Change Committee (CCC), the UK Government’s climate advisor. She will be responsible for advising the UK Government on progress towards emission targets and on adapting to the impacts of climate change. Pinchbeck brings with her a wealth of experience from her time in the energy sector, most recently as CEO of Energy UK, a trade association representing energy industry suppliers, generators and service providers. She’ll need to hit the ground running, with the publication of the seventh Carbon Budget advice expected in early 2025, and the fourth Climate Change Risk Assessment in 2026 - both key imputs into the UK Government response to the impacts of climate change in the coming years.
Energy
UK secures £24bn from clean energy developers
Energy firms including Iberdrola, Orsted and Greenvolt have announced over £24 billion of private investment for the UK’s clean energy development, in what Prime Minister Keir Starmer has called a “huge vote of confidence” in his Government’s ability to grow the economy and accelerate the energy transition. Meanwhile, the UK Government has unveiled the first details of its new ten-year industrial strategy, with advanced manufacturing and clean energy industries included within eight focus industries. Businesses are being invited to provide feedback on a draft of the Industrial Strategy Green Paper to help shape the final strategy, which is expected to be published in the first half of 2025.
IEA releases World Energy Outlook 2024
The 2024 edition of IEA’s World Energy Outlook, one of the best reputed viewpoints and datasets on the energy transition, has been published. This year the agency has chosen to foreground energy security in the midst of conflicts in the Middle East and Ukraine, with an emphasis on the greater security clean energy systems might eventually bring. One of the other major takeaways is an increased forecast for electricity demand, with the IEA’s most conservative climate scenario (STEPS) seeing 6% higher demand in this year’s outlook by 2035 – driven in part by AI and air conditioning.
The executive summary is available here.
Corporate
Rio Tinto targets energy transition with lithium acquisition
British-Australian mining titan Rio Tinto has acquired Arcadium Lithium for $6.7Bn, part of a stated goal of “establishing a global leader in energy transition commodities”. Lithium is an essential part of the transition, with the International Energy Agency (IEA) predicting demand for the commodity to increase sharply in all climate futures, largely driven by electric vehicle growth.
If you’re exposed to lithium or other minerals as part of your own company’s transition, be in touch with alexander.bridge@sillion.co.uk and we can open up a conversation with our modelling team on understanding your impacts.
Retailers incl. Zara & H&M trial waste textile collection
Fashion is one of the areas most challenged by the transition to sustainability, with circularity being a key part of the sector’s response to waste reduction. Zara, H&M, Decathlon and Primark are among 10 brands participating in a trial which will separate textiles and shoes from other waste to be re-used, in a project titled ‘Re-viste’. From 2025, the EU Waste Framework Directive (WFD) – add that to your EU regulations cheat-sheet! – will be requiring member countries to separate collection of textiles from other waste. Re-viste is an attempt to get ahead of the game.
Events
Business expectations waning for COP29
Top executives from leading banking, asset management, and insurance firms are expected to be a notable absence at COP29 United Nations climate summit in Azerbaijan next month. This contrasts with its unofficial label as "the finance COP", a title stemming from its goal of establishing a finance target for climate adaptation for developing countries. Leaders have said that a realistic figure for this target would sit in the “hundreds of billions”. Some progress has been made, particularly with a UN expert group agreement on the key components of a global carbon trading system, viewed as a critical tool in generating climate finance. Nonetheless, expectations for significant business involvement at this year’s summit seems to be dwindling, with the Bank of America, BlackRock, Standard Chartered, and Deutsche Bank all reportedly giving it a miss.
Calendar
2024
COP: COP16 Biodiversity Conference in Cali, Colombia – 21st October-1st November 2024
COP: COP29 in Baku, Azerbaijan – 11th-22nd November 2024
SBTi: Draft Corporate Net-Zero Standard (CNZS) V2.0 public consultation – Q4 2024
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds – 21st November 2024
2025
CSRD: Undertakings previously subject to the EU's NFRD must report ESRS in their Annual Report this year (i.e. FY24 reporting) – 1st January 2025
UK SRS: UK Sustainability Reporting Standards (SRS) published – Q1 2025
UK SDR: UK Sustainability Disclosure Requirements (SDR) rules on labelling of sustainability-focused funds to come into force – April 2025
ESMA: ESMA Guidelines on fund names using ESG or sustainability-related terms to apply to funds which existed before the rule change – 21st May 2024
London Climate Action Week 2025 – 21st-29th June 2025
COP: COP30, Belém, Brazil – November 2025
SBTi: Corporate Net-Zero Standard (CNZS) V2.0 to come into force – by end of 2025
2026
CSRD: All large undertakings must report ESRS in their Annual Report this year (i.e. FY25 reporting). In CSRD parlance, a 'large undertaking' is a company exceeding two of the three following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2026
UK SRS: UK listed companies need to begin work on their IFRS Sustainability Standards (ISSB Standards) and transition plan reporting, in order to be ready for next year
2027
UK SRS: UK Sustainability Reporting Standards (SRS) to become mandatory for FY26 reporting, making the IFRS Sustainability Standards S1 and S2 (the ISSB Standards) and transition plan reporting mandatory – FY26 reporting
CSRD: Listed SMEs must report ESRS in their Annual Report this year (i.e. FY26 reporting). In CSRD parlance, an SME is a company which exceeds only one (or none) of the following thresholds: Balance sheet total €25 million, net turnover €50 million, 250 employees – 1st January 2027
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to very large companies (over 5,000 employees and over €1.5 billion turnover) – 26th July 2027
2028
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to large companies (over 3,000 employees and over €900 million turnover) – 26th July 2028
2029
CSRD: Non-EU undertakings with EU branches / subsidiaries must report ESRS for the previous business year. This applies if the non-EU undertaking has a net turnover generated within the EU above €150 million, and if it has either subsidiaries that are large undertakings or SMEs (CSRD definitions of these are given in the calendar above) with securities traded on an EU market; or if it has branches with net turnover generated in the EU above €40 million – 1st Jan 2029
CSDDD: The EU Corporate Sustainability Due Diligence Directive (CSDDD) will start applying to all remaining companies within its scope (over 1,000 employees and over €450 million turnover) – 26th July 2029
Questions on the above? Contact alexander.bridge@sillion.co.uk with any queries, comments or feedback.