ESG Update as at 4 June 2019

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Australian and New Zealand ESG Updates

LGS super fund achieves carbon neutral certification for portfolio

Local Government Super has had its buildings and property portfolio rated by NABERS, a New South Wales program that gives a building an environmentally-friendly star rating. There are six possible stars to achieve, and each building averaged 5.1 stars, but became 6 stars when carbon offsets were purchased.

In this case, 5,000 native trees were planted in eastern Australia, planted by Greenfleet via dual credit offset units.

The portfolio is the first NABERS-rated portfolio to obtain carbon neutral certification using the National Carbon Offset Standard for Buildings. The four rated buildings and two shopping centres are located in Sydney.

Canberra to be fully run on renewables from October

Canberra will be powered by renewable energy as of the first of October, an Australian city first. The Australian Capital Territory (ACT) sources most of its renewable energy from reverse auctions, then hydro, wind and solar, with each person paying an $5 extra per week with their power bill to fund the scheme. Two per cent of the renewable energy comes from resident’s solar systems.

In October the South Australian Hornsdale wind farm will crank up its turbines, allowing Canberra to claim the last little bit to get to 100 per cent. This fulfils a promise made 10 years ago by the ACT Government to reach this important milestone by 2020.

The ACT will remain on the national electricity grid, which is mostly powered by fossil fuels, which in reality means the city will still be running on fossil fuels. But, for every watt the city draws from the grid, it feeds one watt of renewable energy back in. This means we’re all running on a little bit of Canberra’s good renewable juju.

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Global ESG Updates

Philip Morris tobacco to launch life insurance products

In a move that finally brings full circle what the life insurance industry has been doing all along - investing in tobacco stocks - big tobacco now wants in on the life insurance industry. Philip Morris International is launching life insurance products via its United Kingdom subsidiary, Reviti. The idea is that premiums get cheaper as customers start to improve their lifestyle - that is, quit smoking.

Premiums start at around £5 per month. Reviti is saying its different, since it reduces premiums based on customers making healthy choices. The company quoted research that said consumers feel that life insurance companies don’t do enough to incentivise consumers to stop smoking.

Reviti offers up to 50 per cent off premiums when they quit tobacco and nicotine completely. The plan is to develop an app that includes 120 activities and programs to support their policyholders journey to a healthy lifestyle.

Philip Morris has taken the bull by the horns in turning its business model around, with its 2018 sustainability report detailing its plan to ‘unsmoke’ the world. This means helping 40 million smokers to switch to smoke-free products in just six short years. Note that is not get people to quit smoking, but to use nicotine delivery products like vapes, which have yet to be fully accepted by regulators.

Ghana: 2019’s fastest growing economy

Ghana has made quite the comeback and is predicted to be the world’s fastest growing economy this year. Ghana exports a lot of gold and cocoa, but now crude oil production is expanding and prices are rising. This has catapulted Ghana to the top of the GDP growth chart.

The International Monetary Fund has suggested Ghana’s GDP will rise 8.8 per cent in 2019, which is twice the rate of emerging economies overall and way past world growth.

Ghana’s growth looks good on graphs, but it’s important to remember that the GDP of Ghana is still about half that of emerging and developing countries.

Ghana’s resources are not the only driver of the economy - a stable government has started to formalise the economy, while also introducing a tax structure that is starting to pay off.

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ESG Research

IRENA study: renewables now lowest-cost power source (for most of us)

A major global study published by the International Renewable Energy Agency (IRENA) clearly demarcates the end of the coal era - renewables are now cheaper almost everywhere in the world. The report, Renewable Power Generation Costs in 2018, predict that within a year about 83 per cent of the electricity generated by new photovoltaic (PV) capacity will be cheaper than new fossil fuel generation.

Photovoltaic means electricity generated from light, which is the underlying technology of solar panels.

IRENA has a power purchase agreement and solar auction database that indicates solar will generate electricity at a global weighted average price of $0.048/kWh in 2020. This means that PV electricity will be cheaper than the cost of power generated from 700 gigawatts of coal-fired power plants that already exist globally.

Key findings of the report:

  • PV panel prices fell by more than a quarter between December 2017 and December 2018

  • Modules are now in the low hundreds of dollars each

  • The cost of solar electricity has continued to fall in most regions, except for the United Kingdom and Germany (due to higher project development costs)

  • A price of just $0.03/kWh was recorded in many areas of the world

  • Record low prices were recorded in the United Arab Emirates, Mexico, Peru, Chile and Saudi Arabia

  • A global average price for solar power was recorded at $0.085/kWh in 2018