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Traders get misplaced in Huge Oil’s carbon accounting maze

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LONDON (Reuters) – Large variations in the best way oil corporations report their efforts to cut back carbon emissions make it troublesome to evaluate the danger of holding their shares because the world shifts away from fossil fuels, senior fund managers say.

FILE PHOTO: Oil pump jacks work at sundown close to Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/Recordsdata

Traders have poured cash into so-called sustainable funds, which take note of corporations’ environmental, social, authorized and different requirements, and funds are below strain from their clients and authorities to make these requirements sturdy.

Fund managers are additionally making use of environmental, social and governance (ESG) standards extra extensively in conventional investments to assist them decide how corporations will fare over the long run.

There’s a rising realization that some corporations’ income will shrink quicker than others as governments prioritize low-carbon vitality to satisfy the U.N.-backed Paris settlement’s objective of slicing emissions to “web zero” by the top of the century.

However oil and fuel corporations are among the many largest dividend payers, and main funds are reluctant to divest from them, arguing that by staying in they’re in a greater place to strain corporations to enhance.

“Do buyers have the information that we want? No, I don’t assume we’ve got the information that we want in any respect,” mentioned Nick Stansbury, funding strategist at British insurer Authorized & Common’s funding administration unit, Britain’s largest asset supervisor with round $1.three trillion below administration.

“Disclosure just isn’t essentially so we will search to vary the numbers, however so we will begin understanding and pricing the dangers,” Stansbury mentioned.

“A THOUSAND WAYS TO PARIS”

There are a lot of voluntary initiatives and frameworks to unify carbon accounting and goal setting; some overlap however none have been universally adopted. Additional tasks exist for different greenhouse gases reminiscent of methane.

The Greenhouse Fuel Protocol is one such set of requirements, established by non-governmental organizations and industrial teams within the 1990s.

Corporations can report their progress according to these requirements by way of non-profit CDP, previously often called the Carbon Disclosure Challenge, which then ranks them. Norway’s Equinor comes first in its listing of 24 oil main corporations, however not all of them report in yearly.

(GRAPHIC: Huge oil rating by the CDP – right here)

There’s additionally the Job Drive on Local weather associated Monetary Disclosures (TCFD), created by the G20’s Monetary Stability Board, in addition to business our bodies, in-house fashions at oil companies and banks and third-party verifiers and consultants.

“There are a thousand methods to Paris,” London-based BP’s Chief Govt Bob Dudley mentioned at a Chatham Home occasion earlier this yr referring to the 2015 accord aiming to maintain world warming properly beneath 2 levels.

BP Finance Chief Brian Gilvary advised Reuters BP would welcome extra consistency inside the sector to indicate what oil corporations are doing about emissions and that an business physique, the Oil and Fuel Local weather Initiative (OGCI), was discussing carbon accounting.

A plethora of third celebration ESG verifier corporations had been rising with various methods of measuring ESG metrics, he mentioned, including that some such companies would say to an oil firm, “We consider your rating is that this, and, by the best way, in case you spend $50,000 we’ll present you how one can enhance that rating.”

UBS, with $831 billion of invested property, has $2 billion in its Local weather Conscious passive fairness technique, which is partly primarily based on an organization’s emissions reporting.

In that technique “we tilt in the direction of corporations which are higher acting on a spread of local weather metrics and away from corporations that don’t carry out so properly on this respect,” Francis Condon, govt director for sustainable investing, mentioned.

“We don’t need to be accused of greenwashing or falling for it,” he mentioned, including that UBS commonly inspired corporations to organize for the local weather transition.

Utilizing a broad measure, world sustainable funding reached $30.1 trillion the world over’s 5 main markets on the finish of 2018, in keeping with the World Sustainable Funding Assessment. This equates to between 1 / 4 and half of all property below administration, as a consequence of various estimates of that determine.

Condon mentioned most buyers had been nonetheless extra centered on returns than wider sustainability standards however had been changing into involved that corporations could expose them to potential future climate-related monetary losses.

“There’s a very restricted urge for food for giving up efficiency for increased ESG. The query is extra: is administration taking over dangers it will possibly’t handle?”

To attempt to reply that query, the world’s largest monetary service suppliers are investing in corporations which offer ESG-related information.

This yr alone, Moody’s purchased Vigeo Eiris and 4 Twenty Seven, MSCI purchased Carbon Delta and the London Inventory Trade purchased Past Scores. S&P acquired Trucost in 2016.

Impartial local weather threat advisors Engaged Monitoring say they attracted two-thirds of their purchasers previously yr. All six corporations present information, assessments and consulting on the local weather publicity of corporations or bonds.

HOW TO COUNT

A central difficulty, mentioned at European oil majors’ shareholder conferences this yr, is how they cope with the emissions attributable to the merchandise they promote, reminiscent of gasoline or kerosene, that are often called Scope three emissions.

(GRAPHIC: Oil Majors’ Carbon emissions – right here)

Such emissions are usually round six occasions bigger than the mixed emissions from oil corporations’ direct operations and energy provide, also referred to as Scope 1 and a couple of emissions, in keeping with Reuters calculations.

Even when an organization publishes Scope three information, there are 15 completely different classes primarily based on the Greenhouse Fuel Protocol. These embrace use of bought merchandise reminiscent of gasoline alongside secondary elements reminiscent of enterprise journey or worker commuting.

Constantine Pretenteris at Engaged Monitoring mentioned some corporations achieved a excessive rating for comprehensiveness by disclosing information for a lot of the Scope three classes, however omitted the important thing ones, reminiscent of emissions from use of their gasoline.

“We’d like to see a basic commonplace which makes comparisons straightforward,” Sven Reinke of Moody’s mentioned. “It doesn’t totally exist as of late.”

RELATIVE OR ABSOLUTE

The vast majority of climate-related targets are primarily based on depth measures, which suggests absolute emissions can rise with rising manufacturing, even when the headline depth metric falls.

Complete recorded Scope three emissions from the world’s high public oil corporations are nonetheless rising, largely as a consequence of rising oil and fuel output, in keeping with Reuters calculations primarily based on information carried on Refinitiv’s Eikon platform and firm web sites.

They confirmed mixed Scope three emissions recorded by BP, Royal Dutch Shell, Exxon Mobil, ConocoPhillips’, Chevron, Eni, Complete, Equinor and Repsol rose round 1.6% over 2018, after a 1% related rise the earlier yr.

Particular person figures differ in keeping with the metrics an organization chooses to incorporate. Conoco mentioned its Scope three emissions had fallen 5%, whereas the opposite corporations’ particular person recorded Scope three emissions both rose or stayed roughly the identical.

Requested for remark, BP and Chevron pointed to absolute targets associated to their very own operations. Complete pointed to progress it had made in the direction of decreasing emissions depth per unit produced. Shell and Repsol referred to their short-term intensity-based targets and Equinor mentioned it couldn’t take accountability for emissions it doesn’t management.

U.S. agency Exxon didn’t reply to a request for remark. Eni had no fast remark.

Prime oil corporations have boosted funding in renewable vitality and low-carbon know-how lately, notably in Europe, however a lot larger sums are nonetheless going into growing oil and fuel.

“We can not change the patterns of consumption world wide – we can not make individuals fly much less. We are able to cut back the carbon depth of the merchandise we promote,” Shell Chief Govt Ben van Beurden mentioned in June.

Mark Lewis from BNP Paribas and a member of TCFD, mentioned total cuts had been what would depend ultimately. Repsol is at present the one main oil firm to have set absolute discount targets for all its output.

“The Paris Settlement is all a few carbon price range and that’s an absolute quantity. It’s not an depth quantity,” Lewis mentioned. “The environment works by way of absolutes not depth.”

Within the meantime, some buyers are avoiding oil corporations which others say needs to be supported for going additional than a lot of their friends.

London-based funding administration agency Sarasin & Companions mentioned in June it was promoting down its stake in Shell as a result of its spending plans had been out of synch with worldwide local weather targets.

Requested for remark, Shell pointed to feedback from representatives of the pension funds of the Church of England and Britain’s authorities Surroundings company, which praised the corporate’s transparency and mentioned others ought to comply with its lead.

(GRAPHIC: European Carbon costs – right here)

Modifying by Philippa Fletcher

Our Requirements:The Thomson Reuters Belief Rules.

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Good house tech makes inroads into China’s rising aged care market

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WEIFANG, China (Reuters) – Charging aged shoppers simply 1 yuan or about 15 cents a day, little-known Lanchuang Community Expertise Corp has launched into one of the crucial formidable undertakings in aged care by a personal sector agency in China.

FILE PHOTO: An aged lady walks with a stick alongside a road in downtown Beijing, China July 30, 2019. REUTERS/Jason Lee

Supplied with a setup field, a webcam paired with a TV set and “Xiaoyi”, a Siri-like voice assistant, clients achieve entry to telemedicine and an SOS system in addition to for-pay companies that embrace housekeeping and meal deliveries.

A small robotic that may ring up a medical middle in response to verbal requires assist prices an additional 2 yuan per day.

Launched simply 4 months in the past, Lanchuang’s good care system has already signed up 220,000 aged shoppers in 16 cities, half of that are in Shandong, a quickly growing older province in jap China the place the corporate relies.

It’s concentrating on as many as 1.5 million customers this yr, 12 million subsequent yr and 30 million in 2021, when it hopes to listing on China’s new Nasdaq-style tech board.

The goal, nonetheless, is to not generate income from its shoppers, a few of whom get by on pensions as little as a number of hundred yuan a month, however to take a lower from suppliers of offline companies.

“China’s marketplace for aged care is big, however companies within the business are fragmented,” CEO Li Libo advised Reuters in an interview at his firm’s headquarters in Weifang metropolis.

“Scattered on the bottom are pearls,” Li, 47, mentioned of the services accessible, including it was his firm’s goal to string them collectively.

Lanchuang, which can be working with China Cellular Ltd (0941.HK) on a smartphone for seniors, is an instance of rising, albeit nonetheless nascent, makes an attempt by entrepreneurs to supply complete good house care companies for China’s huge variety of aged.

China has 1 / 4 of a billion folks aged 60 or over, and by 2050, that quantity is about to climb to virtually half a billion, or 35% of the inhabitants, in keeping with authorities estimates.

Liu, 66, a local of Jinan, Shandong’s capital, is aware of how arduous taking good care of the aged may be. In her mom’s last years, her urinary tract would get obstructed regardless of sporting a catheter and infrequently in the midst of the night time, to her daughter’s despair.

“If solely I had been in a position to attain a physician to assist my mom, however medical doctors should not reachable 24 hours a day,” mentioned Liu, who solely gave her surname.

The retired accountant, who was unaware of tech merchandise aimed on the aged, now lives alone and is reluctant to bother her personal daughter and son-in-law.

Care of growing older dad and mom has historically fallen on the shoulders of kids, however in fashionable China, the place the one-child coverage was abolished solely in 2016, the son or daughter has to take care of as many as 4 growing older folks together with in-laws. Typically, youngsters have moved to cities distant for work.

Retirement and nursing properties are on the rise, however are too expensive for many households and largely perceived as ridden with abuse. Three-quarters of outdated folks desire to reside out their days at house, official surveys present.

LOCAL AUTHORITIES

Whereas Beijing has been keen to ascertain a coverage framework for a proper aged care system, native governments have been reluctant to help aged-care companies which they see as nice-to-haves or simply an excessive amount of work.

However change is afoot.

In April, Beijing issued an in depth coverage doc outlining companies to be developed for the sector, together with good know-how, in addition to monetary help.

The central authorities supplied virtually 22 million yuan ($three million) in subsidies for Lanchuang’s good platform and the Shandong provincial authorities has given three million yuan.

That degree of encouragement is a far cry from a decade in the past when entrepreneurs persistently met with native resistance.

“Why are you doing this? What has this obtained to do with me?” mentioned U.S. entrepreneur Wang Jie, 59, as he recalled skeptical appears when he sounded out native authorities in China about trials of movement sensors at folks’s properties.

Wang needed to go to Canada for his trials. When he returned to Beijing in late 2013 to kick begin a enterprise, Wang needed to persuade native authorities, district by district, of the virtues of his sensors – which assist members of the family monitor exercise ranges of aged folks through an app however should not as intrusive as cameras.

Wang, who sits on the Nationwide Advisory Committee on Good Aged Care, has since managed to make inroads into two Beijing districts, with talks underway with three others.

The 2 districts have helped Wang establish high-risk people, sometimes these aged 70 and above, who reside alone and may be keen to make use of his sensors.

His agency, Beijing eCare Good Tech Co, has offered a number of hundred units of sensors in Beijing to this point this yr underneath three-year contracts with group organizations. Wang’s firm additionally helps practice grassroots emergency response crews as a part of the deal. Households pay nothing.

“If an aged particular person dies and the physique is barely found after three days, this creates unfavourable publicity for the native authorities, publicity that it needs to keep away from,” Wang mentioned.

EARLY DAYS

Entrepreneurs in different graying economies resembling america, Britain and South Korea have equally seized on alternatives within the sector, touting applied sciences from voice recognition for house home equipment to robotic companions for lonely outdated folks.

However it’s nonetheless early days in China.

In Weifang, Zhuojing Healthcare Heart, one in every of 147 group medical service suppliers linked to the Lanchuang community, mentioned it has solely receives 1-2 calls by the system a day.

On a Reuters go to organized by Lanchuang to the properties of two aged shoppers in Weifang, each mentioned they use the platform primarily for video chats with household.

Zhao Xi’e, 55, mentioned she makes use of it to speak to her mom who lives close by.

Slideshow (14 Photos)

Zhao’s purchasing and meals supply panels on her TV show have been grayed out, indicating zero service suppliers in her neighborhood.

She was additionally unaware the purple button on her handheld management had an SOS operate.

“Is that an on/off button?” she requested.

Reporting by Ryan Woo; Extra reporting by Beijing newsroom; Modifying by Edwina Gibbs

Our Requirements:The Thomson Reuters Belief Rules.

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How a shadow banking disaster despatched India’s autos sector right into a tailspin

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MUMBAI (Reuters) – Sudhir Gharpure and his gross sales crew sat chatting at an enormous Maruti Suzuki (MRTI.NS) dealership on the outskirts of Mumbai some two hours after its doorways have been opened on a current Saturday morning – not a single buyer was in sight.

FILE PHOTO: A employee adjusts the windscreen wipers of a parked automobile at a Maruti Suzuki stockyard on the outskirts of the western Indian metropolis of Ahmedabad September 1, 2011. REUTERS/Amit Dave/File Picture

“There was near 15-20 bookings every day, however now we’re all the way down to 3-5 on good days,” stated Gharpure, the final supervisor on the dealership.

Gharpure’s expertise is just not an remoted one. Throughout India dealerships are being pushed out of enterprise and the Indian auto sector goes by its greatest stoop in almost twenty years. Passenger car gross sales fell for eight straight months till June, and in Might gross sales dropped 20.55% – the sharpest recorded fall in 18 years.

Preliminary knowledge signifies passenger car gross sales might have plunged as a lot as 30 % in July. The stoop in India, together with a simultaneous slide in Chinese language auto gross sales, is a blow for automakers wrestling with increased prices pushed by extra stringent emission norms and a push to develop electrical automobiles.

Not like in China, the place the plunge in automobiles gross sales has been prompted largely by new emissions guidelines, India has seen a mixture of elements which have mixed to erode demand for vehicles.

Prime Minister Narendra Modi’s 2016 ban on high-value financial institution notes, increased tax charges below a brand new items and providers tax regime, a increase of ride-sharing companies similar to Uber and Ola, and a weak rural financial system have all performed a job.

However many sellers and automakers agree it’s a deepening liquidity crunch amongst India’s shadow banks that has been the most important single think about an auto gross sales collapse, which some worry might result in greater than 1,000,000 job losses.

Non-banking finance firms (NBFCs), or shadow banks, have dramatically slashed lending following the collapse of one of many greatest, IL&FS, in late 2018.

IL&FS, or Infrastructure Leasing & Monetary Companies Ltd, was a behemoth in shadow banking and its defaults and unraveling, amid fraud allegations, have dried up funding for rivals and led to a surge of their borrowing prices.

Non-bank or shadow banking companies generate credit score exterior conventional lenders, by means similar to collective funding autos, broker-dealers or funds that put money into bonds and cash markets.

In India, NBFCs have in recent times helped fund almost 55-60% of business autos each new and used, 30% of passenger automobiles and almost 65% of the two-wheelers within the nation, in response to ranking company ICRA.

To worsen issues, the stress within the autos market has additionally prompted banks to start trimming their publicity to the sector.

“The automobile doesn’t promote, it’s the finance that sells,” stated R. Vijayaraghavan, a senior advertising and marketing guide on the similar Mumbai dealership. “At present the finance is just not promoting, so the automobiles will not be promoting.”

PROBLEMS AMPLIFIED

Some 286 dealerships have shut down within the final 18 months throughout India as rising prices for stock administration have made companies unviable, in response to the Federation of Vehicle Sellers Affiliation (FADA), a foyer group of auto sellers.

“The slowdown within the (NBFC) sector has dragged down car gross sales development,” stated A.M. Karthik, monetary sector head at ICRA. “Now the auto slowdown is turning into extra seen because the liquidity squeeze continues.”

Automakers together with Maruti Suzuki (MRTI.NS), Tata Motors (TAMO.NS), and Mahindra & Mahindra (MAHM.NS) are feeling the warmth and have both lower manufacturing or quickly closed crops to right mounting shares.

In keeping with FADA knowledge, passenger car inventories now stand at 50-60 days up from round 45 days earlier, whereas these of two-wheelers are even increased at 80-90 days. For business autos, stock ranges vary between 45 and 50 days.

“We’re asking sellers to keep up a list of 21 days, which is sort of half of the present ranges,” stated Ashish Kale, president of FADA.

No less than 4 sellers from totally different manufacturers stated, nonetheless, there was little scope to scale back inventories as automakers have been pushing them to purchase inventory regardless of there being no demand even with heavy discounting and different sops on supply.

Whereas 70-75% of automobile gross sales have been beforehand financed in-house by NBFC or financial institution brokers sitting at a dealership, that has fallen to about 50%, say sellers, as patrons battle to qualify below extra stringent lending norms put in place by lenders which are below stress to shore up their books.

Furthermore, as many NBFCs usually lent to much less creditworthy shoppers, banks are reticent to hurry in to fill the void, as they themselves battle to deal with an current pile of about $150 billion in unhealthy loans.

“The banking sector is definitely one of many elements that has affected the expansion of the business,” stated R.C. Bhargava, chair of Maruti Suzuki, noting rates of interest for automobile patrons have gone up within the final 12 months regardless of the central financial institution chopping charges.

EARLY RECOVERY UNLIKELY

With the autos sector using greater than 35 million individuals instantly and not directly, and contributing greater than 7% to India’s GDP and accounting for 49% of its manufacturing GDP, the fallout from the autos stoop is big and presents an enormous problem to Prime Minister Narendra Modi’s authorities because it begins its second time period.

Your complete provide chain, from car producers to element makers, are bleeding amid the stoop.

“I’ve been making my funds for the final 30 years and the lenders know me,” stated Adarsh Gupta, the director of finance at Autolite (India), a element manufacturing agency. “However even a two-day delay has individuals crying that I’ll default.

“I too need to pay, however due to the autumn in cashflows I’m dealing with short-term points and due to that it’s tough to get extra financing. That is the vicious cycle we’re in.”

Kale, the FADA president, stated on Sunday the commerce physique estimated that dealerships had collectively already lower round 7-8% of their workforce, or round 200,000 jobs nationwide.

“Many of the cuts which have occurred are in front-end gross sales jobs but when this continues, then even the technical jobs might be affected as a result of if we’re promoting much less then we may even service much less,” he stated.

Nonetheless, automakers are hopeful of a restoration within the months forward, helped by the September-December festive season that historically sees a surge in client spending.

“One can solely want that issues enhance sooner somewhat than later. With festive demand beginning to seep by, we should always begin seeing a gradual enchancment in gross sales,” stated P.B. Balaji, group CFO at Tata Motors.

Analysts are extra skeptical although, and say with out car financing turning into cheaper and simpler the possibilities for which are low. With no silver lining in sight, analysts worry unhealthy money owed might mount within the auto sector, forcing banks to additional cut back their publicity.

“We see market costs and gross sales coming down so there could also be points,” stated a high official on the Indian Banks’ Affiliation. “We might see a spillover by way of unhealthy loans for the general sector, however we’re going to wait and watch.”

Sellers stated they have been hopeful of tiding over the present downturn because the broader development story for India stays intact, however there might be much more ache earlier than a restoration kicks in.

“The long run goes to be multi-brand automobile showrooms,” stated advertising and marketing guide Vijayaraghavan. “That’s the solely manner for dealerships to outlive going ahead as overhead prices have to be shared.”

Further reporting by Derek Francis in BANGALORE; and Aftab Ahmed and Aditi Shah in NEW DELHI; Enhancing by Euan Rocha and Alex Richardson

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