Environment

Banks ‘being let off hook by weak climate regulation’

The Bank of England is facing criticism over the way it is conducting its first climate regulation tests, with politicians and campaigners warning that a lack of penalties for dirty assets will give banks little incentive to clean up their act.

While the regulator has been praised for committing to the exercise, the Bank of England has come under fire for so far refusing to publish data for individual firms, and stopping short of introducing immediate capital requirements, which would make it more expensive to offer loans and services to fossil fuel companies and high carbon projects.

Campaigners are concerned that one of the UK’s most lucrative industries is being given a free pass.

“Finance is one of the priorities of Cop26, but the UK’s credibility as hosts risks being undermined by the fact it has let its banks pour more than £200bn into fossil fuels since the Paris agreement was signed,” the Green MP Caroline Lucas said. “It needs to rectify these failures if it is to have any credibility during climate finance negotiations.”

The Bank of England is not the only regulator moving cautiously. So far, the European Central Bank and the Banque de France – which are among the few central banks to have conducted climate stress tests for their respective financial sectors to date – have only published aggregate data covering their finance industries, and have not introduced any restrictions, or deterrents, for banks serving polluting firms.

That is despite warnings from both regulators that banks will be severely affected unless they ramp up their response to the climate crisis.

Any deviation from the Paris agreement would result in higher loan losses for banks, according to the ratings agency Moody’s, rising anywhere from 3.5% in the “least disorderly” scenario, to 20% under the most extreme climate outcomes. It has raised concerns that the banking sector itself will suffer financially without swift action, which could had a ripple effect throughout the global economy.

Globally, reporting standards are low. A report by the Task Force on Climate-related Financial Disclosures (TFCD) published last year found that while bank reporting has improved since 2017, the sector continues to have the lowest percentage of disclosure for climate-related targets across all global industries, with 19% of firms meeting TFCD standards. By comparison, figures for the energy and transport sectors are 44% and 35% respectively.

Part of the challenge is that regulators are intent on gathering as much data as possible before introducing deterrents such as capital requirements, which determine the kind of financial cushion that banks must hold to protect them from risky loans and products on their balance sheets.

With such a complex exercise that looks at potential climate scenarios over the next 30 years, campaigners say the Bank of England may be setting an impossible task.

Its first climate tests – which it has not yet committed to repeat after this year – are far more complex than the regulator’s annual financial stress tests, which were introduced after the 2008 banking crash and measure banks’ resilience against economic shocks like a surge in unemployment, or a sudden collapse in house prices.

Instead, the climate tests will put banks through three scenarios with a 30-year time horizon, covering physical and transition risks, including one in which governments fail to take further steps to curb greenhouse gas emissions, resulting in average temperature increases of 3.3C, and a 3.9-metre rise in sea levels. The exercise will also look at how those scenarios could affect potential loan losses, as customers default on their loans due to slowing growth and economic uncertainty.

“If you’re looking for the perfect data set, you’re going to be disappointed because it’s never going to happen – there is always uncertainty” said James Vaccaro, who is an executive director of the Climate Safe Lending Network, which represents banks, academics and investors hoping to decarbonise the banking sector. “You’re always trying to extrapolate the past, but right now in terms of climate change, the past is not a good predictor at all of the likely future,” he said.

If that was not challenging enough, the Bank of England is also letting lenders determine how they measure their exposure to those climate risks individually, a move that it believes will foster innovation and unearth best practices that can be shared across the industry. However, that means it will take even longer for UK banks to produce comparable data that will help the public, governments and investors determine where they should apply the most pressure, or pull their business.

“At the moment the financial system is enabling and financing the forces that are driving climate change,” Lord Oates, the Liberal Democrats’ spokesperson for energy and climate change in the Lords, said. “And so the regulators have a duty to act now [and] in the absence of perfect information.”

International regulators have proved they are willing to consider capital requirements when new risks emerge. In June, the Basel Committee on Banking Supervision, which consists of regulators from the world’s leading financial centres, highlighted the potential risk around cryptocurrencies such as bitcoin, saying banks should be forced to put aside enough capital to cover 100% of potential losses.

Campaigners are calling for similar rules for climate risks. Last week, activists and academics including the historian Adam Tooze, signed an open letter to the Cop26 president, Alok Sharma, calling for the introduction of one-for one capital requirements, meaning that for every pound invested in fossil fuel projects, financial institutions such as banks and insurers would need to hold the equivalent to absorb future losses.

But not all central bankers are convinced that capital requirements on dirty assets will fully protect against financial shocks, since renewable energy and other innovative green assets could carry investment risks. There are also concerns that introducing capital requirements could cause market turmoil, since forcing a swathe of banks to raise money simultaneously could spook investors and make it more expensive for lenders to secure funds.

However, Vaccaro warned that near-term pain might be necessary to create a sustainable future for both the climate and financial system.

“We are potentially and unwittingly, perhaps even unconsciously, sacrificing long-term stability for short-term stability. In other words: don’t rock the apple cart now. But by not rocking it we basically totally hobble it from the perspective of actually getting it fit for the massive shocks that we’re expecting.”

The Bank of England said in a statement that “climate scenario exercises are new and complex across a number of dimensions”. A spokesperson said that it launched the exercise without having a perfect framework in place, since it may have taken years to do so otherwise.

“A key intention of the exercise was to build capabilities, and in some regards learn through doing. Consequently, we do not feel individual firm level disclosure at this juncture is appropriate.”

Environment

We Are Providing Immediate Solution To Isheri Flooding – Ministers

L-R: Minister of Water Resources and Sanitation, Prof Joseph Utsev; Ogun State Governor, Prince Dapo Abiodun, Minister of State, Environment, Dr Ishaq Salako and the Olofin of Isheri, Oba Sulaiman Bamgbade, during the visit of the two ministers to the flooded area in Isheri, Ifo Local Government Area of Ogun State on Wednesday.

The Federal Government on Wednesday assured residents of flood-prone areas, particularly the Isheri North community in Ifo Local Government Area of Ogun State of quick and permanent solution to the perennial menace of flooding in the corridor.

This assurance was given by the Minister of State, Environment; Dr Isiaq Salako who was in the company of the Minister of Water Resources and Sanitation, Prof. Joseph Utsev.

The Ministers were led to the areas by Governor Dapo Abiodun, and the Onisheri of Isheri, Oba Sulaiman Bamgbade, during an on the spot assessment of the community which has been ravaged by floods in the past days, occasioned by the release of water from Oyan Dam.

Dr Salako, noted that the flood problem facing the community is multifaceted and must be tackled from many angles, adding that the role and habits of the people, as regards the protection of the environment must be critically çonsidered.

The Minister promised that with the support of President Bola Ahmed Tinubu and Governor Dapo Abiodun, a permanent solution would be found to the problem.

According to him, the President fully understands what the problems are and the Governor has also been very proactive in addressing them.

The minister, while adding that a comprehensive study must be embarked upon to find a lasting solution to the problem, said that there was a need for the expansion of drainages and lifting of roads in the area.

“For us to be able to permanently solve this problem, we must undertake a comprehensive study so that we understand fully what needs to be done in a way that will permanently bring forward a solution.

“Therefore from the perspective of the Federal Ministry of Environment, the first thing we are going to do is to immediately commission a comprehensive study of this place so that we fully understand what we need to do, what we need to do with Ogun River and I am sure my brother, the Minister for Water Resources will also support us with what we need to do with the dams.

“We also need to know how to ensure we expand our drainages and lift our roads and then also our people to change their habits and be more environmentally responsible,” he said.

Salako also disclosed that the effect of climate change cannot be reversed but can be slowed down if adapted to, charging the people and the state to ensure their water channels are properly cleared and their waste disposed properly.

In his remarks, Minister of Water Resources and Sanitation, Prof Joseph Utsev disclosed that the Federal Government has set up a committee that is working extensively on flood challenges across the country.

He assured the people that the Federal Government is leaving no stone unturned to find a lasting solution to the problem.

He said: “The Federal Government has set up a committee that is working entirely on the flood challenges of Nigeria.

“We are providing solutions to flooding in the country, not only in Ogun State. We have gone to other states and we have visited Ogun State now and we have seen what has happened. We believe that by the grace of God, the solution has come.

“I want to assure the people of Ogun State and the Lagos people residing within the terrain that we are leaving no stone unturned to try to see how we can proffer solutions to this problem.”

Responding, Governor Abiodun, while commending President Bola Tinubu for his response to the plight of the flood victims, also disclosed that the Ministry of Humanitarian Affairs would visit the state in the next few days.

The governor also thanked the Redeemed Christian Church of God and NASFAT for making available their premises to serve as centres for some of the displaced residents.

Abiodun also affirmed that some buildings built on channels would give way, adding that the drainage problems would also be sorted.

“In the cause of our moving around, we saw some buildings that were built on a channel. Channel that is meant to channelize the Ogun River into the lagoon, such buildings will not stand.

“For us to have a permanent solution, we must appreciate the fact that there will be some pain. I know the minister may not want to tell you, but as your Governor, I can tell you that we are going to immediately embark on how to increase the level of the arterial roads.

“We will also sort the drainages. Water in the drainages is stagnant; they are not flowing anywhere. So, some buildings may have to give way so that the drainages can become outfalls where water falls into,” he said.

Environment

Abiodun declares state of emergency on flooded Isheri community

Ogun State Governor Prince Dapo Abiodun with state officials on a tour of the flooded Isheri community

…assures residents of permanent solution after comprehensive assessment

Ogun State Governor, Prince Dapo Abiodun, on Monday declared state of emergency on the flooded Isheri community, in Ifo Local Government Area of the State, as he assured residents of the area quick intervention to save the situation.

The governor added that a comprehensive assessment that would lead to permanent solution to the menace of flooding in the affected area would be conducted very soon.

Prince Abiodun, who stated this while fielding questions from newsmen after inspecting the flooded community, said that his administration is working with the federal government to deal with the situation as an emergency case.

He noted that the time has come to find a lasting solution to the perennial flooding to make the area morw conducive for living.

According to him, the state government will see to the elevation of some roads in the area as parts of the solutions to the problem.

The govenor said: “We will prioritize the works here because I am touched with what I have seen. I will ensure that we immediately begin to see signs of relief as we are stepping this up. The Minister of State for Environment is already aware. The Vice President is already aware and also the president. It will be dealt with as an emergency and we are taking it as such.

“As an emergency, I will like to take it up myself. Please continue to bear with us as we are going to conduct a comprehensive assessment of what we need to do to make this place conducive for living.

“Whatever that assessment comes up with is what we are going to implement. So, we are going to first start with ensuring that we have the required road infrastructure at the appropriate levels.

“So if you now built in such a way that we need to relocate you, we have to do that. Whatever it is that we must do to ensure that place does not persistently experience flood, we will do it. But let us wait for the result of the studies to come back and then we will begin to take that decision as and when the situation arises.”

Addressing residents of Riverview Estate, Governor Abiodun said he has requested for an area survey of the entire estate to identify critical areas that needed immediately intervention.

He assured that the intervention would come through the construction of an elevated road with adequate drainages to mitigate their suffering.

“I want to assure you today, knowing fully well that we are a promise keeping administration, we do not say what we do not mean, my heart goes out to you, it is very unfortunate, I am giving my commitment today, the commissioner for works will come and see what needs to be done.

“We have also engage the Minister of State for the Environment, who fortunately, is from Ogun State and I have already brought this to his attention.

“Before the end of the week, I will also table it before the Vice President and the President as well so that we ensure that this problem gets all the desired attention and consequently gets the desired solution so we can bring this to an end,” he said.

The governor also disclosed that he and the Minister of Water Resources would visit the community in few days time.

“We will also discuss the issue of the Ogun-Osun River Basin Authority and try and interrogate the activities there and understand how their activities affect this community and other communities with respect to the opening and closing of the dam,” he said.

The governor described the environment around the Kara cattle market as an eyesore and not befitting the dreams of a “new Ogun State”.

He said that the market was not conducive for human living and not in tandem with the Sustainable Development Goals and waste disposal.

He, however, acknowledged the area as one of the biggest commercial operation that provide services to a large number of people, even as he assured that government would go into a satisfactory agreement with the market men and women after which a comprehensive beautification of the area would take place.

The Chairman, Riverview Estate, Abayomi Akande, in his remarks, intimated the governor of the suffering residents of the area are going through as a result of the flooding.

He said that there is a need for a panel of inquiry into the operations of Oyan Dam to stop incessant release of water to cause havoc in the State

He applauded the governor for sending miscreants packing from the road, saying residents of the axis have suffered robbery attacks and other criminalities for quite awhile.

Akande urged the state government to think of converting the area into a Government Residential Area (GRA) through Public Private Partnership arrangement to fast track its development.

Environment

NiMET Predicts States To Expect 3-day Dust Haze, Cloudiness

The Nigerian Meteorological Agency (NiMet) has predicted dust haze and cloudiness from Wednesday to Friday across the country.

NiMet’s weather outlook released on Tuesday in Abuja predicted dust haze on Wednesday over the northern region with a visibility range of 2km to 5Km, especially in a few states like Kano, Katsina, Kaduna and Jigawa during the forecast period.

The agency said that sunny spells with few patches of clouds were anticipated over the North Central during the morning hours.

“Later in the day, a hazy atmosphere with few patches of cloud is expected over parts of the Federal Capital Territory, Nasarawa, Kogi, Kwara, Niger and Benue states.

“The atmosphere over the southern parts of the country should be cloudy with intervals of sunshine, while morning thunderstorms are anticipated over Lagos, Delta, Rivers, Cross River and Akwa Ibom states.

“Later in the day, isolated thunderstorms are expected over parts of Ondo, Edo, Abia, Enugu, Anambra, Lagos, Bayelsa, Delta, Rivers, Akwa Ibom and Cross River states,” it said.

The agency envisaged dust haze over the northern region during the forecast period on Thursday.

It anticipated sunny skies with patches of clouds over the North Central in the morning hours.

“Hazy atmosphere with few patches of clouds are expected over parts of Kwara, Plateau and Kogi states. There are prospects of thunderstorms over parts of the Federal Capital Territory, Nasarawa and Benue states in the afternoon and evening hours.

The atmosphere over the southern parts of the country should be cloudy with spells of sunshine. However, we expect morning thunderstorms over parts of Rivers, Cross River and Akwa Ibom states.

”Later in the day, isolated thunderstorms are expected over parts of Oyo, Osun, Ekiti, Anambra, Imo, Edo, Delta, Bayelsa, Lagos, Cross River, Akwa Ibom and Rivers states,” it said.

The agency forecasted dust haze over the northern region during the forecast period on Friday.

NiMet said that sunny skies with few patches of clouds were anticipated over the North Central during the morning hours.

“Later in the day, there are prospects of isolated thunderstorms over parts of the Federal Capital Territory, to be cloudy with prospects of isolated thunderstorms over parts of Akwa Ibom and Cross River states during the morning hours.

“Later in the day, thunderstorms are expected over parts of Oyo, Ondo, Enugu, Anambra, Imo, Abia, Lagos, Cross River, Bayelsa, Delta and Rivers states,” it said.