London Calling on a dubious LME initiative

London Metals Exchange annoucement

Investment Weekly (UK)

ESG blog

4 June 2020

London Metal Exchange has announced plans to introduce a platform to meet
investor demand for ‘low-carbon’ aluminium, the first time a metal will be
traded based on environmental factors in the 143 years of the exchange,
the Financial Times has reported.

The spot trading platform is due to go live in 2021 and will highlight
aluminium that meets low-carbon criteria, but environmental disclosures
regarding the metal will remain voluntary on the main exchange.

Renewable electricity factors heavily in the carbon footprint of aluminium
producers, with one tonne of the metal in Europe, which mostly uses
renewable energy, producing four tonnes of carbon-dioxide equivalent,
compared to 15 tonnes from China, which relies mostly on coal-fired power.
Matt Chamberlain, chief executive of the London Metal Exchange, said:

"There is not enough low-carbon aluminium in the world to fulfil all
the requirements. This [platform] will allow the low-carbon metal to
flow to the consumers who are particularly concerned about that topic.

"There will still be markets for non-low carbon aluminium. We do not see
this as a situation where the LME could or should simply impose limits on
carbon footprint as part of its brand listing requirements, but what we do
see is there is a growing set of end-consumers that are conscious [of this
issue] and that message goes up the supply chain".

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The majority of company boards are lacking in climate-related knowledge,

Dutch asset manager Robeco has claimed this, while calledimg for firms’ directors
to “build up their climate expertise”.

Robeco called on investors to push firms to improve their understanding of
climate-related issues at the board of director level, with an emphasis on
those that are heavily reliant on fossil fuels and, thus, in need of
de-carbonising to lower their future risks.

This, said Robeco’s head of active ownership team Carola van Lamoen, could
be in the form of providing training by internal experts, accessing
external advice or appointing directors with expertise in areas that are
key for the company to succeed in a low-carbon economy.
van Lamoen continued:

"We are not looking for academics or scientists to sit on boards. On
the contrary, we believe that industry knowledge and expertise is
critical to understanding what an industry might look like in a
low-carbon economy and how the business models will need to change in
order to adapt to new emerging needs.

"Board self-assessment will be an important tool for them to identify
potential gaps in skills or expertise among their members and update the
profiles needed. So far, our engagement efforts have revealed that only a
small minority of boards are assessing their composition from a
climate-related expertise perspective.