ESG Impact: What you need to know - August 2024
While much of the world watched Olympians go for gold, host city Paris kept a close eye on the event’s environmental footprint. In this edition, we look at the greening of the Olympic Games, a new report on decarbonising iron and steel production, fresh plans for Rio Tinto’s Boyne smelter near Gladstone, Boral’s exploration of low-carbon concrete, plus a hospitality giant’s support for the circular economy, and more.
POLICY
Paris goes for green
While athletes focus on a gold-medal finish during the 2024 Olympic and Paralympic Games, host city Paris is measuring its own performance on the climate front.
The City of Light set a goal to halve the carbon emissions of the Games compared with the average footprint of the London 2012 and Rio 2016 Games, which emitted an average of 3.5 million tonnes of CO2 equivalent. From energy efficient stadiums to sustainable waste management and the promotion of public transport, the host city considered both direct and indirect emissions.
Just one competition venue – the Aquatic Centre – was built for this year’s Games. Rental furniture was favoured, a second life for equipment was considered, and Games’ sites were connected to the public electricity grid while priority was given to renewable energy sources to power them. Catering was considered through a green lens, with more plant-based and local produce on the menu and a considerable reduction in single-use plastics for food containers and cups.
Organisers of the Paris 2024 Games are helping to boost the sustainability of other sporting events in France through the development of the Climate Coach for Events tool, which helps to assess and reduce the carbon footprints of these events.
Why does it matter?
The Olympic and Paralympic Games represent the pinnacle of sporting achievement for elite athletes and has the power to unite and inspire global communities. Hosting the Games is a huge undertaking and, with host cities in the global spotlight, it represents a powerful opportunity to promote sustainability within a context that resonates across the world.
Building on its Olympic Agenda 2020, the International Olympic Committee (IOC) recently released its Olympic Agenda 2020+5 – 15 Recommendations. Amongst others, the recommendations include strengthening the role of sport as an important enabler for the United Nations Sustainable Development Goals, and achieving climate positive Games by 2030, developing strategies to address the impact of Climate Change on future Games, and to monitor oversight of supply chains and construction workers’ rights. As IOC President Thomas Bach stated in the Paris 2024 Sustainability & Legacy Pre-Games Report, “it is the Olympic Games that adapt to their hosts, not the other way around”.
Limiting the temperature increase to 1.5 degrees Celsius above pre-industrial levels by 2100 requires work from all sectors, and the Paris Games has demonstrated how different levers for sustainability can work together.
INDUSTRY
Transforming the steel industry
Independent conservation organisation World Wide Fund for Nature (WWF) has released a report calling for greater collaboration between Australia’s state and federal governments and trading partners to help secure the country’s future in low-emissions iron and steel manufacturing.
The report, Australia’s Green Iron Key, identifies potential for a green iron and steel regional co-operation program between Australia and East Asian steel-making economies. It outlines a series of policy recommendations, including the establishment of a AUD10 billion domestic support package to decarbonise the existing iron ore and steel industry and prioritise the development of green iron projects for a focus on exports.
The report promotes the opportunity to decouple the ironmaking and steelmaking processes. It recommends relocating ironmaking to places of low-cost renewable energy and iron ore, while retaining steelmaking where these industries currently exist. The development of renewable hydrogen supplies and the transition of iron ore mining and steelmaking facilities to operate on renewable energy are identified as key priorities.
Why does it matter?
The steel industry is responsible for up to 9 per cent of global greenhouse gas emissions, and the International Energy Agency (IEA) expects demand for steel to rise by more than one third by 2050. Decarbonising the sector is vital to achieving net zero.
In current steelmaking practices, most of the emissions come from the use of fossil fuels in blast furnaces and as a source of electricity in electric arc furnaces.
Australia is the world’s largest exporter of iron ore, predominantly direct shipping hematite ore that is used in blast furnaces as part of the iron making process. The majority of primary steel globally is made from blast furnace technology. Hematite ore is currently not compatible to the lower emission Direct Reduction Iron (DRI) iron-making process, that is one of the pathways to lower emission steel.
To explore the use of hematite in low emission steel production, in February this year BHP, Rio Tinto and BlueScope announced the establishment of a joint venture. Their aim is to demonstrate Pilbara ores can be used to produce molten iron by using renewable power combined with a DRI process that utilises an electric smelting furnace.
The pilot plant will require a significant investment of capital. The findings of the pilot plant may influence the outlook and development of iron making in Asia as the industry transitions from blast furnace to DRI technology, and the role that Pilbara ores play in that transition.
Rio Tinto strikes deal for Boyne smelter
Rio Tinto has struck a preliminary deal with the Queensland Government for the future of its Boyne aluminium smelter near Gladstone.
Under the agreement, the government will support the smelter’s financial viability from 2029 as it transitions to renewable energy. In return, Rio Tinto will be required to maintain the smelter’s full operational capacity and invest in demand-response capabilities to reduce its electricity demand at times of tight supply.
Rio Tinto has also committed to additional sustainable energy investments in Queensland, building on its existing commitments to Australia's largest solar and wind projects across the state.
The agreement remains contingent on the completion of Rio Tinto's energy contracting activities, relevant joint venture approvals, and the establishment of an Australian Government pathway for a decarbonised aluminium industry.
Why does it matter?
Global aluminium production accounted for approximately 3% of the world’s direct industrial CO2 emissions in 2022. Indirect emissions from power generation across the aluminium value chain accounted for 70% of total (direct + indirect emissions) from aluminium production in 2022.
Increasing the use of renewable energy in the aluminium value chain represents the biggest source of potential short term emissions reduction.
Australia’s second largest aluminium smelter, Boyne has been operating since 1982. The agreement between Rio Tinto and the Queensland Government paves the way for a competitive, green energy-powered Boyne smelter that will help to lower Australia's carbon footprint, while supporting employment and boosting Australia’s status as a leading global supplier of aluminium to support the global energy transition.
The partnership also supports Queensland's vision to establish Gladstone as a renewable energy hub.
Eating away at food waste
The Hyatt Regency, near Sydney’s Darling Harbour, is seeking to support the circular economy with an innovative approach to tackling food waste. The hotel has become one of the latest organisations to install a robot-controlled insect farm developed by waste-management company Goterra.
The Goterra system uses black soldier fly larvae, housed in climate-controlled containerised units known as ‘maggot robots’, to break down food waste on site. They can consume 95 per cent of the food waste in 24 hours. After 7-10 days, the fattened larvae will be transported to the hotel’s eggs supplier, Hilltops Free Range farm, where it can be used as high-protein chicken feed.
The hotel is not the first organisation to install the Goterra system, with others including Woolworths, Lendlease and Queanbeyan-Palerang Regional Council also deploying the technology. The City of Sydney will begin a 12-month trial with Goterra at the end of this year to turn residential food scraps into protein-rich animal feed and fertiliser.
Why does it matter?
Food waste is a significant challenge in Australia. In addition to costing the Australian economy close to AUD 36.6 billion each year, it generates about 13 million tonnes of greenhouse gas emissions, which equates to about 3 per cent of Australia’s total annual emissions. The country also uses around 2,600 gigalitres of water to grow food that is wasted.
Australia’s National Waste Policy Action Plan seeks to achieve an average resource recovery rate of 80 per cent from all waste streams by 2030. By this time, the plan also aims to cut the total amount of waste generated in Australia by 10 per cent per person. It also seeks to halve the amount of organic waste sent to landfill by 2030.
Innovative systems like that of Gottera may help to solve part of this problem, while creating a circular economy to turn food waste into feedstock.
Boral explores low-carbon concrete
Australian construction materials company Boral Limited is collaborating with industry partners and researchers on a two-year, AUD1.67 million project to develop a lower carbon concrete using local calcined clay.
Working in partnership with the University of Technology Sydney, Transport for NSW, environment technology company Calix, and the independent co-operative research centre SmartCrete CRC, the project aims to demonstrate the technical feasibility of using calcined clay as a supplementary cementitious material (SCM) in the production of concrete for use in Australian buildings and infrastructure.
Australia has an abundance of calcined clay, and its industrial use may help to advance decarbonisation pathways for the cement industry. During the validation stage, the project will include accelerated lab testing and field trials for the long-term structural suitability of the use of calcined clay as an SCM in concrete.
Why does this matter?
Concrete is the world’s most-used building material, largely due to its abundance and affordability, and it plays a vital role in the construction of renewable energy infrastructure such as wind farms.
Production of cement, which is a key component of concrete, is responsible for 7 per cent of global GHG emissions and is considered hard to abate due to the process emissions that are released during the clinker manufacturing stage. Clinker is the traditional cementitious material that causes concrete to harden as it dries.
Supplementary cementitious materials (SCMs) are currently used to reduce the proportion of clinker in cement manufacturing and its resultant carbon intensity. Traditional SCMs include blast furnace slag and fly ash but, as coal-fired power generation winds down, availability of these products will be constrained. Calcined clay may present a feasible alternative in helping to cut concrete’s carbon emissions.
WESTPAC IN ACTION
Westpac launches Sustainable Upgrades loans
Australians looking to make energy-efficient or climate-resilient upgrades to their home are set to benefit from Westpac’s new Sustainable Upgrades home and investment loans.
Supported by the Clean Energy Finance Corporation (CEFC), the Australian Government-owned ‘green bank’, the loans offer customers a competitive variable interest rate to install new features or technology in their property to improve its energy efficiency or climate resilience.
Westpac is the first bank to be supported by the CEFC’s AUD1 billion Household Energy Upgrades Fund, a landmark program to help Australians access home energy solutions through access to finance.
Sustainable finance snapshot
For the latest trends in sustainable debt issuance in the Australian-New Zealand markets and around the globe, head to Westpac IQ’s latest Sustainable Finance Market Update.
This quarter’s report includes insights from the Westpac and Economist Impact’s Financing for Sustainability Report on the Asia-Pacific sustainable finance market. There’s also a snapshot of notable use-of-proceeds and sustainability-linked issuances, as well as sustainable finance policy news and key events to keep you informed.
Mirvac’s Green Bond
Westpac supported Mirvac as a Joint Lead Manager in their A$400m Green Bond. This is the first Australian Dollar Green Bond issued under Mirvac’s Sustainable Finance Framework which Westpac assisted Mirvac in executing. The bond was certified by the Climate Bonds Initiative and funds will be used to finance and refinance low carbon buildings.
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