Weekly clippings #25 - No impact, green window dressing, carbon premium,

This week in science we do a fairly deep dive into recent studies of the known problems of land surface measurements and their bias and unreliability over time. Such measurements are often used to support the claim for dangerous man-made global warming, yet every time you carefully dig deep into the numbers you find an abundance of scientists who express caution about such interpretations. 

In the investment/economics category, we have a substantial collection of recent articles focused on greenwashing, portfolio manipulation for ESG reasons, and even research showing that companies with higher CO2 emissions have higher returns. 

Finally, in the theatre of the absurd, we have a look at the irrational ideas of multiple climate-related tipping points. Happy reading!

Although urban areas occupy only about 4% of the land surface, most weather monitoring stations are located in urban regions. Those same regions have an abundance of concrete and asphalt, which have remarkable heat-absorbing properties. The result is that these urban islands are warmer than their rural counterparts. Here are recent studies showing how the measurement of warming is likely overstated.

EPA: Few Stations Show Increase in Hot Days  Only 19% of all weather stations report an increase in the number of hot days since 1948

The Detection and Attribution of Northern Hemisphere Land Surface Warming (1850–2018) in Terms of Human and Natural Factors: Challenges of Inadequate Data Important challenges remain for the broader detection and attribution problem of global warming: (1) urbanization bias remains a substantial problem for the global land temperature data; (2) it is still unclear which (if any) of the many TSI time series in the literature are accurate estimates of past TSI; (3) the scientific community is not yet in a position to confidently establish whether the warming since 1850 is mostly human-caused, mostly natural, or some combination. Suggestions for how these scientific challenges might be resolved are offered.

Challenges in the Detection and Attribution of Northern Hemisphere Surface Temperature Trends Since 1850  Here we show that when applying multilinear regression analysis to an expanded and updated data set of 27 TSI series, the original conclusions of Connolly et al. are confirmed for all five ST data sets. Therefore, it is still unclear whether the observed warming is mostly human-caused, mostly natural or some combination of both.

Evidence of Urban Blending in Homogenized Temperature Records in Japan and in the United States: Implications for the Reliability of Global Land Surface Air Temperature Data  Using the Japanese stations in the widely used Global Historical Climatology Network (GHCN) dataset, it is first confirmed that the unhomogenized Japanese temperature data are strongly affected by urbanization bias (possibly ∼60% of the long-term warming). The U.S. Historical Climatology Network (USHCN) dataset contains a relatively large amount of long, rural station records and therefore is less affected by urbanization bias. Nonetheless, even for this relatively rural dataset, urbanization bias could account for ∼20% of the long-term warming.

Examples from our New UAH Urban Heat Island Dataset  The following map shows the estimated total Urban Heat Island effect on air temperature in the years 1850 and 2023. The colour indicates a greater effect. This shows how much the temperature record is skewed by the growth of cities.

The Cost of Doing Good - Proponents of “impact investing” made big promises and failed to deliver.  After 15 years, and trillions invested in its name, impact investing, as currently practiced, has made little progress on the social and environmental problems that its proponents intended to solve. Maybe it’s time to try something different.

ESG investing is dying on Wall Street. Here’s why. If you’ve ever been down in the weeds and tried to calculate true ESG scores for companies, you find out how impossible it is to bring those three very different analytical pillars together into a single score that actually tells you something meaningful about the overall company.

ESG still a 'minefield' for wary wealth managers  The percentage of investment advisers who say they "completely trust" sustainability claims from funds has fallen from 1% to zero, according to the ESG Attitudes Tracker from the Association of Investment Companies. On a scale of one to five, most respondents (51%) rated their level of trust as ‘three', indicating limited trust. Advisers told the researchers that recommending funds based on misleading claims puts their business at risk.

Sustainability or Performance? Ratings and Fund Managers’ Incentives Following the introduction of Morningstar’s sustainability ratings, mutual funds increased their holdings of sustainable stocks to attract flows. Such sustainability-driven trades, however, underperformed, impairing the funds’ overall performance.

Green Window Dressing  We uncover evidence of widespread sustainability ratings manipulation by mutual funds. ESG fund portfolios exhibit 31% higher ESG exposure immediately before mandatory portfolio disclosure than immediately afterward.

Global Pricing of Carbon-Transition Risk  We have found evidence of a widespread, significant, rising, carbon premium— higher stock returns for companies with higher carbon emissions. This premium is not just present in a few countries (U.S., EU) or in a few sectors tied to fossil fuels. It is ubiquitous, affecting firms in all sectors over three continents, Asia, Europe, and North America. Moreover, stock returns are related not just to firms’ direct emissions but also to their indirect emissions through the supply chain. Finally, we have found that this carbon premium has been rising after the landmark Paris Accord of 2015, in line with the growing awareness about the urgency of combatting climate change and the rise of the sustainable investment movement.

Smoke and mirrors: A look inside ESG fund portfolios  Fund managers may game regulatory disclosure to disguise themselves as sustainable, while including higher-performing yet controversial assets in their portfolios.

Do Investors Care about Carbon Risk? We find that U.S. stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, after controlling for size, book-to-market, momentum, and other factors that predict returns. 

ESG Investing declining in popularity as fears of greenwashing grow  In the 2021 survey, 48% of respondents agreed with the statement “I’m not convinced by ESG claims from funds”. This rose to 58% in 2022 and hit 63% in this year’s survey, showing that the investment industry has a long way to go before investors trust what they are being told about ESG.

Raising capital now biggest risk to mining companies after ESG Massive outlays are required by the green energy transition, but environmentalists fiercely oppose mining, and capital is restricted because of ESG-driven efforts.

What Happens When China Restricts the Global Flow of Critical Energy Minerals?

Looks like we're all about to find out. if you wanted to create a plan that would render America entirely subservient to China for its energy security, Biden’s Green New Deal energy and environment policy structure is what you would devise.

Tipping into absurdity Among the metaphors that obstruct thought rather than facilitate it is the notion of multiple tipping points. For any given thing, or system, there can logically only be one; before it you don’t tip, after it you do. But in the wacky world of climate they’re everywhere and nowhere at the same time.