ESG Convergence

Is the alphabet soup clearing up, or just adding different letters???

This week the news broke that the International Sustainability Standards Board (ISSB) will take over the Task Force on Climate-related Financial Disclosures’ (TCFD) role in monitoring companies’ progress on climate-related disclosures.

Some context might help for those staring in confusion at noodle letters on their metaphorical spoons…

Way back in 2015, an important part of the G20 (the club of 20 largest economies in the world) called The Financial Stability Board (FSB) created the TCFD. Its charter was in its name: to create a framework for companies to report on the financially relevant aspects of climate information. And it worked. The TFCD framework was supported by thousands of companies and governments around the world.?

Now the framework forms the backbone of the new ISSB climate standards (as well as the new European climate standards), which prompted the FSB to declare "the culmination of the work of the TCFD."

So, hats off to the FSB for declaring mission accomplished and handing the reins to the ISSB where it should belong. One less abbreviation!?

ISSB Chair Emmanuel Faber said, “The ISSB welcomes the FSB's request to transfer the TCFD’s monitoring responsibilities to the ISSB… This announcement provides yet further clarification of the so-called ‘alphabet soup’ of ESG initiatives for companies and investors.”

Assurance Standard Approved

Keeping our green eyeshade on for a minute, the world of accounting and disclosure got a boost this week with the release of the “International Standard on Sustainability Assurance (ISSA 5000).”

Why is this news? The majority of sustainability disclosure is not assured and thus less reliable for investors. Also, all of the new climate disclosure regulations - from the US to Europe -? will require assurance. So the new standard is very timely as it aims to help accountants conduct “limited” and “reasonable” assurance across any sustainability topic under any reporting framework.

The ISSA 5000 will be open for public consultation from early August until December 2023, ahead of the standard being finalized in 2024.

The New Normal - Climate Disaster

Reminding us of the urgency of these policy moves, this week brought more evidence of the rapidly unfolding climate crisis. Floods in Vermont, New York, and elsewhere, the unrelenting heat dome across the western and southern United States, and record-breaking heat in Florida waters are the steady drumbeat of a changing climate.??

A decade ago, any one of these events would have been seen as an aberration. This week, they are happening simultaneously as climate change fuels extreme weather, prompting Governor Kathy Hochul of New York to call it “our new normal.”

“It’s not just a figment of your imagination, and it’s not because everybody now has a smartphone,” said Jeff Berardelli , meteorologist for WFLA News in Tampa. “We’ve seen an increase in extreme weather. This without a doubt is happening.”

The US “heat dome” (who comes up with these terms?) is forecast to strengthen into the weekend with temperatures poised to approach all-time records. Excessive heat warnings affect over 100 million people and cover 15 states from Washington state to New Mexico, including Arizona and California, and from Texas to Florida.

The question is, with all these climate-related disasters, will anything be done? That is the question posited by Bill McKibben in this excellent New Yorker piece. He spells out all of the climate disasters we have seen in recent weeks and how nothing seems to move the political needle toward climate action.?

Pushback to the Rollback

The recent easing of Europe’s Corporate Sustainability Reporting Directive (CSRD) came under fire this week. A group of more than 90 leading asset managers claimed that relaxing the rules would limit the sustainability-related information required for investment decisions.

The group said, “The proposed approach would limit investor access to the consistent, comparable, and reliable information needed to inform decisions and allocate capital in line with sustainability goals.” Investors see this as a final chance for changes before the CSRD is finalized at the end of July or early August.

Also, the EU’s landmark ruling on nature protection survived fierce pushback from campaigners determined to stop the bill. The law is the EU’s biggest attempt to protect biodiversity and will require members to restore a fifth of their land and sea by 2030.

If you need a handy cheat sheet on all the new ESG policies in the EU, the European Securities and Markets Authority (ESMA) released this timeline.

Climate Showdown Part II

Last month the Biden administration had to make concessions in climate funding to halt a US default but largely protected the landmark Inflation Reduction Act (IRA). Now Republicans are doubling down on their attacks on clean energy and climate spending with a slew of bills and amendments that would block key funding pools established under the IRA and prohibiting policies aimed at reducing greenhouse gas emissions.

Congress has to agree to a swath of spending bills before September 30th to avoid a government shutdown. But, Democrats are accusing Republicans of adding climate “poison pills” to some of the bills sabotaging any chance of progress.?

Among the poison pills are amendments to rules that would ban the Biden administration from buying EVs and stop U.S. funding for developing countries to achieve their emissions and climate-resilience goals. Elizabeth Gore of the Environmental Defense Fund said, “The climate poison pills Republican budget leaders proposed are unsound, and they show that GOP leadership is not serious about working with Democrats to pass a budget and prevent a government shutdown.”

Landmark Shipping Agreement

The global shipping industry reached a historic emissions reduction pledge, agreeing to reduce emissions to net zero "by or around 2050." The landmark commitment from the London United Nations’ International Maritime Organization meeting also sets a goal of reducing shipping emissions by at least 20% but aiming for 30% by 2030.

Ships carry around 90% of all traded goods globally and are a major source of pollution, emitting around one billion tons of greenhouse gas every year. This is roughly the same amount as 243 coal plants. Also, 40% of all products transported on ships is the coal, oil and gas that heat up the atmosphere when burned.

“The new fuels that we expect the majority of the shipping industry will have to use [are] two, three or four times more expensive than the fuel oil which we use today,” said Simon Bennett , of the International Chamber of Shipping. “So, what we need to do is to create a market for these new fuels.”

“Companies who are going to provide emission reduction equipment want a clear signal so they know it is safe to invest in these technologies. This is why it is important to have ambitious 2030 targets,” said John Maggs, president of the Clean Shipping Coalition.

Environmentalists claim that the ambiguity in these agreements missed an opportunity to set clear deadlines for progress. “This week’s climate talks were reminiscent of rearranging the deckchairs on a sinking ship,” said Fa?g Abbasov from NGO Transport and Environment. ?“The U.N. had the opportunity to set an unambiguous and clear course towards the 1.5 C temperature goal, but all it came up with is a confusing fudge,” Abbasov said.

Anthropocene Started in the 1950’s

According to new scientific research, the Anthropocene — the epoch in which humans began to substantially impact Earth’s systems — began in 1952 in a small lake in Ontario, Canada.?

Crawford Lake was chosen as the starting point out of many other options because its stratified sediment is perfect for showing annual changes in anthropogenic contaminants. It shows pollution from fossil fuels, fallout from nuclear experiments, and changes in geochemistry.??

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.?

Other Notable News:

• The US Agricultural Department earmarked $300 million of investment into monitoring emissions from farming, which accounts for 10% of national emissions. Establishing the emissions data collection and monitoring network will use funding from the Inflation Reduction Act to determine how much carbon can be captured and how effective new agro-tech can be.
• A new climate simulator combining climate models with economic models and 1,200 technologies for supplying and using energy found that only 30% of the 40,000 possible scenarios predict the world will not breach 1.5°C warming in the next five years.?
• The world’s oceans are changing color due to climate change. Images from NASA have revealed that the oceans are becoming greener from increased Plankton populations. Over 50% of the world's oceans are affected, mainly around the equator.
• Colombia says deforestation fell by 29% in 2022 versus the previous year. It marks the lowest deforestation level in the country since 2013. Colombian President Gustavo Petro has called on rich nations to cancel foreign debt in exchange for conserving more areas of the Colombian Amazon.
• A new study found that while most board members (75%) see the financial benefit of having good ESG strategies, half of them lack the skills and expertise in their organizations to address climate change.
• When the climate crisis seems so hopeless and the effects closer than ever, how should we react emotionally? That is the question posed in this New Yorker piece that looks at how some deal with anxiety and stress through stories of those on the front lines.
• Carbon Direct and Microsoft release the 2023 criteria for high-quality carbon dioxide removal. This report marks the third year that Microsoft and Carbon Direct have joined forces to address the quality challenges in the voluntary carbon market through the development of rigorous, science-based standards for carbon dioxide removal projects.?
• How much will net zero cost? This new BCG white paper explores the lowest-cost paths to reach net zero. The study found that to identify the most cost-effective path to net zero, companies need to consider technological, organizational, and economic requirements and that renewable power, efficiency, and circularity—offer the largest opportunities for building positive business cases.

Notable Podcasts:?

• This week’s ESG Talk podcast is all about ESG auditing from the perspective of two leading internal auditors. The hosts share lessons they’ve learned about ESG and assurance and how cross-functional engagement is the key to collecting consistent and accurate ESG data.
• In this week’s episode of the Outrage and Optimism podcast, the podcast hosts Christiana Figueres and Tom Rivett-Carnac shared what they gleaned from a discussion with ISSB chair Emmanuel Faber about the ISSB’s new standards. They were also joined by Simon Sharpe , Director of Economics for the UNFCCC Climate Champions and author of Five Times Faster. Together, they discussed how they can accelerate climate action.