ESG: corporate greenwashing or strategic ethical investing?

It has been said that the shift in corporate focus to ESG over recent years and the ensuing transition to low-emissions technologies the world over, will require the largest reallocation of capital in human history.?

This momentous change in the way companies are making strategic and financial decisions heralds a great new era for the planet.?But perhaps it’s slightly more complicated for a company’s bottom line.?Or is it?

Earlier this month, South32 decided not to proceed with a $1billion expansion of its Dendrobium coking coal mine, extending the mine’s life into the 2040’s.?Despite the clear economic incentives to invest in coking coal (essential to produce iron and steel) with prices up considerably from a year ago, the company chose not to proceed citing “expected returns [as] not sufficient to support an investment relative to alternatives”.?

Not only does the decision indicate that investors expect higher returns when the ESG reputational risks associated with projects are higher, but perhaps also that looming corporate crack downs on ESG greenwashing are starting to have an effect.

The Australasian Centre for Corporate Responsibility has recently expanded its landmark Federal Court case against Santos over alleged greenwashing in its recent investor briefings and climate change reports.?It’s also looking into Origin’s “climate cognitive dissonance” after the company’s failure to consider emissions from its new gas basins in recently released climate and transition plans.

APRA has also started taking meaningful action when it comes to climate change risk assessments for corporations.?Late last year it released CPG 229 – Climate Change Financial Risks affecting banks, insurers and superannuation trustees and it’s expected to release its Climate Vulnerability Assessment later this year.

ASIC and the ACCC have also made it clear they are targeting greenwashers – see our recent articles on this here and here.

It seems headway is finally being made when it comes to real corporate accountability in the ESG space.?Investors and the market are watching with keen interest to ensure companies are developing action-based measures to improve not just sustainability but accountability.?And companies are listening.?An exciting time in human history.

Questions? Give us a call.