ESG In Pills - March 2024
Top story
The Global Election Wave of 2024: Environmental Policy at Crossroads
2024 is the election year. More voters than ever in history will head to the polls as at least 64 countries, plus the European Union, —representing a combined population of about 49% of the people in the world. The outcomes of these elections are pivotal, especially as current climate policies project a warming of approximately 2.7°C by 2100, significantly overshooting the 1.5°C target of the Paris Agreement. The need for intensified governmental action is evident, with potential climate commitments poised to avert an additional 0.6°C of warming, contingent on the electoral verdicts across the globe.
In the European Union, the 2024 European Parliament elections this June are anticipated to be a critical juncture for climate policy, particularly the EU's Green Deal framework and net zero targets. The next mandate will run until 2029, just before the deadline for the ambitious 55% emissions reductions by 2030 target . Historically, the EU Parliament has seen a centre-left coalition drive environmental policy. Projections suggest a possible rightward shift, which might challenge existing climate initiatives and affect the EU's ability to meet its climate goals. Analysis by ECCO – a climate change think tank – presents four political scenarios based on current projections, indicating that election outcomes could either diminish or maintain the current pace of the EU's climate ambitions.
In India, where elections are slated for April, the political landscape is at a crossroads. Prime Minister Narendra Modi's bid for a third term could significantly influence India's climate policies, considering Modi's legacy hinges on his climate leadership, with India's aggressive push for renewables and green hydrogen development. Climate action is not a campaign talking point for the two leading parties, the BJP and the Indian National Congress. The priority is energy security to meet burgeoning demand, which in the short term means more fossil-fuel consumption and a continued reliance on coal. In the unlikely event that Modi loses, experts do not expect a shift away from India’s dual push for renewables and coal. Unlike countries such as the United States, India’s climate policies don’t flip-flop according to who is in power, says Dhruba Purkayastha, director for India at the non-profit research group Climate Policy Initiative.
Indonesia, having recently conducted its elections, is poised to continue its existing climate and energy policies under Prabowo Subianto. Despite a relatively young voting population, climate and environment were not key issues in these elections, says Ika Idris, who chairs the Monash Climate Change Communication Research Hub Indonesia Node, and is based in Jakarta. In the international arena, while aiming for net-zero emissions by 2060, Indonesia's immediate future appears anchored in coal consumption and exports, alongside the nickel industry's growth, vital for electric vehicles and batteries. This reliance on coal and nickel extraction points to economic priorities overshadowing climate action, despite the potential for renewable energy given the country's resources.
Africa's diverse political landscape, with nine countries heading to elections running throughout the year, holds substantial implications for climate policy on the continent. Disproportionately affected by climate change, elections could see a new wave of climate governance, focusing on adaptation strategies, green energy investments, and sustainable agriculture practices. ?In this context, South Africa, set to host the 2025 G20 summit, after Brazil, is positioned well to leverage its role on the global stage to advance climate action. In Senegal, a West African country doubly affected by drought and coastal erosion, former Prime Minister Idrissa Seck is proposing a new vision that takes account of the ecological transition. And 5,200 kilometres from the land of Teranga, current President Paul Kagame, who has been in power since 2000 in Rwanda, is seeking a fourth term.?The challenges facing the winner this election include reducing greenhouse gas (GHG) emissions in the country by 38% by 2030, and combating flooding.?The electoral outcomes of the continent could determine the extent to which climate action is integrated into national development agendas.
U.S. elections, planned for November, also present a significant consideration for climate policy. Researchers have estimated that Biden’s flagship achievement, the 2022 Inflation Reduction Act, could double the pace of US climate progress by itself and reduce the country’s carbon emissions by 43–48% by 2035, relative to 2005 levels.?Trump, on the other hand, has also said he would use his executive authority to weaken climate regulations and expand federal oil and gas programmes. The intersection of climate issues with broader economic concerns and democratic values underscores the importance of these elections for climate action. The emphasis is on the critical need for clear, actionable climate strategies from candidates, rather than a mere acknowledgment of climate change as a challenge.
And finally, the United Kingdom is bracing for a potential change in governance, with the next general election required by January 28, 2025, amid challenging economic conditions. 2023 saw the expansion of North Sea oil and gas licenses and reduced ambition on building and transport decarbonisation targets. The opposition Labour Party, leading in polls, advocates for robust environmental policies with its flagship Green Prosperity Plan. This potential change in direction makes such an election critical for the UK's climate commitments post-Brexit.
Climate change is hardly the only issue in 2024. But it overlaps with all the other big questions facing voters. Amidst a backdrop of escalating challenges – ranging from conflict and public health crises to economic upheaval and the devastation wrought by natural disasters – our greatest asset, our planet, needs to be centre stage in 2024 elections. The elections across various regions—major democracies and pivotal economies—offer a unique chance to reaffirm commitments to the Paris Agreement, invest in green technologies, and adopt policies that promote environmental justice and biodiversity conservation.
Chart of the month
Environment
Global Alarm on Migratory Species Decline
The Convention on the Conservation of Migratory Species of Wild Animals (CMS), under the aegis of the United Nations, released the first-ever State of the World’s Migratory Species report at CMS COP14 in Samarkand, Uzbekistan. The report highlights the dire situation facing migratory species across the globe, with nearly half experiencing population declines and more than 20% threatened with extinction. Alarmingly, 97% of listed fish species are on the brink, pointing to a bleak future for biodiversity. The document underscores human-induced threats like overexploitation and habitat destruction as principal culprits, alongside climate change and pollution, stressing the urgent need for international cooperation and action to safeguard these vital components of the world's ecosystems. Financial institutions and finds banks and investors are significantly contributing to the destruction of the world's tropical rainforests through their investments. With $307 billion credit provided since 2016 and $38 billion in equity held, financial backers support companies with land grabbing, rights abuses, and extensive deforestation, underlining a system that prioritises profit over planet. In this context, the findings emphasise the importance of integrating biodiversity considerations into investment decisions and business strategies, ensuring long-term resilience and profitability in a world facing environmental challenges.
You can read more here .
Engagement Efforts Falling Short
Marking a growing trend of environmental responsibility among investors, PFZW, Europe's third-largest pension fund with assets amounting to €238bn, has divested €2.8bn from prominent oil companies such as Shell, BP, and TotalEnergies. This move is a culmination of a two-year program of active engagement with oil and gas companies, encouraging them to produce "verifiable" transition plans to support the aims of the Paris climate agreement. Today, only seven oil and gas firms with convincing strategies for transitioning to clean energy remain in PFZW's portfolio. This decision underscores the escalating investor dissatisfaction with the fossil fuel industry's slow pace of adapting to climate change imperatives, even as global temperatures momentarily exceed the critical 1.5°C threshold.
You can read more here .
The Rising Trend of Environment-Focused Bonds
Sustainable Fitch finds investors seeing special financial products, known as labelled bonds, as key tools for funding projects to restore and protect ecosystems. These bonds are gaining popularity for their focus on projects that aim to conserve both land and water-based environments, with 16% of issues in 2023 which marks 5% increase from 2020. ?Despite facing challenges such as the complexity of biodiversity-related data, these initiatives signal a robust movement towards integrating fiscal policies with environmental sustainability goals. Looking beyond the private sector, governments are also moving forward. Japan launched the sale of climate transition bonds, raising 800 billion yen ($5.3 billion) through a 10-year bond issue, marking a milestone in global finance. This initiative, part of Prime Minister Fumio Kishida's strategy to issue 20 trillion yen of climate bonds over the next decade, aims to propel the country towards its ambitious target of achieving net-zero greenhouse gas emissions by 2050.
You can read more here .
Social
The Silent Consensus on Climate Action
A survey involving nearly 130,000 people across 125 countries reveals a strong global consensus in favour of climate action, with findings indicating a significant majority of the world's population is ready to personally contribute to the fight against global warming. According to the study published in Nature Climate Change by researchers Peter Andre, Teodora Boneva, Felix Chopra, and Armin Falk, about 69% of respondents are willing to donate 1% of their income to combat climate change, 86% support pro-climate social norms, and 89% demand more robust political measures. The survey highlights that individuals in countries more vulnerable to climate impacts are even more prepared to contribute. More troubling, the researchers finds there is a pervasive underestimation of others' willingness to take action, a phenomenon termed as 'pluralistic ignorance,' which may hinder further progress on climate initiatives. This misperception, coupled with the fact that many are more likely to act if they believe others will too, suggests that increasing awareness about the widespread readiness to address climate change could significantly bolster collective efforts.
You can read more here .
Paris Votes for Increasing SUV Parking Charges
Parisians have voted in favour of a proposal to substantially increase parking fees for large, heavy vehicles, commonly known as SUVs. The initiative, championed by the city's mayor, Anne Hidalgo, saw a 54.55% approval rate for imposing an €18 per hour parking charge in the city centre for cars weighing over 1.6 tonnes, and €12 in outer areas. This decision, derived from the ballot involving 1.3 million eligible Paris voters, exempts residents, workers in specific professions, and individuals with disabilities. SUVs burn 15% more fuel than a classic coupe and cost more to build and purchase. City hall has further pointed to safety concerns about taller, heavier SUVs, which it says are "twice as deadly for pedestrians as a standard car" in an accident. Hidalgo’s environmental strategy, highlighted by efforts to reduce car pollution through pedestrianisation and enhanced cycling infrastructure, aligns with her broader vision of minimising car dependency. Despite the backlash from some conservative critics, the city anticipates the new charges will not only address safety and spatial concerns but also generate substantial revenue, potentially amounting to €35 million annually. This policy reflects a growing trend towards environmental prioritisation in urban planning, with similar initiatives being considered in other French cities.
You can read more here .
Exxon CEO Shifts Climate Crisis Blame to Public
In a controversial stance, Darren Woods, CEO of ExxonMobil, attributed the lag in achieving climate goals to public resistance towards the financial burdens of the clean-energy transition. As head of one of the leading contributors to greenhouse gas emissions, Woods argues that the responsibility for the climate crisis does not solely lie with oil giants but also with consumers reluctant to shoulder the costs associated with reducing carbon emissions. His comments come amid growing scrutiny over ExxonMobil's role in climate change, highlighted by lawsuits and criticism from climate experts who accuse the company of deflecting blame and continuing to prioritise fossil fuel expansion over substantial investments in renewable energy. Despite acknowledging the urgency of decarbonisation, Woods defends Exxon's focus on emerging technologies like carbon capture and hydrogen fuels, questioning the economic viability of established renewables such as wind and solar, against scientific consent. His stance has met with backlash from academics and environmentalists, who point to ExxonMobil's long history of disinformation regarding climate change and its current efforts to resist stringent environmental standards.
You can read more here .
Governance
China’s Leap Towards ESG Disclosure Regulations
In a decisive move, China has recently mandated over 400 of its largest corporations to issue sustainability reports by 2026, aiming to align with the European Union's ESG criteria and bolster investor trust. The regulation, introduced through draft guidelines by China's primary stock exchanges, targets companies on key stock indexes, representing over half of the total market value on China's major exchanges. Required disclosures will include exhaustive ESG governance and strategy details, energy transition plans, and their environmental and societal impacts, incorporating the concept of double materiality. This step mirrors the EU's Corporate Sustainability Reporting Directive (CSRD), which affects approximately 50,000 companies within the EU, and over 10,000 non-EU companies outside the EU – with a majority in the US . China's initiative, seen as an effort to synchronise with international norms and attract foreign investment, underscores how proactive regulation can position a country at the forefront of sustainable finance, demonstrating the beneficial cascading effects of robust standards across jurisdictions.
You can read more here .
UK Legal Body Clarifies Fiduciary Duties for UK Pension Schemes
The Financial Markets Law Committee (FMLC) released a report aimed at resolving legal uncertainties for UK pension schemes regarding the integration of climate and sustainability factors into their investment strategies. Addressing the longstanding concern of fiduciary duty as an obstacle, the FMLC advises trustees to view sustainability as a core financial factor in their decision-making process, rather than a peripheral non-financial one. Emphasising the financial implications of climate change, the committee encourages trustees to move beyond mere compliance with existing regulations, acknowledging the material risks of climate-related physical, transition, and litigation issues. The report challenges trustees to consider long-term investment sustainability over short-term gains and warns that diversification alone may not suffice to mitigate systemic climate risks. This clarification is expected to empower more trustees to incorporate climate considerations into their strategies, aligning investment decisions with fiduciary duties while addressing the urgency of sustainable investment practices.
领英推荐
?You can read more here .
Danone Polluting Indonesia's Rivers
Aqua, a popular bottled water brand by Danone, has been identified as the leading contributor to plastic pollution in Indonesia's rivers. The study, conducted by Sungai Watch, a non-profit organisation based in Bali, analysed over half a million pieces of debris intercepted by river barriers across Bali and East Java, uncovering that one quarter of all polyethylene terephthalate (PET) bottles found were linked to Aqua. This troubling finding places the spotlight on other significant contributors, including Coca-Cola and local giants Wings Group and Indofood. Despite Aqua's sustainability pledges and efforts to enhance recycling, the scale of pollution underscores the urgent need for systemic change. With Indonesia ranking as a top source of marine plastic waste, the report from Sungai Watch demand a revaluation of corporate practices and a stronger commitment to environmental accountability. This change involves the adoption of circular economy principles, reducing waste and banning single-use plastics, encouraging refillable bottle systems, and exploring sustainable packaging alternatives. While governments are in the process of negotiating a Plastic Treaty, effective corporate governance mechanisms are essential to ensure that environmental commitments are genuinely met, thereby aligning corporate practices with global sustainability goals and stakeholder expectations.
You can read more here .
Events
EY/EU Council,
March 20,
Brussels
?
Reuters Events,
March 26-27,
New York City
?
The Climate Group,
April 22-25,
Washinghton, DC
?
Investment Association,
April 24,
London
?
Climate Action/UNEP FI,
May 2,
Paris
?
UKSIF,
May 15,
Edinburgh
March 2023, issue n26. Previous editions can be found on LinkedIn or the OBR website . All information in this article is personal and does not represent the viewpoint of any company.