March 18, 2022 - ESG and Climate News

As horrific scenes from the invasion of Ukraine continue to roll in, there are signs of hope from the ongoing peace talks . When the conflict does inevitably run its course - hopefully soon - the world will be a different place.?

The world is united against Putin. Even Switzerland , which remains neutral in nearly all conflicts, will join Europe in imposing sanctions on Russia. A long and growing list of multinational companies have shuttered their Russian operations and it is unclear how they will ever return.??

The connection between the war and environmental issues continued this week as the EU moved to ban new investment in the Russian energy sector . With hopes to wean themselves off of Russian oil and coal , the EU has also announced a plan to cut Russian gas imports by two-thirds before 2023 and abolish all Russian fossil fuels by 2030. Even in the face of skyrocketing oil prices, the list of countries banning imports of Russian crude grew this week .?

With Russian aggression in Ukraine causing a harrowing refugee crisis, US climate envoy John Kerry reminded us to consider the plight of climate refugees – over 100 million people by 2050 – who will be forced to leave their homes if the climate crisis remains unaddressed.?

Eco-Anxiety

This week, the New York Times released a poignant article showing how existential threats like the war in Ukraine and the perils of climate change are having an unseen toll on global mental health . Although the physical toll of climate change is plain to see for all, the costs of climate change on mental health are hidden and less discussed. ?

The most recent IPCC report explains how increasing temperatures are associated with more severe mental health challenges, especially for young people. It also outlines the mental trauma caused by extreme weather events and a growing loss of livelihoods and culture. The NYT article tells some of the real life stories of people suffering from mental health issues as a result of the looming threat of climate change.?

A 2020 poll revealed that two-thirds of Americans are somewhat or extremely anxious about the impacts of climate change and over half are anxious about the effect it will have on their mental health. This ‘eco-anxiety’ – defined as the chronic fear of the irrevocable impacts of climate change on oneself and future generations – is something psychologists are increasingly seeing in the therapy room .?

If you suffer from anxiety there are resources to help. This HealthLine article has some good recommendations on how to cope.?

Generation Dread

Gen Z seems to be the most affected by this environmental dread . A recent Lancet poll of 16-25 year olds found that 55% believe that humanity is doomed and 75% find the future a frightening prospect. Young people are struggling to find meaning in an unsure and frightening future.

Many gen z members are turning to activism as a positive outlet for their climate anxiety . It's also shaping how and where they are willing to work. A 2018 survey by Deloitte found that 77% of Gen Z respondents said they would only choose roles in organizations whose values aligned with theirs . A 2021 study in the UK found that 64% of 18-to-22-year-olds consider it important for employers to act on environmental issues , with 59% saying they would leave a company if it was not environmentally accountable.

SEC’s Sunshine Act Rises

On Monday March 21, the US Securities and Exchange Commission (SEC) will hold its open meeting to consider its long-awaited climate disclosure proposal. After many years of effort and support from all sides, the final rule will require publicly traded companies to disclose their climate information in their SEC filings.??

While only a proposal at this point, this is a historic milestone . When enacted, it will provide investors the information needed to align capital to sustainable business practices. Persefoni’s resident SEC expert Kristina Wyatt created this 2-min video to give a high-level overview of the SEC procedure. In the coming weeks we will break down the content of the proposal and what it means for companies.??

Myself and other sustainability veterans weighed in on the forthcoming SEC proposal in this GreenBiz article . The discussion surrounded how beneficial a mandate will be. Mindy Lubber, president and CEO at Ceres said, we are "hopeful the forthcoming rule will be strong. A strong mandate will protect investors, communities, and the economy”.? A poll by Ceres revealed that 87% of Americans are in favor of companies reporting their emissions.

Greenwashing machine

The SEC’s proposal could not come at a more critical time, as greenwashing is eroding the credibility of ESG. The greenwashing phenomenon has in fact now morphed into “ESG washing.” Here are just two examples of ESG wash:

• ESG investors hold $13.4 billion in military suppliers to Myanmar, where at least 1,500 civilians have been killed by the ruling junta.
• Vanguard, Northern Trust ESG funds actually grew their stakes in Russia as the Kremlin war on Ukraine approached.

Stay positive

I like to end these weekly newsletters with reasons for hope. The forthcoming SEC proposal, the ongoing peace talks in Ukraine and this week’s announcement from CDP that 680 financial institutions worth over US$130 trillion will work together to require environmental impact disclosures from more than 10,000 companies around the world. That's a lot of assets lined up behind better measurement and management of sustainability impacts.??

With this news and spring in the air across the Northern Hemisphere, let’s all hope for brighter days ahead.?

Notable news items of the week:

• In a first-of-a-kind action, Shell directors are being sued for not preparing their company’s transition to net zero. Climate activist shareholders seek to hold Shell’s 13 directors personally liable for not meeting the goals of the Paris Agreement. If successful, Shell could be forced to change their strategy to meet net zero targets.
• The Wall Street Journal covers how regulators and investors are demanding better carbon emissions data from companies' supply chains . Carbon accounting startups are prepared to fill this gap by selling software which quickly calculates a company's environmental impact. It's already a "hot" market.
• The European Central Bank (ECB) says banks are falling short on disclosing their climate risk and will have to fix it quickly. The ECB sent out feedback letters to banks under their jurisdiction highlighting the gaps in their disclosures and will expect significant progress when they reassess at the end of 2022.
• Australian researchers have claimed a ‘giant leap’ in technology to produce affordable renewable hydrogen. Researchers believe that this finding could give us a better chance to meet net zero sooner.

Notable Podcasts:

• In this week's ClimateTech with Kentaro podcast episode , Kentaro was joined by NCX’s Max Nova. NCX (formerly SilviaTerra) is a forest carbon marketplace that connects corporations buying carbon offsets to landowners in America. They discuss what carbon offsets and credits mean and the challenges and opportunities of bringing in landowners into the forest carbon market.
• As part of ClimateTech with Kentaro, Kentaro is also delivering a weekly climate tech deal digest, where he waxes lyrical on all things going on in the climate tech funding world. This week’s digest included Volocopter, an urban air mobility service, and Swobbee, a startup working on commercializing battery swapping for micro-mobility vehicles.

Events to Put on Your Radar:

• Persefoni’s Mike Wallace will be speaking at the FEI ESG Ecosystem: Micro Perspectives Conference . The event held virtually between 22-24 of March will bring together finance professionals at the forefront of ESG reporting to share insights on topics ranging from how they got started to where they are now.