May 27, 2022 - ESG and Climate News

A Very Different Davos?

Has Davos lost its mojo? With lower attendance this year, it was great to be able to stroll around without struggling through crowds of Nobel Prize winners, CEOs and billionaires in snow gear, but it also felt like a turning point.?

What sets the World Economic Forum annual meeting apart from other events, is the notion that the world’s rich and powerful come together in a peaceful, somewhat relaxed, setting. It provides a warm fuzzy feeling that maybe the world isn’t coming apart after all.?

But, founder Klaus Schwab’s vision of global connection and cooperation may be at risk. It’s undeniable that there was a weird vibe at this year’s forum. War, inflation and the pandemic have created a palpable sense of unease in the spring air. One of the popular selfie spots on the promenade was “Russia House” – this year not occupied by actual Russians, but made into an icon protesting their war crimes. Having attended the last Davos event in January 2020 (when a certain virus was just cocktail chat), the juxtaposition with this year’s meeting highlighted the massive changes of the past two years.?

Despite flagging attendance, the special sauce of Davos persists. No other meeting brings together a critical mass of decision-makers in a ‘school camping trip’ setting that puts everyone at ease and gives time for informal connections as well as a world stage for more scripted announcements.?

Even with war and recession topping the agenda, I would guess that more than half the events had a sustainability focus. Al Gore nearly lost his voice shouting “who cares if we screw up the future?” John Kerry heralded the “First Movers Coalition” where tech giants Microsoft and Alphabet collectively pledged to invest $400 million in carbon removal programs , Boston Consulting Group targeted the removal of 100,000 tonnes of carbon by 2030, and Salesforce committed $100M to scale carbon removal tech .

Reflecting on these announcements, I had a sense of déjà vu. It was just six months ago at the COP 26 meeting in Glasgow, where countries, companies and financial institutions all pledged to cut carbon. As John Kerry said to one packed Davos event, “if the commitments made in Glasgow were on track, keeping global temperature rise below 1.5C would be in reach.”??

But that’s not what’s happening. Lofty goals are announced with little follow up and no accountability. UN Secretary-General Antonio Guterres called the cascade of missed milestones "a dismal litany of humanity's failure to tackle climate disruption."?

The hope that the ‘build back better’ plans on both sides of the Atlantic would stimulate the green transition has been superseded by the economic upheaval and geopolitical uncertainty brought on by the Russian war. Which makes it even more astonishing that companies continue to step up with voluntary climate commitments. The real issue here is the lack of transparent, comparable data on progress toward these goals.??

It wasn’t all doom and gloom though and there was a note of optimism voiced on a Bain and Company panel I was speaking on. Executives from three top tech companies discussed how they are quickly ramping cutting edge technologies that can include supplying the data needed to not only provide confidence and transparency to the market, but more importantly, enable a credible pathway transition to Net Zero.

The Destabilizing Force of the Ukraine War

Russia’s invasion of Ukraine is affecting world food and energy supplies. US climate envoy, John Kerry, warned the WEF audience that the energy crisis wrought by Russia’s war could pave the path for more fossil fuel investment, accelerating the climate crisis. The WEF’s own website marks this as the “first truly global energy crisis” and calls for an accelerated transition to low-carbon energy sources to combat it, rather than further investment in coal and oil.

International Monetary Fund managing director Kristalina Georgieva addressed the Davos audience this week and warned about skyrocketing food prices , as UN experts warned that the world has only a ten-week supply left of wheat . Ukraine is one of the world’s largest exporters of wheat, barley, and sunflower oil, exporting over 50 million tons of produce annually. But now, the UN says that 20 million tons of grain are stuck in Ukraine as the country absorbs increasingly intense waves of attacks from Russia. Ukrainian president Volodymyr Zelenskyy, who spoke to the Davos audience through a video link , called for additional military aid and underscored that Russia has blocked food exports from leaving Ukrainian ports. This has contributed to global food prices rising 30% from last year and could lead to massive food security and famine problems around the world over the coming months.

The Costs of Inaction

While the war and its effects have eclipsed all other global priorities, new research from Deloitte this week shows just how expensive climate inaction could prove to be. The report estimated the price tag of climate inaction at $178 trillion over the next 50 years (yes, you read that right). For reference, the global GDP in 2021 was a hair under $85 trillion . The Bank of England, meanwhile, announced on Tuesday that late action on climate change could cost UK banks over $100 billion in extra losses over a 30-year period compared to early climate action scenarios.?

The SEC Doubles Down

In the wake of its climate disclosure proposal in March, the Securities and Exchange Commission proposed two rule changes this week aimed at greenwashing in the financial services sector . The new proposals followed a hefty settlement with BNY Mellon over selling ESG financial products without sufficient due diligence.?

One proposal would update the so-called ‘Names Rule’ to encompass characteristics related to ESG and provide guidance on how ESG funds market their names and investment practices. Funds with “ESG” in their name would have to clearly define the term and then ensure that 80% of the assets in the fund adhered to that definition.

Climate Tech the hottest commodity of the decade?

As worries about the cost of unchecked climate change mount, the climate technology sector is on fire. Climate tech investment grew 30% last year and 2.5x more than in 2019 . Bob Keefe’s new book "Climatenomics: Washington, Wall Street, and the Economic Battle to Save Our Planet " lays out the market forces aimed at saving our planet.??

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Notable news of the week:

• The Canadian government took another step toward mandatory climate disclosure . when they asked the Sustainable Finance Action Council to create a TCFD-aligned climate disclosure ruling as its top priority.
• A new report revealed that net-zero plastic production could be possible by 2050. The only caveat is that it would take huge investments today in nascent technologies such as carbon capture and storage and electrification.
• Another summer, another record-breaking heat event in the US . A heatwave affecting over 12 states brings historic temperatures 20-30 degrees Fahrenheit above average to the mid-Atlantic and North East.
• I provided input to this Sustainable Future News article , on how CSOs and ESG chiefs drive corporate change by empowering companies to combine sustainability into their corporate strategies and cultures.?
• It was a great experience leading off for the ISM World Conference in Orlando this week. At about 1,000 people, the crowd was lighter than usual for their first post-pandemic conference but what they lacked in numbers, they made up for in enthusiasm.?

Notable podcasts:

• I joined Troy Paredes and Lee Schneider on their Appetite for Disruption Podcast which aired this week. We discussed the history and recent explosion of disclosures related to carbon, the SEC’s latest proposed rules, and other ESG topics.

• I was interviewed by Mandi McReynolds on Workiva’s 'ESG talk' podcast which aired this week. We discussed the past, present, and future of ESG and sustainability.
• The BNP Paribas 'Talking Heads' podcast featured ESG analyst Delphine Riou who pointed out the significance of the ‘S’ in ESG for achieving sustainable corporate performance.??

Notable events:

• On June 7th, I will be speaking at Fast Company’s Annual Impact Council Meeting where this year’s theme is “Sustainable Impact,” highlighting the ways businesses and organizations can engage in long-term thinking about issues ranging from workplace diversity, climate change, income inequality, and more.
• My colleague Kristina Wyatt will be speaking at this year's National Investor Relations Institute’s (NIRI) Annual Conference on the 5-7th of June . The NIRI Annual Conference is the world’s largest and most comprehensive IR event, with two and a half days dedicated to your professional development and networking. You can register for the event here .
• The AWS Clean Energy Accelerator 2.0 Innovation showcase will be held next week on June 2nd in Lisbon Portugal, The Clean Energy Accelerator 2.0, will feature 12 Clean Energy startups selected from 424 innovators from 58 countries. Register here to take part.