October 8, 2021 - ESG and Climate News

COP26 gets the royal treatment

The Pope, the Queen of England, President Biden, and Greta Thunberg walk into a room. This is not the set up to a bad joke…it’s the reality of the upcoming climate talks. In case anyone missed the gravity of the upcoming COP meeting in Scotland, this week the Queen of England and the Pope backed the negotiations. Pope Francis and other religious leaders made a joint appeal for concrete solutions to save the planet from "an unprecedented ecological crisis." 95-year-old Queen Elizabeth, announced she would join 120 heads of state to emphasize the importance of the negotiations to address what UN Secretary General Antonio Guterres declared a “code red for humanity.”

As we anticipate the outcomes of the talks, companies and investors are not waiting. More than 50% of the Global S&P 1200 companies now disclose their sustainability information using the Sustainability Accounting Standards Board (SASB) standards. Similarly, 30% of the companies listed on the London-based FTSE 100 are already reporting climate change risk in accordance with the framework from the “Task Force for Climate Related Financial Disclosures (TCFD).” And, a recent survey of 104 international asset managers found 76% consider climate-related risks and opportunities, and almost 30% are reporting against the Task Force on Climate Related Disclosures (TCFD).??

Designing a new path (and math) for net zero?

It’s no news that “net zero goals” have evolved as the crux of voluntary actions in recent years. Fortune’s recent Global Sustainability Forum, which convened leaders to discuss how companies are responding to the new climate reality serves as the latest example. As Mike Roman, CEO of 3M put it, “the math and the path,” to net zero challenges every company to reinvent processes and products and make it work financially.??

Many panelists agreed that for this to work, all the companies in the supply chain must do their part. This point was well-made by long-term friend Mitch Jackson, chief sustainability officer at FedEx who shared: “I’ve long said that sustainability is a team sport … and if we’re going to transform the world economy with respect to a net zero or zero emissions world, we’re going to have to be working together to do that.”?

Mitch is spot on.?The “Science-Based Target initiative” requires most companies to include their “scope 3” emissions in the goals. These are the carbon emissions that are peripheral to a company’s operations and most often stem from their supply chains.?An article in GreenBiz points out that companies won't reach their science-based targets without suppliers on board.??

A new survey showed that of CEOs a quarter of executives say improving supply chain sustainability is their top priority over the next two years. We are truly in this together…

Investors put companies in the hot seat

And, if companies are slow to follow this trend, a major investor coalition managing more than $29 Trn has called on 1,600 companies to set science-based targets to align their carbon emissions to the goals of the Paris Climate accord. Another group of investors warned that leading companies like Nestle, Delta Air Lines and Clorox are among dozens of global firms "highly exposed" to climate hazards. They urged businesses to do more to address the risks of climate change.?

Bloomberg reports that Investors are also waking up to the reality that the fossil fuel business will go away if the planet is to survive and being the last one out the door would be a colossal financial mistake. The transition away from fossil fuels has many investors reconsidering the wisdom of owning such assets. It’s not a question of being a “climate believer” or ethics, it’s a fiduciary reality.

Regulate us…please

As voluntary commitments and investor pressure to fight climate change accelerate, calls are getting louder for new regulations. In the US, the Wall Street Journal reported that executives at large public companies are asking the Financial Accounting Standards Board to write rules related to environmental, social and governance issues.?While it’s unusual for companies to call for regulation, it makes sense. When most of the leaders have already committed to the change, new regulations will level the playing field and prevent an advantage for the laggards.?

The US Securities and Exchange Commission (SEC) is happy to oblige with new mandates – albeit in a phased manner. Chairman Gary Gensler testified this week that the SEC is considering phasing in requirements for companies to report their greenhouse gas emissions and climate change risk management plans based on company size. The agency may require quantitative reporting of greenhouse gas emissions and the financial impacts of climate change, Gensler said. Qualitative disclosures under consideration would cover how executives manage climate risks and opportunities, and how climate change factors into a company’s business strategy.?

The White House issues renovations

Late this week, the Biden Administration released plans outlining the steps each federal agency will take to ensure their facilities and operations adapt to and are increasingly resilient to climate change impacts. With the 2020 budget of $4.8 Trln, these plans will have impacts across the economy,?

On Capitol Hill, legislators managed to avoid the spectacle of a government shut-down but continued to wrangle over President Biden’s ‘Build back better’ agenda as deadlines have come and gone and Democrats scramble to find a compromise within their fractious caucus.?It’s anyone’s guess what will happen, but the odds are good that a scaled down package can get enough votes to squeak through.

Hope springs eternal

While partisan politics divides America, a multi-national team of three scientists received the Nobel Prize in physics for work that is essential to understanding how the earth’s climate is changing, pinpointing the effect of human behavior on those changes and ultimately predicting the impact of global warming.?Here’s hoping that their example inspires budding scientists and leaders in the next generation.?We will need them!?

As always, please comment, share, and subscribe. Here are a few other headlines that may be of interest.

• Our very own Robert Eccles co-authored a piece in Harvard Business Review on the pressing need for companies to decarbonize now ahead of a price tag being placed on carbon emissions. Current estimates place early price tags from $50 - $100 per ton of CO2 emitted–that’s definitely a price most companies can’t afford.
• ESG Today covers a new report by Accenture that finds that despite an increase of commitments by European companies to reach net zero emissions by 2050 or earlier, only 5% are on track to meet those goals.?
• Google is trying to make your next trip a little more eco-friendly, reports Axios. You may notice some changes in Google Maps which aim to reduce the carbon emissions of travelers by using metrics like road congestion and incline to identify routes that burn the least fuel.
• A new report by the Proceedings of the National Academy of Sciences finds climate change and population growth tripled the number of urban citizens exposed to extreme heat over the past 30 years. The findings are grim: “Globally, urban exposure increased nearly 200%, affecting 1.7 billion people.”