September 24, 2021 - ESG and Climate News

In just over five weeks, world leaders will gather in Glasgow for COP26, and, at the risk of hyperbole, have our future in their hands. As outlined in the Washington Post, there is a furious push to act quickly as success depends on efficient, advanced work.

A Pivotal UN General Assembly on the Road Towards COP26

World leaders came together this week to speak to the UN General Assembly. Chinese leader Xi Jinping announced that China will cease building coal-fired power plants overseas .?While this news was particularly welcomed given China has been one of the biggest financiers of coal infrastructure in developing countries, he sidestepped the issues of curbing emissions from China’s domestic power generation.

The New York Times provided some color on these negotiations, highlighting presidential envoy for climate and John Kerry’s simple pitch of “do what the science tells us” to save the planet. As a former United States secretary of state, presidential candidate, and senator, Kerry is very equipped to negotiate a strong climate pact.?

Accountability in Focus

Leaders at the COP meeting also mentioned that major oil companies like BP and Shell will have a lower profile than tech and consumer companies that have been named as “principal partners.” While this is understandable, it’s also a risk because we need energy companies to be essential as we transform the basis of our global economy over the next 30 years. I outlined this, as well as a number of other reasons why we need to work with fossil fuel companies in this week’s Energy Thinks Podcast.

The theme of corporate accountability continued in a piece by the Guardian which called out big tech for spending only six percent of their $65 million lobby budget on climate policy. Fast Company followed suit?with a great article on the importance of “scope 3” emissions. Although these impacts can be the hardest to calculate and control, they often comprise most of the corporate carbon footprint.????

Scope 3 Emissions, a 1st priority

Looking back at my career highlights the importance of scope 3 emissions. One event that stands out is when I worked for AMD, a semiconductor company that transferred its major manufacturing facilities to another entity. In the company’s sustainability report, this looked like a 75% reduction in the overall footprint, but obviously the emissions had not disappeared, they only moved up the supply chain.?As AMD continued to dive into scope 3 they learned that the majority of the carbon impact wasn’t in the supply chain, rather it was from the electricity used by the chips in devices. This led to the highly successful 25 by 20 program that increased energy efficiency of their chips 25-fold by 2020.?

This is an example of the kind of innovation that will be necessary to transition to a low carbon economy.?But it all starts with a solid understanding of the corporate carbon footprint. Reuters reported that Investors managing more than $2.5 trillion signed a letter calling for tighter carbon accounting rules . These investors want governments to compel companies and auditors to file audited and assured carbon disclosures integrated into company financial accounts.

Carbon Accountants, our Unsung Climate Heroes!

Who ever thought that accountants would emerge as the climate heroes??Professors Andrew King and Kenneth Pucker penned a great article on the “Heroic Accounting ” – laying out the need for a new breed of bean counters that will keep track of carbon emissions with the same rigor as financial information.?

And we cannot forget the role of the auditor.?While financial auditors have taken a few black eyes from Enron to the mortgage meltdown to the 1MDB scandal , they are also the ‘thin black line’ that we all rely on to call out green wash – whether green equals money or the environment.?Reuters published a guest view from Natasha Landell-mills making the point that greenwashing is insidious . The solution? Auditors must be trained in carbon accounting so that they can sniff out the BS and warn investors and other stakeholders.

In the meantime, investors are losing patience with poor ESG disclosure , with BlackRock leading the change to pressure companies to improve. While investor pressure mounts, The Securities and Exchange Commission have sent letters to dozens of public companies asking them to provide more information to investors about how climate change might affect their financial earnings or business operations.?This will help build a record for the SEC’s proposed climate disclosure regulation slated for this fall.?

Our Changing Planet, Right Before our Eyes?

Keeping it real, the New York Times spotlighted how our favorite places on earth are changing due to climate change and invited readers to submit their own impact stories.?Another sobering reminder of the real impact we have on our planet highlighted that nearly 500 species have been removed from the endangered species list, not because they are no longer in danger, but because they are extinct.??

A few weeks ago, global headlines quoted U.N. Secretary-General António Guterres summing up the latest climate science as a “code red for humanity.” Each week we summarize more warnings and scientific findings that validate his dire perspective.?Let’s hope that our leaders find the courage to come together and take decisive action in the coming climate talks.?The world is waiting.?

Please like, share, and subscribe.?Below are additional articles that may be of interest.?

• According to a new report from the Mortgage Bankers Association’s Research Institute,?the mortgage market is woefully unprepared for climate risk . Namely, lenders and investors are struggling not only to mitigate their risk but also to even gauge that risk.
• The EU announced a sustainable finance proposal in July which intends to set a global gold standard. Highlighting just how hard it is to regulate a quickly growing ‘green’ bond market, the proposal is not expected to be passed officially for at least “one year or two” .