Top 10 ESG Markers - January 2021

This is my first Environment, Social and Governance (ESG) Markers blog for the year. Our family was in Africa this time last year, a long-planned travel destination from which you see some of the photos I have used in my blogs. We had no idea what was around the corner. Bitten, by the exotic travel bug, we were planning our next holiday on the way back from Africa. Little did we know not only that not only the plans will be thrown into disarray, but the world as we knew it will be very different – all caused by another bug! 

The devastating and soul-destroying Australian Bushfires followed by the pandemic made 2020 one that was truly testing. But, I saw an unexpected sharpening of focus on ESG by the private sector. My ESG Markers columns show the tremendous acceleration climate action, human rights and environmental progress had over 2020. My strong feeling is that 2021 will see the gear shift to fifth, driven by market forces, community concerns and political tipping points. This is underscored by EY’s recent announcement, following its 2020 global carbon neutral commitment, that EY will be carbon negative in 2021 and net zero by 2025. Now, this may not be on most people’s top ten ESG markers for this month, but one that I’m incredibly proud of, and therefore it scores a spot!

As the world took a breath during the Christmas/New Year period, the momentum continued to shift, and as a consequence this January 2021 blog sees some big news items.

Again, if I happen to miss some key markers in a particular month. Just drop me some comments, and I will pick them up next month! 

*‘ESG Markers’ – like biomarkers that tell us how healthy our body may be, ESG Markers showing us the big movements in the field of ESG in Oceania and globally. 

So, here are my Top 10 for January 2021, again not in any particular order.

WEF ranks environmental and social risks the greatest for 2021

The 16th edition of the World Economic Forum’s Global Risks Report published in January analyses the risks from societal fractures—manifested through persistent and emerging risks to human health, rising unemployment, widening digital divides, youth disillusionment, and geopolitical fragmentation. Businesses risk a disorderly shakeout which can exclude large cohorts of workers and companies from the markets of the future. Environmental degradation—still an existential threat to humanity—risks intersecting with societal fractures to bring about severe consequences. One of the reports by WEF in January indicated that Earth could cross the dangerous 1.5 degrees mark as soon as 2027 based on new modelling. Ten of the thirteen WEF top quadrant risks relate to environmental and social risks!

2020 – Warmest Year on Record and global ice lost at worst case scenarios!

The Copernicus Climate Change Service has just confirmed that 2020 was the world’s warmest year on record in a dead heat with 2016. As a result of being 1.25C above the long-term average and dangerously close to the 1.5C target set by the world’s nations to avoid the worst impacts, 2020 was the world’s warmest year ever recorded, with $210bn in damages from global natural disasters caused by climate change.

It is expected that atmospheric carbon dioxide levels will exceed 417ppm for several weeks from April to June, which is 50% higher than pre-industrial levels recorded in the late 18th Century. Astonishingly, it took 200 years for the levels to increase by 25% and then just another 30 years for it to increase by another 25%.

Separately, a study titled Earth’s Ice Imbalance published recently in the Journal The Cryosphere indicates that the rate of loss of ice is in line with the worst case scenarios projected by the Intergovernmental Panel on Climate Change. Greenland and Antarctic sheets are speeding up the fastest, followed by glaziers. Sea level rise caused by such significant ice melts are likely to cause serious impacts on coastal communities this century, according to the authors.

Spending on Global Energy Transition Hits Record $500 Billion

Bloomberg reports that world spent a record $501.3 billion in 2020 on renewable power, electric vehicles and other technologies to cut the global energy system’s dependence on fossil fuels. Despite the disruptions of the Covid-19 pandemic, the transition marked a 9% increase over 2019. Growth in Europe was the greatest, at 52% while investment in the US and China dropped by 20% and 12 %, respectively. Notably, offshore wind investment soared by a 56% increase.

And as shares of electric vehicle maker Tesla soared to make Elon Musk the world’s richest man, competition was on the rise. EV companies raised about $24.5 billion from equity markets last year, up from just $1.6 billion in 2019.

Biden Presidency marks a swift 180 degree turn in US climate politics

One of Biden’s first actions, within hours of being inaugurated, was to re-join the US to the Paris Climate Agreement. This action is likely to accelerate climate action more than any other and give the best chance yet of trying to keep the global temperature increase below 1.5 deg C. It is expected that the Biden administration may settle on a new emissions target of somewhere between 40 percent and 50 percent below 2005 levels by 2030.

In other actions, Biden also revoked the permit granted for the controversial Keystone XL pipeline and instructed all executive agencies to review executive actions that were “damaging to the environment, or unsupported by the best available science”. Biden also ordered all executive branch employees to sign an ethics pledge and placed limits on their ability to lobby the government during his term in office. Other orders made include:

-         Using the government procurement system to make Federal facilities more reliant on clean energy and purchase zero-emissions vehicles

-         Reimpose methane pollution limits for new and existing oil and gas operations (repealed by the precious administration)

-         Ban new oil and gas permitting in public lands and waters including the national wildlife range.

BlackRock doubles down on Net Zero and TCFD/SASB Disclosure

In Larry Fink, the BlackRock CEO’s, annual letter to investors, said BlackRock would ask companies whose shares it holds to disclose their plans to achieve net zero emissions, and may otherwise divest from polluting companies in its actively managed funds – which represent about a tenth of its assets – if they did not improve. Fink writes that “I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives”.

Following the launch of its own TCFD and SASB reports last year, Fink writes that “we strongly support moving to a single global standard, which will enable investors to make more informed decisions about how to achieve durable long-term returns. Because better sustainability disclosures are in companies’ as well as investors’ own interests, I urge companies to move quickly to issue them rather than waiting for regulators to impose them. (While the world moves towards a single standard, BlackRock continues to endorse TCFD- and SASB-aligned reporting.)”.

‘Living Wage’ back on the agenda

Unilever, via the living wage initiative, has promised that every worker who provides it with goods and services will earn a living wage by 2030 even if it costs the company more. Ben & Jerry's, owned by Unilever, also pledged to spend $2.4 billion annually by 2025 with suppliers owned and managed by people from under-represented groups, including women and Black people, up from $363 million currently. This initiative is likely to see pressure on similar global players to consider living wage guarantees for workers in their supply chains. The new US President Joe Biden has also come to the table with a proposal as part of his $1.9tn pandemic relief plan to double the minimum wage to $15 per hour. Notably, this will see the US minimum wage rise to above that of Australia’s! We must note that there's further work needed in how this translates to purchasing power and free market economics.

Prince Charles urges businesses to sign Terra Carta pledge to put planet first

The Prince of Wales is launching the Terra Carta – the Earth charter – that will ask business signatories to agree to almost 100 actions to become more sustainable by 2030. Companies supporting the launch of the Terra Carta include BlackRock, Bank of America and HSBC.

In the Terra Carta’s statement of intent, the voluntary commitments include supporting international agreements on the climate, biodiversity and desertification, backing efforts to protect half of the planet by 2050.

“If we consider the legacy of our generation, more than 800 years ago, Magna Carta inspired a belief in the fundamental rights and liberties of people. As we strive to imagine the next 800 years of human progress, the fundamental rights and value of nature must represent a step-change in our ‘future of industry’ and ‘future of economy’ approach,” he stated at the launch.

Five-minute charge game-changing electric car batteries produced

A new lithium-ion electric car battery capable of being charged in five minutes has been developed by Israeli company StoreDot and manufactured by Chinese company Eve Energy. The extreme fast charging batteries have previously been demonstrated on drones, phones and scooters, but a mass-produced EV battery is considered a game changer due to being able to bring the same level of convenience as petrol/diesel cars in terms of re-fuelling time at the pump/charge station.

EY will become carbon negative in 2021 and net zero in 2025 

Following on from the December ESG Markers blog that EY has become carbon neutral globally, EY is going further by becoming carbon negative in 2021 and net zero in 2025. EY will reduce our absolute emissions by 40% across Scopes 1, 2 and 3 by FY25, against an FY19 baseline, consistent with a 1.5°c science-based target, approved by the Science Based Targets initiative (SBTi), enabling EY to reach net zero in FY25. EY will do so by reducing business travel emissions, reducing office electricity usage and becoming 100% renewable-powered by 2025, providing team members tools to reduce their footprint, requiring the largest 75% of suppliers to set SBTi targets by 2025 and investing in services that help EY clients decarbonise.