Top 10 ESG Markers - October 2023

The month of October covers the 2023 State of Climate Report, IEA report on fossil fuels peaking at 2030 while major companies call for fossil fuel phase out at the next COP, AASB’s exposure draft climate disclosure standards, Denmark’s plant-based food roadmap, California’s new emissions disclosure laws, Woodside’s seismic blasting permit invalidated after legal challenge by Traditional Custodian, US hedge fund Gramercy grants $552.5M loan for environmental lawsuits against miners and car manufacturers Brazil to mandate IFRS sustainability disclosure standards and WWF report warns of $58 trillion water crisis.

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 October 2023, again in no particular order.

Planet Earth under siege: New report warns of dangerous climate instability in 2023

A new report titled "The 2023 State of the Climate Report: Entering Uncharted Territory" highlights alarming climate trends, suggesting that "life on planet Earth is under siege" and that human activity is pushing the planet's systems into dangerous instability. The study, published in Bioscience, identifies specific climate events in 2023, including extreme heatwaves, record-breaking warm ocean temperatures, and reduced sea ice around Antarctica.

The report's authors, a group of 12 international scientists, note that 2023 has witnessed 38 days with global average temperatures exceeding 1.5 degrees Celsius above pre-industrial levels. Both the U.S. National Oceanic and Atmospheric Administration and Europe's Copernicus Climate Change Service predict that 2023 may become the hottest year on record. July 2023 recorded the highest average surface temperature ever documented, possibly the warmest in the last 100,000 years.

Human-induced global heating is identified as the primary driver of recent extreme climate events, although the report acknowledges the influence of non-human factors like water vapor from underwater volcanoes, African dust, and the El Ni?o climate pattern.

The study criticises the minimal progress made in addressing anthropogenic climate change impacts, with renewable energy consumption still far lower than fossil fuels. The report's co-lead author, William Ripple, warns that failing to address the root issue of overconsumption could lead to natural and socioeconomic system collapses, unbearable heat, food and water shortages.

The authors emphasise the need for immediate action to combat climate change, advocating for the reduction of emissions from fossil fuels, changes in land use, and increased carbon sequestration through nature-based climate solutions to prevent further extreme climate impacts.

IEA report forecasts fossil fuel peak by 2030 as renewable energy takes centre stage

The International Energy Agency (IEA) predicts a significant shift towards emissions-free energy sources like wind, solar, and nuclear by the end of this decade. The IEA projects that nearly half of the world's electricity will come from emissions-free sources by 2030. Additionally, the demand for fossil fuels, including coal, oil, and gas, is expected to peak within this decade.

The report also suggests that there could be ten times as many electric vehicles on the road by 2030, and heat pumps are expected to outsell fossil fuel-fired hot water heaters. However, the IEA cautions that stronger measures are necessary to prevent global temperatures from rising more than 1.5 degrees Celsius above pre-industrial levels.

While the report acknowledges that coal, gas, and oil still make up about 80% of the world's energy supply, it predicts this share will decrease to 73% by 2030. The IEA emphasises that the transition to clean energy is unstoppable and urges immediate action to accelerate this transition. It also highlights the growing capacity for green technologies like electric vehicles and heat pumps and the significant potential for solar power to change the global energy supply mix. Finally, the report mentions that China's role in renewable energy manufacturing and its commitment to renewables could accelerate the peak demand for fossil fuels, expected within this decade.

AASB releases exposure draft for mandatory climate-related financial disclosure in Australia

The Australian Accounting Standards Board (AASB) has released an Exposure Draft to support mandatory disclosure of climate-related financial information in Australia. The draft includes three proposed Australian Sustainability Reporting Standards (ASRS):

·?????? Draft ASRS 1: General Requirements for Disclosure of Climate-related Financial Information, outlining the core content disclosures related to governance, strategy, risk management, and metrics and targets for climate-related financial disclosures.

·?????? Draft ASRS 2: Climate-related Financial Disclosures, specifying required climate-related financial disclosures, including climate resilience, greenhouse gas emissions, and climate-related targets.

·?????? Draft ASRS 101: References in Australian Sustainability Reporting Standards, serving as a 'service standard' to manage the legal effect of references in the ASRS Standards to non-legislative documents.

Key differences between the AASB's draft ASRS Standards and the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards include a narrower scope focusing only on climate, a requirement for climate resilience assessments to consider ambitious global temperature goals, measurement of greenhouse gas emissions according to specific methodologies, disclosure of market-based Scope 2 emissions, and less prescriptive disclosure requirements for Scope 3 emissions and financed emissions.

The AASB's Exposure Draft also extends the application of the draft ASRS Standards to not-for-profit entities. Treasury is expected to publish an Exposure Draft of amendments to the Corporations Act to clarify which entities will be required to make climate-related financial disclosures, when they will be required to do so, and the assurance timetables.

This development represents a significant shift in financial reporting, emphasising the importance of climate-related risks. Companies are encouraged to provide feedback during the consultation period and prepare for implementation as early as July 1, 2024.

Denmark leads the way with ground-breaking plant-based food roadmap

Denmark has taken a pioneering step by unveiling a comprehensive 40-page roadmap to transition towards a more plant-based food system, becoming the world's first country to do so. The plan is designed to reduce greenhouse gas emissions by promoting plant-based food production, making Danish meals more sustainable and aiming to position the country as a leader in plant-based food exports.

The roadmap encompasses measures across the entire supply chain, including chef training for plant-based meal preparation and a focus on research and innovation to establish Danish companies as leaders in plant-based food production. Denmark had previously invested USD $177 million in the sector in 2021, creating a Fund for Plant-Based Foods.

The plan foresees the potential to generate 13.5 billion kroner from plant-based food production and create 27,000 jobs. Additionally, transitioning to a more climate-friendly food system could save Denmark 12 billion kroner annually in healthcare costs, according to a study from the University of Copenhagen.

Recognising the significance of plant-based food production for achieving climate goals, the Danish government aims to reduce greenhouse gas emissions by 70% by 2030 from 1990 levels. The initiative aligns with the understanding that a plant-rich diet significantly reduces the climate footprint and addresses the pressing environmental concerns linked to animal agriculture.

Denmark's approach stands in stark contrast to the UK government's reluctance to prioritise plant-based food transition, despite the mounting scientific evidence supporting such a shift. Other countries, like Switzerland and Germany, are also taking steps to promote plant-based food consumption as part of their climate and sustainability strategies.

California enacts sweeping law requiring large businesses to disclose emissions

Californian Governor Gavin Newsom has signed a ground-breaking law in California that compels large businesses making over $1 billion in annual revenues to disclose both their direct and indirect greenhouse gas emissions. This new mandate affects more than 5,300 companies operating in California. It goes beyond merely reporting emissions from their operations and covers emissions linked to activities such as employee travel and product transportation. Advocates believe the law will enhance transparency and encourage businesses to evaluate and reduce their emissions. Several companies already disclose some emissions to the state.

However, the California Chamber of Commerce, agricultural groups, and oil industry leaders oppose the law, asserting that it imposes new reporting mandates on companies lacking experience and expertise in assessing indirect emissions. They argue that implementing such requirements is premature while the federal government contemplates emissions disclosure rules for public companies.

The law's proponents, including major companies like Apple and Patagonia, argue that this move aligns with California's trendsetting climate policies and promotes corporate transparency. By 2026, companies must start annually disclosing their direct emissions, with indirect emissions reporting commencing in 2027. This law marks a substantial shift, particularly for private companies that may not have the infrastructure to report a wide range of greenhouse gas emissions. Federal rules proposed by the U.S. Securities and Exchange Commission also require major public companies to disclose emissions and assess climate-related financial risks.

Woodside's seismic blasting approval invalidated after legal challenge by Traditional Custodian

The Federal Court has invalidated Woodside Energy's approval for seismic blasting in its Scarborough Gas Project following a legal challenge by Traditional Custodian Raelene Cooper. Cooper argued that the offshore regulator NOPSEMA made a legal error in approving the blasting and that Woodside had not properly consulted her, as required by the approval condition. The project is located offshore the Burrup Peninsula in Western Australia, which is nominated for UNESCO World Heritage listing due to its extensive Aboriginal rock art collection. Cooper expressed concerns about the impact of seismic activity on her Songlines, particularly the cultural significance of whales and turtles. The court's decision means Woodside no longer has approval for seismic blasting. The case underscores the need for proper consultation before approvals are granted for offshore developments, as it was argued that seismic testing would harm Cooper's Songlines and culture. The proposed Scarborough Gas Project is part of the Burrup Hub, which includes multiple gas fields and is expected to release large carbon emissions over its lifetime.

US hedge fund Gramercy grants $552.5M loan for environmental lawsuits against miners and car manufacturers

Gramercy, a US hedge fund, has provided a record-breaking $552.5 million loan to UK law firm Pogust Goodhead for environmental lawsuits. The funding will support separate trials next year involving mass environmental claims against mining companies BHP and Vale, as well as 14 global car manufacturers. Pogust Goodhead is overseeing the UK's largest opt-in class action lawsuit, representing 700,000 Brazilian claimants against the mining companies for the 2015 Fund?o tailings dam collapse. Additionally, the law firm is pursuing over a dozen lawsuits on behalf of 1 million UK customers affected by the "dieselgate" scandal involving the car manufacturers. Gramercy's loan is co-funded by some of its clients and is among the largest in the UK's $16 billion litigation funding market.

Brazil to mandate IFRS sustainability disclosure standards, enhancing transparency in capital markets

The Brazilian Ministry of Finance and the Comiss?o de Valores Mobiliários (CVM) have announced that the International Sustainability Standards Board’s (ISSB) IFRS Sustainability Disclosure Standards will be incorporated into the Brazilian regulatory framework. This move outlines a roadmap for transitioning from voluntary use, starting in 2024, to mandatory use on January 1, 2026. Brazil's authorities believe that the ISSB’s standards can enhance transparency around sustainability-related risks and opportunities, strengthening the country's capital markets and making it more attractive to companies seeking capital and global investments. This announcement coincided with the IFRS Foundation Trustees meeting in Panama City, where stakeholders discussed the role of IFRS Accounting and Sustainability Disclosure Standards in creating a more resilient, sustainable, and competitive financial sector in the region. This move highlights the urgency of advancing climate-related disclosures due to the increasing risks posed by climate change to capital markets in Latin America and the Caribbean.

WWF report warns of $58 trillion water crisis threatening global economic value, sustainability, and food security

The first annual estimate of the economic value of water and freshwater ecosystems, provided by the WWF, is approximately $58 trillion, equivalent to 60% of global GDP. Despite its immense value, the report, "The High Cost of Cheap Water," indicates that freshwater ecosystems are in decline, with consequences for both human and planetary health. Wetlands have decreased by one-third and freshwater wildlife populations have, on average, fallen by 83% since 1970. This downward trend leads to water scarcity, food insecurity, and increased pollution, exacerbating the challenges posed by climate change. WWF urges governments, businesses, and financial institutions to invest in protecting and restoring freshwater ecosystems to ensure water security and a sustainable future. The report emphasises the need to adopt sustainable water infrastructure and reverse the ongoing loss of freshwater ecosystems.

131 major companies worth $1 trillion urge COP28 to commit to fossil fuel phase-out

131 major companies, collectively worth almost $1 trillion in annual revenues, have issued a plea to political leaders ahead of the upcoming United Nations climate summit, COP28. These businesses, including Nestle, Unilever, Mahindra Group, and Volvo Cars, are urging world leaders to commit to a timeline for the phased elimination of fossil fuels. They are specifically calling for a pledge to achieve 100% decarbonised power systems in wealthier economies by 2035 and to provide financial support to developing nations for a transition away from fossil fuels by 2040 at the latest.

These companies represent various sectors and have stressed the economic consequences of climate change, emphasising the urgency of transitioning to clean energy while discontinuing fossil fuels. Although many firms have set their own emission reduction targets, they acknowledge that government intervention is crucial for substantial progress. The letter, organised by the non-profit We Mean Business Coalition, which promotes increased global climate action, conveys the impacts and costs of more frequent extreme weather events as a result of climate change.

With growing concerns about the world falling short of the 2015 Paris Agreement's goals to limit global temperature increases to 1.5 degrees Celsius, the approach to phasing out fossil fuels is expected to be a contentious issue at COP28. Major fossil fuel producers, consumers, and poorer nations seeking additional support for emissions reductions all hold different perspectives on the matter.