Top 10 ESG Markers - September 2024

The month of September covers the Royal Assent of the landmark climate reporting legislation in Australia, the Ecocide proposal at the International Criminal Court, an ACCA Report highlighting the living wage, UK's last coal fire power station closing, global floods in Africa, Europe and Asia at the same time, ING's climate commitment, Earth Commission’s critical assessment of humanity's unsustainable trajectory, a turning point being marked in global emissions, a new study on global temperatures over an astounding 485 million year timeframe, and the latest research on microplastics.

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 September 2024, again in no particular order.

Australia's landmark climate reporting legislation

A significant step towards addressing climate change has been taken in Australia with the recent passage of legislation requiring mandatory climate reporting. This landmark legislation will mandate detailed disclosures about climate-related risks and opportunities for certain organisations, starting with the largest emitters and corporations in 2025 (estimated by Treasury to be over 700 entities).

The legislation will require covered entities to disclose climate-related information in their annual reports, aligning with the Australian Sustainability Reporting Standards (ASRS). These standards are designed to provide a comprehensive framework for climate-related disclosures, ensuring consistency with international best practices.

The reporting requirements will be phased in over three years, with larger entities subject to the initial reporting requirements in 2025 and smaller entities following in subsequent years (a further 762 and 355 entities respectively). The legislation also includes provisions for directors' declarations, assurance requirements, and a modified liability regime during the initial implementation period.

One of the key provisions of the legislation is the requirement for organisations to undertake at least two climate scenarios as part of their disclosures: one consistent with 1.5 degrees Celsius warming and another exceeding 2 degrees Celsius. This will help stakeholders understand the potential impacts of climate change on the organization's operations and financial performance.

The Australian Accounting Standards Board (AASB) is developing the ASRS standards, which will provide guidance on the specific disclosures required. The Auditing and Assurance Standards Board (AUASB) will also establish assurance requirements for climate-related disclosures.

The passage of this legislation is expected to have several positive impacts, including increased transparency, improved decision-making, and stimulation of climate action. By providing investors, stakeholders, and the public with better information about companies' climate-related risks and opportunities, the legislation will enable more informed decision-making. Additionally, by highlighting the financial risks of climate change, it may encourage companies to take more proactive steps to reduce their emissions and transition to a low-carbon economy.

The adoption of the AASB ASRS standards ensures that Australia's climate-related disclosures are consistent with international best practices, facilitating cross-border comparisons. This will enhance the comparability of climate-related information across different jurisdictions and promote global efforts to address climate change.

Overall, the passage of this legislation represents a significant milestone in Australia's efforts to address climate change. By enhancing transparency, accountability, and informed decision-making, it will play a vital role in driving a transition to a more sustainable and resilient economy.

Ecocide proposal gains momentum at International Criminal Court

A landmark proposal to recognize ecocide as an international crime has been submitted to the International Criminal Court (ICC), marking a significant step towards environmental justice.

The proposal, spearheaded by Vanuatu, Fiji, and Samoa, defines ecocide as "unlawful or wanton acts committed with knowledge that there is a substantial likelihood of severe and either widespread or long-term damage to the environment being caused by those acts." If adopted, it would join genocide, crimes against humanity, war crimes, and the crime of aggression as crimes within the ICC's jurisdiction. ?

The proposal has garnered significant support from civil society organisations and individuals worldwide. Polls indicate that a majority of people in the world's richest countries support criminalizing severe environmental harm. Several countries, including Belgium, the European Union, Peru, Brazil, Scotland, Italy, and Mexico, are also considering or have already introduced ecocide legislation at the national level.

The ICC has faced international scrutiny in recent months, which may impact the progress of the ecocide proposal. However, the growing recognition of the need for environmental justice and the strong support for the proposal offer hope for its adoption.

If adopted, the recognition of ecocide as an international crime would send a powerful message that severe environmental destruction will no longer be tolerated. It would also provide a legal framework for holding those responsible accountable, deterring future acts of environmental harm.

ACCA Report highlights the importance of living wage

A recent report by ACCA, Shift, and Forvis Mazars has highlighted the crucial role of living wages in promoting sustainability and reducing inequality. The report, titled "A Living Wage: Crucial for Sustainability," calls on businesses and governments to prioritise paying workers a fair wage that allows them to meet their basic needs.

The report found that while a significant majority of finance professionals recognise the importance of paying a living wage, many still do not see it as their responsibility to ensure their organizations implement such policies. This disparity highlights the need for increased awareness and action to address wage inequality.

Key findings from the report include:

• Ethical and Human Rights Imperative: Paying a living wage is not only a moral obligation but also a human rights imperative. It is essential for ensuring that workers have access to basic necessities like food, shelter, and healthcare
• Business Sustainability: A living wage is not just a social responsibility but also a business necessity. Companies that pay their workers a fair wage are more likely to have a sustainable business model, attract and retain top talent, and foster positive relationships with their communities
• Economic Multiplier: Paying a living wage can have a significant economic multiplier effect, benefiting not only workers but also businesses, communities, and governments
• Global Inequality: Wage inequality is a major contributor to global inequality. By paying a living wage, businesses can help to reduce this inequality and promote social justice.

The report makes several recommendations to businesses and governments, including:

• Setting Living Wage Standards: Governments should establish living wage standards and policies to ensure that workers are paid a fair wage
• Corporate Responsibility: Businesses should take responsibility for ensuring that their employees and supply chain workers receive a living wage
• Measurement and Reporting: Businesses should be transparent about their wage practices and report on their progress towards paying a living wage
• Collaboration and Partnerships: Governments, businesses, and civil society organizations should work together to promote living wages and address wage inequality.

End of an era: UK's last coal-fired power station to close

The Ratcliffe-on-Soar power station, the UK's final remaining coal-fired power station, is set to close its doors on September 30. This marks a significant milestone in the country's transition to cleaner energy sources. ?

The power station, which began operations in 1967, has played a crucial role in the UK's energy supply. The closure of Ratcliffe-on-Soar is part of a broader effort to phase out coal-fired power generation in the UK. In recent years, numerous other coal-fired power stations have closed, reflecting the shift towards cleaner energy sources. ? The UK government has pledged to reduce greenhouse gas emissions to net-zero by 2050. To achieve this goal, the government is focusing on increasing the share of renewable energy sources, such as wind and solar power, in the country's energy mix. ?

The final delivery of coal to the power station marks a symbolic end to an era. The site is expected to be decommissioned over the next two years, with plans for future development as a zero-carbon technology and energy hub. This transition highlights the UK's commitment to a sustainable and low-carbon future.

Global floods in Africa, Europe and Asia at the same time

A series of devastating floods across three continents this month has been unprecedented. These extreme weather events, linked to rising global temperatures, have claimed over 1,500 lives and caused billions of dollars in damage.

A Perfect Storm of Factors:

• Record Rainfall: Warmer temperatures are fuelling more intense rainfall, leading to catastrophic flooding in vulnerable regions.
• Jet Stream Disruptions: Climate change has altered the jet stream, causing persistent weather patterns that can lead to prolonged periods of heavy rain.
• Blocking Patterns: Stalled weather systems can create conditions conducive to severe flooding, as seen in recent events across Europe.

The Devastating Impact has been felt across:

• Africa: Torrential rains have caused widespread flooding, affecting millions and exacerbating existing humanitarian crises.
• Asia: Typhoon Yagi, a powerful storm, led to devastating floods and landslides, resulting in hundreds of deaths and billions of dollars in damage.
• Europe: Severe flooding has impacted several countries, displacing tens of thousands and causing significant economic losses.

The devastating floods in South Sudan, caused by record water levels in Lake Victoria, have displaced hundreds of thousands of people, raising concerns that this could be the first instance of mass population displacement primarily driven by climate change.

The floods have forced hundreds of thousands of people to flee their homes, leading to a humanitarian crisis. Many displaced individuals are living in overcrowded camps and facing shortages of food, water, and essential services. Stagnant floodwaters can increase the risk of waterborne and vector-borne diseases, further exacerbating the health crisis.

The scientific community is actively studying these events to better understand the role of climate change and inform future adaptation strategies.

ING's climate commitment: A bold move

Dutch bank ING has taken a significant step towards addressing climate change by announcing plans to divest from clients who are not making sufficient progress in reducing their carbon footprint. This decision marks a divergence from many other financial institutions, particularly in the United States, which have been more hesitant to address climate risks.

ING's approach involves a thorough assessment of its clients' climate transition plans and other relevant data. Companies that fail to meet the bank's criteria will face restrictions or termination of financing. This includes a ban on new financing for LNG export terminals starting in 2025 and a focus on phasing out support for pure-play upstream oil and gas companies.

The bank's decision is driven by a recognition of the societal and financial risks associated with climate change. By supporting companies that are actively working to reduce their carbon emissions, ING aims to contribute to a more sustainable future. This approach aligns with the global agreement to limit global temperature rise to below 2 degrees Celsius.

While ING's stance may face challenges from some industry peers, it is a clear signal of the growing importance of climate action in the financial sector. As the risks of climate change become more apparent, it is likely that other institutions will follow suit and adopt more stringent climate policies.

A critical assessment: Humanity's path to sustainability

A landmark study led by the Earth Commission, a group of renowned scientists, has issued a stark warning about humanity's unsustainable trajectory. Published in the Lancet Planetary Health journal, the report highlights the urgent need for a radical transformation of our societies to secure a sustainable and equitable future.

The study reveals that our current consumption patterns and resource distribution are rapidly eroding the "safe and just space" within which humanity can thrive. We have exceeded planetary boundaries, jeopardizing ecosystems and climate stability, while the benefits of economic growth are distributed inequitably.

The Earth Commission's analysis underscores the urgent need for a shift towards renewable energy, reduced consumption, and a fairer distribution of resources. Failure to act could lead to severe consequences for future generations.

This groundbreaking research, conducted by a team of international experts, serves as a critical wake-up call for policymakers, businesses, and individuals alike. It emphasizes the urgency of addressing the environmental and social challenges we face and highlights the potential for a more sustainable and equitable future.

A turning point in global emissions

Two major international climate agencies predict global emissions have reached a critical inflection point and 2024 could be the beginning of the decline.? This significant shift is primarily driven by the rapid growth of renewable energy sources, particularly solar and wind power, and the increasing adoption of electric vehicles.?

China, the world's largest emitter, has played a crucial role in this transition. The country has invested heavily in renewable energy infrastructure and electric vehicle production, leading to a decline in emissions from its electricity and transport sectors.

Other factors contributing to the emissions decline include:

• Falling costs of renewable energy: Solar and wind power have become more affordable than traditional fossil fuels, making them a more attractive option for both businesses and consumers.
• Increasing government support for renewable energy: Many countries have implemented policies and incentives to promote the adoption of clean energy technologies.
• Growing awareness of climate change: Public pressure and increasing understanding of the risks of climate change have led to a shift towards more sustainable practices.

While the data suggests that global emissions may have peaked, it is important to note that the transition to a low-carbon economy is still ongoing. Continued efforts are needed to accelerate the adoption of renewable energy, reduce reliance on fossil fuels, and address the challenges associated with climate change.

Earth's temperature: A 485 million year journey

A new study has revealed the dramatic fluctuations of Earth's global temperature over the past 485 million years. Led by the Smithsonian and the University of Arizona, the research offers the most detailed look at how temperature has changed across deep time.

Using data assimilation, a method similar to weather forecasting, scientists combined geological data and climate models to create a comprehensive temperature curve. This curve shows that Earth's temperature has varied significantly throughout history, with periods of extreme heat often linked to elevated carbon dioxide levels.

For example, the study found that during the Paleocene-Eocene Thermal Maximum about 55 million years ago, global temperatures rose by 5-8 degrees Celsius in a relatively short period. This event was primarily driven by a massive release of methane from the ocean floor.

In contrast, during the Ice Age periods, global temperatures dropped by 5-10 degrees Celsius compared to pre-industrial levels. These cooling periods were primarily caused by changes in Earth's orbit and the concentration of greenhouse gases in the atmosphere.

The study confirms the strong correlation between carbon dioxide and global temperature. The current rate of human-caused warming, which is estimated to be 0.2 degrees Celsius per decade, is unprecedented and poses serious risks to species and ecosystems.

While the new research provides valuable insights, it is important to note that it is an ongoing effort. As scientists continue to uncover new evidence, the temperature curve may be refined in the future.

Microplastics: A growing threat

Microplastics, tiny plastic fragments, are pervasive in our environment and have been detected in wildlife and humans. A recent review Twenty years of microplastics pollution research—what have we learned? Published in Science of over 7,000 studies confirms their widespread presence, from remote regions to our bodies.? Studies have identified some of the main sources of microplastics as:

·?????? cosmetic cleansers

·?????? synthetic textiles

·?????? vehicle tyres

·?????? plastic-coated fertilisers

·?????? plastic film used as mulch in agriculture

·?????? fishing rope and netting

·?????? “crumb rubber infill” used in artificial turf

·?????? plastics recycling

Evidence suggests that microplastics pose a risk to organisms at all levels of the food chain, from insects to apex predators. They have been found in food, water, and air, and have entered human organs.? As equipment has advanced, scientists have identified smaller particles. They’ve found microplastics in our lungs, livers, kidneys, blood and reproductive organs. Microplastics have crossed protective barriers into our brains and hearts.

While the exact health impacts are still being studied, there is increasing concern about their potential to cause inflammation, oxidative stress, and immune responses.

To address this growing threat, global action is urgently needed.? Some countries have implemented laws regulating microplastics. But this is insufficient to address the challenge. That’s where a new legally binding agreement, the UN’s?Global Plastics Treaty, offers an important opportunity. The fifth round of negotiations begins in November.? The treaty aims to reduce global production of plastics. But the deal must also include measures to reduce microplastics specifically.

The views expressed in this article are the views of the author, not Ernst & Young (EY). This article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.