A Torrent of ESG and Climate News
On the 11th hour of the 11th day in the 11th month of 1918 an Armistice marked the end of horrendous conflict in World War One. Now this day is designated as Remembrance Day or Veterans Day when many countries honor the sacrifices of millions in our all too frequent conflicts.??
This day, honoring struggle for a greater good, is a fitting metaphor for a week filled with a stunning array of ESG and Climate news that, when taken together, could have lasting implications for our sustainable future.?
US Midterm Elections Buck a 60 year Trend
Not since 1962 , has a Democratic president with control of the Congress picked up Senate seats, or even held steady, in a midterm election. Defying forecasts of a “red wave,” Americans voted in record numbers motivated by threats to their rights and to democracy itself. Time will tell if this is a turning point for US politics, but there is a note of cautious optimism that false narratives are being rejected.?
Reaction to the election by ESG and Climate leaders was muted - having seen the bipolar nature of the US on these issues and knowing that commitments made now could be swept away in 2024. Political polarization has now become sustainability's most important issue .? As the levers of power are sorted out, so will be the future of US climate action (more on this below).?
President Biden arrives at COP27 today, but unlike last year, he comes armed with? hundreds of billions of dollars from the Inflation Reduction Act dedicated to climate action. US Climate Envoy John Kerry called it a “credibility letter” - adding that the law is already defanging common attacks about America making big promises it doesn't keep . Since the predicted “red wave” in the midterm elections did not happen, and because the law’s benefits touch every state - including red states - hopes are running high that these promises will be kept.
The Implementation COP
To recap, the COP27 climate meeting in Sharm El-Sheikh, Egypt was meant to be an “off-year” meeting, but has taken on greater significance because last year’s meeting in Glasgow failed to deliver the needed climate change reductions. It's too early to summarize the outcome, but as expected, there are a flood of announcements to cover.?
UN Secretary António Guterres' set the context: “We are on a highway to climate hell with our foot still on the accelerator. We are in the fight of our lives, and we are losing. Greenhouse gas emissions keep growing, global temperatures keep rising, and our planet is fast approaching tipping points that will make climate chaos irreversible. Humanity has a choice: cooperate or perish.”
These themes were underscored by Al Gore’s opening remarks, saying:? “We have a credibility problem, all of us. It is a choice to continue this pattern of destructive behavior.”
“We need to obey the first law of holes … When you’re in one, stop digging.” He added a note of optimism saying “When we reach net zero, temperatures will stop going up in 3 to 5 years and half of all CO2 will fall out of the atmosphere in 25 to 30 years.”
Red Line Against Greenwashing
A new report , released at COP27 defines 10 criteria for valid net zero targets. The report's framework sets a high bar : It recommends that net zero pledges contain a series of interim targets aimed at ending the use of fossil fuels and limiting warming to 1.5°C. Targets have to be set within a year, cover the full value chain, and outline funding for renewable energy. Carbon offsets are allowed but companies must prioritize reductions first. Financial institutions would have to immediately end lending, underwriting or investing in companies planning new coal infrastructure, power plants, mines, or fossil fuel exploration.
UN Secretary-General António Guterres said “We must have zero tolerance for net-zero greenwashing. The sham must end.”
Climate Reparations
Loss and damage is climate-speak for providing funds from the countries that grew wealthy by polluting the atmosphere to the countries that are now vulnerable from their pollution. Translated to human terms , think of the thousands killed and millions left homeless in Pakistan from floods this year, and the staggering economic loss of more than 10% of GDP.
Developing countries succeeded in placing this issue on the agenda of this year’s climate summit and several European countries pledged cash for a new loss and damage fund . So far, the US is absent from the discussion, but President Biden may address the topic.?
Scotland’s first minister Nicola Sturgeon said: “Declining to help the most vulnerable nations would represent a moral failure on the part of the West. This is a really fundamental question of climate justice. The rich world has a responsibility here.”
Functional Carbon Markets?
The International Organization of Securities Commissions (IOSCO) issued recommendations for carbon markets. IOSCO Chairman Jean Paul Servais said: “No market can function without appropriate levels of integrity, transparency, and liquidity so IOSCO hopes to lend its international market expertise to help develop appropriate frameworks for sound and well-functioning carbon markets.”?
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US Carbon Credit Proposal?
US Climate Envoy John Kerry announced the Energy Transition Accelerator for trading carbon credits. Only non-fossil fuel companies with net zero goals and science-based targets will be allowed to participate, and they must use the credits to "supplement, not substitute" emission reductions. A portion of the money collected must go toward "supporting adaptation and resilience in vulnerable countries.”?
Although the plan is not finalized, the Natural Resources Defense Council and the World Resources Institute are already opposed because they fear it could undermine efforts to drive global emissions to zero.
Standards get a Boost
CDP (formerly the Carbon Disclosure Project) announced it would incorporate the new International Sustainability Standards Board (ISSB) climate standard into its platform. This is a big deal because 18,700 companies, about half of global market capitalization, currently disclose environmental information through CDP - giving the ISSB climate standard an instant boost across the global economy. Adding to CDP’s big week, the US will now require federal contractors to disclose environmental data through CDP .
Simultaneously the Corporate Sustainability Reporting Directive (CSRD) was approved by the European Parliament (525 to 60 - a vote count hard to image in the US). It will apply to ~50,000 public and private companies, including non-EU companies with more than €150 million of revenue in EU countries.?
The push for common global standards also got a boost when the German government penned a letter to EU institutions and international standards setters stating that "corporate sustainability reporting needs to be regulated and standardized at a global scale," and calling for full consistency between European and international standards.
Nature Based Solutions?
The US announced a new roadmap for nature-based solutions to fight climate change. Nature-based solutions protect and restore natural ecosystems that help address climate change. The roadmap outlines funding authorized under the new infrastructure law and the Inflation Reduction Act.
Republicans Threaten ESG Lawyers?
Late last week, Senate Republicans Tom Cotton, Mike Lee, Chuck Grassley, Marsha Blackburn and Marco Rubio said they plan to use their congressional oversight powers "to scrutinize the institutionalized antitrust violations being committed in the name of ESG."?
Letters were sent to 51 prominent US law firms asserting a "collusive effort to restrict the supply of coal, oil, and gas, which is driving up energy costs across the globe and empowering America’s adversaries abroad." They said Congress would refer anticompetitive actions made in the name of ESG to federal antitrust authorities and told the firms they have a duty to inform clients of such regulatory risks.
Robert Eccles pushed back on this campaign with an open letter to the five 5 Senate Republicans.?
Midterm Elections Threaten the SEC Climate Rule
Rep. Chris Stewart (R-Utah), a member of the House Appropriations Committee said he would block the SEC’s new climate disclosure regulations if Republicans gain control of the House in midterm elections. He and his colleagues would defund the SEC’s climate work and threaten a government shutdown. “The question then becomes: Is the president or our Democratic leaders willing to endure, or have the country endure, a potential government shutdown over this language? I can’t imagine that they would,” he said.?
But investor groups say the consideration of climate-related risk is part of a company’s fiduciary obligation.“Climate is an economic risk for many companies,” said Steven Rothstein, of Ceres.? Al Gore and David Blood of Generation Investment authored a Wall Street Journal Article (subscription) why ESG is consistent with fiduciary duty , and Morningstar outlined 10 Reasons why ESG won’t be stopped .
LGBTQ+ Sweeps the Midterms??
Ending this week’s edition with an historic milestone, the Human Rights Campaign (HRC) reported that a record number of openly LGBTQ+ candidates were elected to Congress in the US midterm elections. HRC President Joni Madison said: “...these members represent the diversity of America and are role models to LGBTQ+ people of all ages... Each will make our country better and advance equality for women, people of color, and other marginalized communities.”?
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I want to help every sustainability research analyst to collaborate to advance your scoring methodology
2 年Thanks for sharing. We are glad to invite you to build a community with Scoring as the topic of our discussion for the year with the leaders across the globe. I would like to invite you to be a member of our community. https://bit.ly/73BitCommunityInvitation2
Corporate Responsibility Leader
2 年Tim, thank you for including the WSJ article on Positive vs Negative screening. As a CR leader, I can't opine from an investment performance perspective, but we have seen decades of "the business case" for ESG resonating mostly around risk mitigation. But, impactful benefit often comes from the opportunity side, and that still seems hard for companies to embrace. Of course, the risk side is important...It may avoid some harm. But, when we see a problem as an opportunity and generate a big idea to not only make some lemonade, so to speak, but find a market of thirsty customers, then we hit that sweet spot...the Creating Shared Value model, where we want to keep striving for the maximum...and not just stopping at what is regulated as a minimum. So, when it comes to screening, I imagine a blend of positive and negative screening can make financial sense, but the more companies are incentivized for positive, innovative, valuable contributions the better for stakeholders and shareholders. I was inspired by reading about these types of innovative solutions in the EarthShot Finalists last week so sharing this link to their stories for this thread. https://earthshotprize.org/winners-finalists-listing/
The Red Wave did happen as More Republicans voted in 2022 then during the red wave of 2014. The Republican Strategy of earning votes was trumped by the Democrats strategy of collecting ballots Climate Change has been happening for 4.5 billion years and looks to be working for the human race as the overall population continues to increase. However there are only so many resources so i see control mechanisms like ESG being put in place rather wr agree with it or not.
Providing Solutions for Sustainability with Greenway Companies
2 年Of interest is Rep. Chris Stewart asking if democratic leaders are willing to endure a potential govt shutdown over SEC proposal... as if 1) this is partisan issue and 2) he is willing to not consider the concerns and interests of say for ex, millennial investors, that are clearly reflected in surveys. Who exactly would that shutdown not look favorably for?
ESG & Supply Chain Leader
2 年This is a really insightful post…. Thanks for sharing this round up!