Why ESG Efforts Will Continue
After 40 years in sustainability, I’ve seen the ebb and flow of government action through many election cycles. Yet, as scientific understanding and public awareness of environmental and social impacts have advanced over the years, the pace of progress has steadily accelerated.??
This momentum continues regardless of the US political landscape. Companies committed to sustainability will stay the course because it makes business sense. Investors will seek value by avoiding risks and betting on new, efficient green tech. Climate advocates will redouble their work, and the public will increasingly expect action from their elected representatives as climate risks mount. While US leadership of climate and sustainability action will undoubtedly reverse, the future of the global sustainability movement will continue.??
Ajay Banga, the president of the World Bank, said, “It was never an America-only game.”
?Christiana Figueres, who led the U.N. climate change body, said, “The direction is unstoppable. What we’re all focused on is scale and speed, but not direction.”
By some estimates, the second term of Trump’s Presidency could contribute an additional 4 billion tons of carbon to the atmosphere by 2030 . However, the election had some green linings. When climate was on the ballot (as we covered last week), US voters supported more action in every case. ? And, looking back at the reaction to the first Trump Presidency, there was a huge outpouring of support for environmental NGOs —a trend we’re likely to see again.?
Companies Will Still Do ESG
The ESG backlash in the US has been running for multiple years now, yet there seems to be no slowdown in companies reporting on environmental and social issues. Two recent reports found that the number of companies reporting on sustainability continues to climb .?
Data from DiversIQ found that S&P 500 companies sharing workforce diversity data rose from 5.3% in 2019 to 82.6% in 2023 . Research from HIP investors revealed that the Scope 1 and 2 emissions reporting for large-cap US companies was up to 85%, from 54%, in the same time period.?
Regulations, like the EU’s Corporate Sustainability Reporting Directive (CSRD), and ambitious corporate goals are driving the trend - neither will be affected by Tuesday's election. Shiva Rajgopal of Columbia Business School said, "Most ESG problems are business problems. I'm an accounting professor. I can tell you that if you pick any company's 10K and look at the risk factors, they are full of E and S problems ."?
California Climate Disclosure Makes Legal Progress?
California’s Climate Law, which will require most large US companies to report their Scope 1, 2, and 3 emissions and climate risks, survived the first phase of its court case when a California judge refused a challenge on constitutional grounds .
The US Chamber of Commerce and other business groups filed a lawsuit against the climate disclosure law, arguing that it violated the First Amendment by compelling speech. The judge disagreed, saying they did not have sufficient information to determine “which of the laws’ applications violate the First Amendment.” The case is far from over, but this ruling cleared a major hurdle for the policy.?
COP16 Biodiversity Funding Out of Reach
After a marathon negotiation session at the end of the biodiversity COP16 in Columbia, delegates could not reach their funding goals.?
One deal was struck for companies to voluntarily pay 1% of their profits or 0.1% of revenue for new products using genetic information found in nature. It also encourages governments to make these rules mandatory. This could bring in around $1 billion a year, but that is a small fraction of the $200 billion needed by 2030 .
COP29 "Finance COP"
The Climate Summit (COP29) starts next week and will focus on finding funding for climate mitigation and adaptation for developing nations. The event risks being?overshadowed by geopolitics, ?with few G20 leaders attending a?carbon trade war looming over border taxes ?and a dispute over the amount?China should contribute to the global climate fund .?
While some key political figures, like outgoing US President Joe Biden and the EU’s President Ursula Von Der Leyen, won't be attending , many leaders remain committed to advancing meaningful outcomes. CEO of the World Resources Institute Ani Dasgupta said, "A strong outcome in Baku, a finance outcome, is possible ."?
Canada Limits Fossil Fuel Emissions
However, this policy, and Canadian Prime Minister Justin Trudeau’s climate policies in general, have been under scrutiny from all sides . In oil-rich states like Alberta, climate policies have not gone down well. Alberta premier Danielle Smith said, “This is a vendetta: he [Trudeau] has a deranged vendetta against Alberta ,” adding the state plans to fight the cap in the courts.?
On the other end of the spectrum, climate activists think Canada’s investments in new pipelines and carbon capture and storage tell another story. Julia Levin of the Environmental Defence NGO said, “Canada isn’t taking the climate crisis seriously. There’s a lot of hypocrisy .”
?A New Standard Is Born
The International Public Sector Accounting Standards Board (IPSAB) released a draft for the world’s first standard for public sector climate reporting. The rules come from the same standard-setting body making sustainability assurance standards under the International Standard on Sustainability Assurance (ISSA) 5000 .
The proposed climate reporting standard, SRS ED 1, is aligned with the International Sustainability Standard Board’s (ISSB) S2 climate-related disclosure standard. Ian Carruthers, IPSASB Chair, said the new standard will allow regional and national governments to make “climate-related disclosures that will help governments provide consistent, comparable, and verifiable information .” The comment period for the exposure draft is open until February 28, 2025.
Spain’s Floods Show A Lack of Climate Preparedness
Valencians are still counting the costs of unprecedented and deadly flooding . Residents are angry at the lack of preparation and warning of the scale of the disaster. Government officials and the royal family felt their ire and got pelted with mud as they visited the city .
A quick analysis by World Weather Attribution found that climate change made the rain 12% more severe and twice as likely . The founder of World Weather Attribution, Frederike Otto, claims that they have been warning about these types of climate risks for a while . These floods show that the EU and other governments are ill-prepared for the extreme weather events climate change will bring .?
The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.?
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CEO at Optom
1 周Ecclesiastes 1:4: A generation goes, and a generation comes, but the earth remains forever
One day what we call sustainability will just be called "business" | Author: Managing Sustainability: First Steps to First Class
1 周The way we talk about it may have to change, which I have been saying for years. Having separate reports, language and goals rather than integration into the business and alignment with and support of the existing business goals has been to our detriment. The simplest way to say it is 'if a business cannot provide a business case for its sustainability efforts the it has no business engaging in those sustainability efforts' and it's doing so for political expediency rather than strategy. A company that wishes to attract, hire, retain and engage top workers is going to have to be a great place to work (whether they call it DEIB or not) - That will not change. Companies that wish to attract investment capital are going to have to engage in a greater level of transparency regarding both the opportunities and risks associated with issues including climate change and supply chain. Again that's a business imperative that is not questioned. Companies that wish to grow their customer base and share of market are going to have to innovate and develop new products that appeal to their existing and attract new customers, which includes appealing to their values. The shift toward ESG has grown and accelerated regardless of elections
Professor Associado na Funda??o Dom Cabral
1 周Compartilhado!
Excellent analysis Tim. Thank you.
chief sustainability officer at Starbucks
2 周Could not agree more Tim Mohin. The U.S. federal government is one actor in the ecosystem, albeit an important and influential one. When its policies ebb and flow, others step in to fill the gap. We must continue to play the long game.