Year of Interoperability Continues: CDP Aligns with ESRS

With so many new ESG standards and regulations announced in 2023, many fear that disclosures would be incomparable and inconsistent. Thankfully, this “year of interoperability” marched forward when CDP announced an agreement to maximize alignment with the European Sustainability Reporting Standards (ESRS ).

Under the agreement, CDP and the European Financial Regulation Action Group (EFRAG - which developed the ESRS) will create technical guidance for the 23,000 companies that currently report to CDP. The guidance will help these companies report on the ESRS data points through the widely used CDP questionnaire.

This change comes in a nick of time as the EU Corporate Sustainability Reporting Directive (CSRD) will require about 50,000 companies (including 10,000 non-EU companies) to report using the ESRS starting next year.?

Maxfield Weiss of CDP Europe said, “With the bar now being raised globally in respect to environmental disclosure, our collaboration with EFRAG will ensure companies preparing to report can do so through CDP .”

Both the EFRAG and the CDP previously announced alignment and interoperability with the standards from the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI). Plus, with another announcement this week between GRI and ISSB that they are opening a joint Sustainability Innovation Lab (SIL), which ISSB Chair Emmanuel Faber said will “make it straightforward for companies using both the IFRS Sustainability Disclosure Standards (ISSB) and the GRI Standards ,” the reporting landscape looks more cohesive than ever.?

Important Agreements Ahead of COP 28

More good news, with only three weeks before the COP28 meeting in Dubai, a deal was reached for a ‘loss and damage fund’ to help the world’s poorest countries impacted by climate change. The 24 nations involved agreed to encourage, but not mandate, all countries to add to the fund. The deal will be finalized at COP 28 in December.?

?"There was a lot at stake at this meeting," said Barbados delegate Avinash Persaud , "The value of the agreement is that it avoided a disaster ahead of COP and gives positive momentum ."

Plus, China has published its highly anticipated methane reduction plan in a move that could signal closer climate ties with the US, ahead of a meeting between China’s leader Xi and President Biden next week.?

More Net Zero Claims, Less Credibility

A new analysis from Net Zero Tracker reported that corporate net zero targets are up 40% in just over a year and include half of the world’s 2,000 largest companies. However, the report pointed out that the quality of these targets remains poor.?

Only 4% of companies meet the Starting Line Criteria, set out by the UN Race to Zero campaign, which includes things like including all Scopes of emissions (only 37% fully cover Scope 3), clear policies on offsets (only 13% have quality standards for offsets), starting to cut emissions immediately, and annual progress updates on interim and long term targets.?

Dr. Takeshi Kuramochi of NewClimate Institute said, “Many companies need to urgently refine their pledges and implementation strategies in line with the UN Expert Group’s recent markers of credibility and other Paris-aligned standards .”

If you want to see how a certain company or country is doing or have a query about Net Zero Tracker’s work, give their AI chatbot Chat Net Zero a try. ?

ESG Goes Mainstream

A couple of weeks back, our headline asked if ESG was beyond redemption . Well, investors and executives have resoundingly said ESG is here to stay. A Bloomberg Intelligence study of 250 investors and 250 C-suite members revealed that a whopping 89% of investors believe that using ESG data is now mainstream, and more than half (57%) said that the ESG term should not be replaced by something less divisive.?

The study highlighted the role of regulation in driving capital toward ESG. Adeline Diab of Bloomberg Intelligence said, “Global regulation anchors ESG in financial markets and corporate strategy, yet challenges include data consistency and fund labeling for investors, and transition costs and supply-chain risk for companies .”

The study comes as JP Morgan CEO Jamie Dimon warned states like Texas that their ESG investing bans could hurt their business-friendly reputation, saying, "We don't discriminate or boycott anybody, neither for political affiliation nor for anything else ."

Bucking the pro-ESG trend, ex-BlackRock researcher Carole Crozat claimed that ESG investments would never align finance with ethical, environmental, and social goals.?

The pros and cons of ESG investment criteria will rage on, but it seems clear that it's moved from a trend to the mainstream and is backed by new regulations and standards.?

Hottest Year Ever Now “Virtually Certain”

2023 has been a year of heat extremes, with the majority of the top 10 hottest days, many of the hottest months, and the hottest summer already confirmed. Now, as we just come out of an “exceptionally hot” October, new data has all but confirmed that 2023 will be the hottest year of the last 125,000 years .

October air temperatures were 0.4°C above the previously hottest October in 2019. Climate scientist Zeke Hausfather said, "We really see no sign that this year's string of exceptional record-setting months is going away anytime soon, and at this point, it makes it virtually certain in all the datasets that 2023 will be the warmest year on record. That's a greater than 99% chance ."?

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.?

Other Notable News:

• BlackRock invests in the world’s largest Direct Air Capture (DAC) carbon capture project . For the Texas-based DAC project, BlackRock will invest $550 million into Oxy’s carbon capture-focused subsidiary, 1PointFive.
• Republican SEC Commissioner Mark Uyeda has thrown another spanner in the SEC’s troubled climate disclosure rule . Since many expect the final rule will be more modest than the proposal, he asserted that the SEC should re-propose the rule if it deviates significantly from the original proposal.
• This new report from BCG and the World Economic Forum emphasizes the urgent need for climate action to meet the Paris Agreement goals . It focuses on the significant competitive advantage early corporate movers can gain and highlights the current lack of progress on global efforts and the essential steps businesses must take towards a sustainable, profitable future.
• Another report from BCG shows how setting an Internal Carbon Price (ICP) can be the most effective way for companies to meet their decarbonization goals . An ICP enables companies to accurately compare emissions across assets and products—and to factor in the impact of carbon reductions in opex and capex decisions.
• Another BCG study (the last one, I promise) revealed the vast opportunities for private capital investment in North America's climate and sustainability sectors . Emphasizing the growth of climate funds and the potential of emerging technologies supported by government policies and also detailing challenges and risks associated with investing in these nascent sectors.
• France bans fossil fuel companies from responsible investment labeled funds . A series of updates to the French Socially Responsible Investment (SRI) label aims to make it harder to get and more climate-focused.
• Investment firm KKR raised a $2.8 billion fund dedicated to investing in companies whose products and services contribute toward the United Nations Sustainable Development Goals.?
• King Charles continued an age-old tradition this week in delivering the opening speech to the UK parliament, although as an avid environmentalist and climate change campaigner, it must have hurt to have to announce plans to increase oil and gas exploration in the North Sea.
• A new report from the UN says that global governments' current plans would produce?around?110% more?fossil fuels?in 2030?than would be consistent with limiting warming to 1.5°C , which contradicts their net zero goals.?
• AI is shaping ESG investing as governments and ESG investors raise concerns about AI's societal impacts, such as job displacement . However, ESG investors also recognize its potential to address climate risks.
• ESG’s role in never-ending quest for alpha is central . 美国宾夕法尼亚大学 - 沃顿商学院 Witold Henisz rebuttal to "ESG is beyond redemption" by Aswath Damodaran 美国纽约大学 - 斯特恩商学院 in the Financial Times

Notable Podcasts:?

• In this week’s episode of the BBC’s The Climate Question , the host, Grahaig Jackson, talks to experts in Greenland to see what is happening with the Greenland ice sheet. When he finds the ice sheet due to climate change is melting at an astonishing rate, he meets some of the people being forced to rapidly adapt their traditional ways of life and what this all means as global sea-level rises.?
• In this week’s episode of WorkWeek’s Climate Tech podcast, The Keep Cool Show , host Nick van Osdol was joined by Adam Goff , Head of Strategy at 8 Rivers, to discuss the challenges and opportunities in scaling carbon capture and why the controversial decarbonization technology is yet to take off at scale.?