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Why ESG Efforts Will Continue
Whats In This Week's Newsletter
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
Public US companies that report their Scope 1 and 2 emissions based on size. Source HIP Investors
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 Governor Gavin Newsom
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
Gabriel Aponte/Getty Images
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.
Clouds Gather Over COP29
The Climate Summit (COP29) starts next week and most are expecting an underwhelming event overshadowed by geopolitics. Only two G20 leaders will attend the meeting, there is a carbon trade war looming over border taxes, and a dispute over the amount China should be contributing to the global climate fund.
With political heavy hitters, like outgoing US President Joe Biden and the EU’s President Ursula Von Der Leyen, not attending, some are saying the writing is on the wall for a failed event. Others are more positive. CEO of the World Resources Institute Ani Dasgupta said, "A strong outcome in Baku, a finance outcome, is possible."
Canada Limits Fossil Fuel Emissions
Alberta tar sands, Image from: Climatestate.com
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.
Other Notable News:
Global Weirding
This year's extreme heat has pushed all but 2 US states into drought. Only Alaska and Kentucky are not under at least moderate drought.
ESG in the EU
Sustainability Research
Notable Podcasts:
In this week’s episode of The Outrage and Optimism podcast, host Christiana Figueres is joined by the US’s Special Envoy for Biodiversity, Monica Medina. Together, they discuss the outcomes of COP16, like the inclusion of Indigenous peoples, a make peace with climate pact, and more, as well as some of the not-so-good outcomes of this year’s event.
In this week’s Zero: The Climate Race from Bloomberg News episode, the podcast host Akshat Rathi interviews actor Stephen Kunken, asking questions about his new role in a climate play. The play in question portrays the complexity of getting climate deals over the line through the eyes of Stephen’s character, Don Pearlman, a notorious fossil fuel lobbyist at the 1997 Kyoto Summit.
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