ESG essentials… in the news this week

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Politics is the barrier to tackling climate change 

This week’s IPCC report has outlined in granular detail the changes we need to make to limit global warming. The answer? Sweeping structural changes. 

Despite it being deemed “almost inevitable” that we will exceed 1.5C of warming by 2030, colossal changes will be needed to limit how much warmer our planet gets. Currently, the main barrier to that is politics, and, more specifically, contrary political agendas. The world needs to wisen up to its key common goal: reducing consumption and increasing green investment to save our planet. Currently, progress in some countries is being outweighed by soaring emissions elsewhere but the key to our survival will be searching for a solution for all, else it is feared the rising tide will sink all boats.

Read the full article here, and specifically about green investment here.

ESG Chart of the Week

Antarctica has recently experienced a heatwave, reaching a high of -11.8°C – more than 40°C warmer than the average for Spring. 

The most recent data show that the Arctic is now warming three to four times faster than the global average. Heatwaves are more common and, as a result, Arctic sea ice is in rapid retreat. 

Source: The Economist

ESG ‘Engagement’ in Crosshairs of $10 Trillion Asset Owner Group 

The Net-Zero Asset Owners Alliance published a discussion paper this week, ‘The Future of Investor Engagement’. The paper urges investors to ‘change the rules of the game’, dramatically expanding their stewardship and engagement efforts to help identify and tackle the hurdles to achieving net-zero emissions. The paper also presses the point that investors must look beyond solely engaging with companies, directly influencing asset managers, entire sectors and stakeholders in creating policies with the planet placed front and centre.

Read the full article here.

‘Major misjudgement’ on UK energy strategy

The UK has made a huge gamble by placing nuclear energy at the heart of its new energy strategy; the IPCC’s most recent report cited nuclear once, in brackets, as an example of a technology with high upfront costs. In contrast, it mentioned renewables, wind, solar and efficiency 67 times in its summary. The strategy also defies the UK’s own goal of reaching net-zero by backing more drilling for oil and gas in the North Sea.

The energy strategy has missed the mark, with a disappointing lack of focus on behavioural change or any incentives to kickstart it. This strategy was an opportunity for the UK to allocate subsidies for improved home insulation (40% of UK homes have sufficient loft insulation), introduce tax breaks for individuals to reduce their consumption and address soaring energy prices. Instead, they have gambled with taxpayer money on nuclear and hydrogen, favouring shiny new projects instead of safe investment options. 

Read the full article here

New TCFD disclosure will take corporates to task

From Wednesday (6th April), the UK will require large, listed companies to disclose climate risks in their annual reporting. This will coerce all companies to align with standards set by the Taskforce on Climate-related Financial Disclosures (TCFD). 

Such a move is suggestive of the way a frustrated parent might act with a naughty child: dragging them kicking and screaming to meet certain standards of good behaviour. ESG Comms welcomes the introduction and hopes it will be a watershed moment for improved accountability, transparency and disclosure in the UK. 

Here are the top five things you need to know about the announcement:

  1. The UK is the first country in the G20 group of nations to mandate TCFD-aligned requirements on large companies and financial institutions. Approximately 1,300 companies will be affected by TCFD standards, and this is expected to grow with a new mandate introduction in 2025. 

This is part of a global trend: last June, G7 financial ministers and central bank governors committed to implementing economy-wide disclosure rules aligning with TCFD guidelines. Last year, Switzerland made such disclosures mandatory, and Switzerland has committed to doing so by 2024. 

  1. Mandatory TCFD is hugely important: the climate crisis is already fuelling economic damage (and vice-versa). As the impacts of such damage continue to grow, so too does the demand for access to risk information. 
  2. Regulated financial filings around climate-related risks through #TCFD will make it easier for investors, individuals and civil society to scrutinise and compare how businesses are tackling the #climatecrisis, enabling them to put pressure on laggards.
  3. TCFD uniquely includes scenario analysis, which involves mapping likely risks and opportunities to a business’s value chain on a range of global warming trajectories, including those detailed in the Paris Agreement (1.5C and 2C).
  4. Companies will also be required to outline their climate-related governance structures, strategies risk management and reduction methods and climate targets, with details of performance against them. 

ESG Comms recognises that this change will not be welcomed by all and that some large firms will be reluctant to disclose the level of climate risk they are exposed to and their adaptation plans. However, such changes are necessary if we are to reach a net-zero economy by 2030 and keep anthropogenic emissions to a minimum of 1.5C. 

Read this article on our LinkedIn.

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