ESG Essentials: the cost of a failed transition, greenwashing amongst FMCG giants and investor calls for agriculture subsidy reform

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The cost of climate inaction

As the world grapples with the aftermath of record-breaking weather, the economic cost of the climate crisis is real and rising. Thus far, the physical impacts of climate change have been further down the investor agenda when it comes to managing climate risk, with the cost and risk of decarbonising taking first place. 

But recent analysis by Cambridge Econometrics and Ortec Finance for Singapore’s GIC shows investors ignoring physical climate risks are entering (increasingly) hot water. There are some exceptions, as forward-thinking investors and entrepreneurs seize opportunities arising from adaptation and mitigation, such as Boston-based Gradient, which became the first water tech start-up to hit a $1bn valuation.

As the world grows more susceptible to extreme weather, financial institutions should heed climate risks for stability, mitigation and efficient resource use. This discourages risky construction, spurs climate-resilient infrastructure and builds in the cost of inaction. 

Though focusing on the climate’s physical impact might feel bleak, time is short to decarbonise. While investors are gearing up for the challenge, they would be wise to also factor in the cost of a failed transition. 

Unilever, Procter & Gamble in danger of missing net-zero targets

Following its series analysing Climate Action 100+ companies, Planet Tracker has published a combined study of leading FMCG giants finding greenwashing and a lack of detail in climate transition plans.

The research reveals Colgate-Palmolive and Procter & Gamble as the worst performers, with expected emissions 7 times higher than the recommended level set by the Science-Based Targets initiative (SBTi) by 2030. Even top performer Unilever was found to be on a path to surpass the recommended SBTi level by a factor of 1.5, and on track for over 2°C warming.

Planet Tracker also warns investors to be wary of greenwashing, as companies are committing to initiatives that tackle downstream indirect emissions – which are challenging to calculate and optional under the SBTi – but not accounting for them in transition plans.

Investor coalition calls for G20 food subsidy reform

An investor coalition led by the FAIRR Initiative, supported by investors representing $7.3 trillion in combined assets, is calling on G20 finance ministers to align agricultural support with climate and nature goals by 2030. 

A UN report identified nearly $470 billion of annual subsidies that are price-distorting and environmentally and socially harmful, representing a staggering 87% of all agricultural subsidies globally. These subsidy systems are estimated to drive $4-6tn of annual economic costs through nature damage. 

Although the global deal to preserve biodiversity was agreed in Montreal, it is vital that G20 nations act quickly, or risk falling short on their commitments.  

Jeremy Coller, Founder of the FAIRR Initiative said: “It’s time for the G20 to listen to investors’ call to support a sustainable food industry… We need to realign subsidies to nature goals to support a transition for farmers and to ensure a level regulatory playing field for alternative proteins and other sustainable solutions.”

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