ESG Essentials: Electric vehicles, BP’s climate plans and sustainability linked pay

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Sustainability linked pay could help fix fashion’s problems

A new report released by Planet Tracker found that some of the world’s largest textile companies continue to isolate executive pay from ESG performance, even though it can be an important incentive to improve corporate sustainability. 

The analysis by Planet Tracker found that 17 of the world’s major brands, such as Levi Strauss, Victoria’s Secret and Under Armour, did not have any link between executive pay and ESG metrics. Of those that do align compensation with ESG performance, the approach was insufficient. Only Adidas and Puma have executive pay programmes with clear annual sustainability-related objectives and reporting. 

Planet Tracker calls for investors to promote meaningful change through their investments into business that back effective sustainability-linked performance pay and which hold companies accountable for achieving their ESG targets and delivering on their sustainability goals. As climate change poses financial risk for investors, it is important that they continue to invest in companies that promote sustainability within every part of their operations.

The EV market is speeding forward, beware hazards ahead

The electric car industry is growing rapidly, and a piece in The Economist highlights BloombergNEF data predicting 700 million electric vehicles globally by 2040.

Stringent emissions regulations have encouraged the shift to electric vehicles. For instance, the EU has approved a draft law that bans all new internal combustion engines by 2035 and China has stated that 20% of cars must be partially or fully powered by electricity by 2025. This puts EVs in a position to overtake the non-electric car market, reducing transport emissions. The market has already become extremely competitive, with industry figures predicting that only 10 companies have the technological and manufacturing capacity to lead the sector- leaving traditional auto companies behind.

Despite this global push, EV’s only comprise a fraction of current car sales and certain barriers must be overcome for the EV market to grow as projected. Inadequate charging infrastructure and risk of grid overload will all require significant investment to reduce the barriers they pose to the EV market. Investors are also looking closely at the issue of critical minerals supply through initiatives like the Global Investor Commission on Mining 2030.

Investors express discontent over BP’s weakened climate plans

The change in BP’s climate plans announced in February was met with concern by investors at this week’s AGM after BP revealed it was aiming for a 20-30% cut in greenhouse gas emissions by 2030, compared to their initial promise of 35-40%. 

BP justified the reduced target by saying it needed to keep investing in oil and gas for at least the next three decades in order to meet current energy demands. However some of the UK’s biggest pension funds – including Nest, USS, Brunel Pension Partnership and Border to Coast – have pushed back against the new targets, arguing that BP’s fossil fuel projects will lose value due to upcoming climate regulations. 

As a result, the five pension funds voted against reappointing BP’s chairman Helge Lund. Pension funds like Border to Coast have stated their intention to vote against executives who fail to reach emissions targets.

OPEC and IEA relationship continues to grow hostile after back-and-forth accusations

Recent back and forth between OPEC and the International Energy Agency (IEA) has intensified, signalling an increasingly frosty relationship between the oil producers’ group and the UN convened agency. 

The IEA warned that the surprise production cuts announced by the oil producers earlier this month risked exacerbating inflation. OPEC then hit back at the agency, stating that their calls to stop investment in oil are causing instability in energy markets.

In recent years, the IEA has said there can be no new oil, gas or coal developments if we are to curb emissions to reduce the impact of climate change, and has criticised governments for not moving quickly enough to reduce the global demand for oil. 

It remains to be seen how the two groups interact on the road to COP28, hosted in the UAE, one of the largest oil producing countries in the world and an important member of OPEC

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