Behind the ESG headlines - April 8, 2022

By mathew-loup

Some people just like to watch the world burn, according to Alfred, butler to B. Wayne Esq. We at Competent Boards would prefer to watch the world start to heal itself from the climate crisis, but the awful, heartbreaking war in Ukraine is making that task harder by the day.

Information and education is so important in this fast-changing world. We are here to help, with a selection each week of environmental, social and governance (ESG) articles and reports that help you see the picture clearly. 

If there are other stories you think we should include next time, please share them at info@competentboards.com.

1. The latest Intergovernmental Panel on Climate Change (IPCC) study hogged the climate crisis headlines last week; and rightly so. The IPCC Sixth Assessment Report: Mitigation of Climate Change concludes global warming levels could easily exceed 3°C by the end of this century, far in excess of the 1.5°C threshold that scientists have warned of. This kind of temperature rise would have devastating consequences for the environment, humanity and biodiversity. However, the picture was not all gloom and doom: changes in the energy sector, big cuts in fossil fuel use, widespread electrification and better energy efficiency, alongside changes in human behaviour, could bring greenhouse gas emissions down by 40-70% by 2050.

2. ESG ratings are still largely unregulated. Now the war in Ukraine has put some of the suppliers in the spotlight. Before Russia invaded, there were approximately $9.5 billion in ESG approved funds in Russia on the basis of rankings from Sustainalytics and MSCI Inc. According to the European Banking Federation, there are currently 600 standards and frameworks, data providers, ratings and rankings that measure ESG-related risks. That’s an awful lot of alphabet soup for asset managers, board directors and investors to wade through. Erik Thedeen, chairman of the Sustainable Finance Task Force at the International Organization of Securities Commissions, was not impressed: “We need to do some kind of rethinking here. This disastrous war is an eye opener. The whole ESG community needs to think through how to handle state-owned companies in countries that violate human rights.”

3. The tragic events in Ukraine are also having unexpected effects on ESG efforts elsewhere. Ukraine is one of the foremost producers of sunflower oil in the world. With that supply curtailed, some UK supermarkets are bringing back palm oil to their shelves instead. This controversial crop has previously been called the world’s most hated commodity due to its links to major deforestation in southeast Asia.

4. The ESG data picture took another big step closer to being 4K not analogue last week. The International Financial Reporting Standards Foundations (IFRS) released its first drafts of proposed standards for company sustainability and climate-related disclosures by its International Sustainability Standards Board (ISSB). Recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD) played a key role in shaping the draft. The ISSB hopes to issue the finalized standards by the end of the year.

5. A new report from Equniti has predicted three key trends for 2022’s annual meetings. Top of the list is logistics, with most companies grappling with the balance between holding an AGM virtually, in-person or as a hybrid event. With COVID-19 waves still occurring around the world and an ever-changing array of regulations, event planners will be gaining grayer hairs. ESG issues, particularly around climate risks, will also be on many agendas. Gender diversity levels in boardrooms will also come under scrutiny. Executive pay is still grabbing headlines, with CEOs pocketing a record 19% pay rise on average in 2021. Investors and other stakeholders will want to know the rationale behind those decisions. 

Mathew Loup is Competent Boards’ Director, Marketing & Communications. Connect with him on LinkedIn.

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