A joint study conducted by the University of East Anglia and the University of Cambridge found that unless action is taken to mitigate climate change, sovereign credit ratings could drop. Researchers simulated what would happen under a “climate-adjusted ratings system” to see how climate change would affect credit ratings. The cost of debt servicing will increase for 59 countries, with Canada, the U.S., India and China potentially seeing the greatest price jumps. These findings show that kicking green investment strategies down the road can increase national borrowing costs, causing significant economic impacts. This is in addition to the already rising cost of extreme weather events and natural disasters. If emissions remain high until the year 2100, costs could end up in the hundreds of billions with developing countries bearing the brunt of the impact.
1. Judge rules in favour of Montana youth in landmark climate case. A judge has ruled in favour of a group of youth who sued the state of Montana for violating their right to a “clean and healthful environment”. Held v Montana is the first constitutional climate case to come to trial in the United States with arguments concluding in June. This ruling will not block fossil fuel developments, but it reverses a state law that banned agencies from taking potential emissions into account when granting permits for fossil fuel exploration. It sets a strong legal precedent for future climate cases around the United States as four other states face climate trials.
2. Employees reveal that corporate greenwashing is rampant. According to a survey from Pittsburgh’s Center of Sustainable Business, 43% of employees believe that their companies struggle with prioritisation of short-term growth and disinterest towards sustainability. 40% of employees agreed with the statement that “Our leaders don’t believe in sustainability”. Two-thirds of surveyed employees did not feel that their companies had undertaken meaningful action to achieve climate targets. These findings point to the fact that companies are either greatly greenwashing their environmental claims or failing to communicate with stakeholders within the company. In a world where workers are taking corporate values into consideration when deciding where to work, boards and management would do well to ensure that their environmental claims are not just lip service.
3. The complex realities of ESG. ESG has been making headlines for all of the wrong reasons in 2023, but there is more to the ESG landscape than politicised attacks. Four years ago, only one in five companies had the full board overseeing ESG. That number has now jumped to 49%. European companies overwhelmingly see ESG as an opportunity (56% of survey responses) instead of a risk (13%). American companies are more divided, with just over 33% calling it a risk and only 30% calling it an opportunity. Shareholder activism has also dropped after peaking in 2021, with social issues such as equity taking precedence over climate action. Anti-ESG shareholder proposals have largely failed, seeing a support rate of only 2%.
4. Science Based Targets Initiative retracts endorsement of Amazon’s climate pledges. Last week, the Science Based Targets Initiative (SBTI) refused to continue to endorse Amazon’s climate plan. In 2019, Amazon announced that it was aiming for net zero emissions by 2040. However, in the four years since the company’s emissions have jumped by 40%. They have also walked back their commitment of delivering half of their packages with net-zero carbon emissions. The SBTI has taken back its endorsement of about 120 companies, but Amazon is the largest. As SBTI gains more recognition and credibility in the world of sustainable investing, companies must ensure they retain their stamp of approval.
5. El Niño impacts renewable energy production in the Asia Pacific region. On top of the natural disasters and extreme weather that this El Niño cycle has caused, it could also affect long term renewable energy production. After huge monsoon floods in Malaysia and Cyclone Gabrielle hitting New Zealand, Willis Tower Watson warned that renewable output in the region could fall significantly as a result. If extreme weather events continue to occur, projects in the Asia Pacific region could become less economically viable.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.
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