At the end of July, the Group of 20 (G20) met in Goa, India, to discuss the energy transition away from fossil fuels. G20 countries are responsible for 75% of all global greenhouse gas emissions, so collaborative and meaningful efforts are essential to mitigating climate change. Out of 29 paragraphs, 22 received full agreement from all 20 member countries while seven were disputed. Those seven included commitments to triple renewable energy capacity before 2030, contributing US $100 billion annually to help developing countries fund climate action, and statements on Russia’s invasion of Ukraine. Saudi Arabia reportedly led a coalition of countries coming out in favour of carbon capture instead of curbing fossil fuel usage. While the list of opposing countries is not available, Russia, China, South Africa, and Indonesia are fossil fuel suppliers who have opposed tripling renewable capacity in the past. 

Despite inaction in the world of international environmental policy, companies should remain proactive in preparing for the energy transition. Our world-class Global Competent Boards ESG and Climate & Biodiversity programs will equip business leaders and board members with the tools to do just that.

1. Atlantic ocean currents at risk of collapse. The Atlantic meridional overturning circulation (AMOC) is a pattern of ocean currents that helps to distribute heat throughout the Atlantic ocean. It is responsible for the Mediterranean region’s mild winters, bringing warm ocean water to southern Europe. A change in AMOC patterns will have significant negative impacts on the global climate system. The Intergovernmental Panel on Climate Change predicted that collapse could happen by 2050 if emissions are not curbed. Changes in AMOC patterns could bring extremely cold winters to parts of Europe and North America, while the south Atlantic warms to compensate. This will have devastating effects on coastal communities as well as marine and terrestrial ecosystems in the area. 

2. CEOs are wary of AI, stalling on sustainability. According to EY’s monthly CEO Outlook Pulse, CEOs overwhelmingly felt that AI was a force for good that could improve operational efficiency. However, an equal percentage of the 1200 CEOs surveyed believed more work needed to be done to manage the ethical and social risks associated with AI. Additionally, CEOs in the Asia-Pacific region were the most likely to prioritise sustainability initiatives and prioritise them in capital allocation compared to those in the Americas and Europe. Despite growing investor demand for robust sustainability strategies, many CEOs are focusing primarily on short term financial gain over long term sustainability and ESG. 

3. European Sustainability Reporting Standards adopted in the EU. Last week, new reporting standards were adopted to harmonise ESG reporting in the European Union. Companies will be expected to comply with the European Sustainability Reporting Standards (ESRS) as of January 1st, 2024. ESRS will satisfy the reporting requirements of another landmark piece of sustainability legislation, the Corporate Sustainability Reporting Directive. The ESRS will touch on ESG topics and other non-financial aspects of reporting, going beyond just sustainability. There are 12 standards under the ESRS within four categories, and the commission that developed these standards worked closely with the International Sustainability Standards Board as well. 

4. Should employers be scared of unionisation? Unionisation efforts are often met with panic in corporate headquarters, but this does not need to be the case according to Professor Chris Wright of the University of Sydney. He points out that unionised companies tend to be more productive workplaces with fewer absentee rates, reduced employee turnover, and stronger communication between employees and management.  Nordic countries with high rates of unionisation such as Denmark, a country where 65% of the workforce belongs to a union, are an excellent example of this. Wright argues that despite the power that unions have to take strike actions in Denmark, the country has remarkably low rates of industrial action. Employers in Denmark are generally supportive of unions as they facilitate dialogue and conflict resolution in workplaces so that problems are addressed swiftly. In an age where employee wellness is taking priority and younger generations are joining the workforce, employers could benefit from a more flexible stance when it comes to labour. 

5. Asset managers shying away from climate action. A recent study of the 45 largest asset managers in the world who collectively control assets worth over US $70 trillion found that they are failing to meet their net-zero targets. 95% of the portfolios analysed were found to be in misalignment with targets of net-zero emissions by 2050. Climate action has stalled, and asset managers are not prioritising sustainable finance practices. Since 2021, there has been a 45% reduction in the number of asset managers that have “truly ambitious and effective climate stewardship practices”. This is partly due to the anti-ESG movement in the United States, but Canadian portfolios are seeing the same trends. European portfolios showed much more ambitious climate action. This comes on the heels of a scorching summer with heat records shattered around the world. 

Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.

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