Friday - December 2, 2022 | News & Views | 4 min read
After all the hype around COP27 in Sharm el-Sheikh, Egypt, last month, international government representatives will gather next week in Montréal, Canada, for the UN’s latest Biodiversity Conference, (aka COP15).
Biodiversity is getting worse rapidly worldwide. Hopes are high that attendees will agree and act upon a global biodiversity framework, as well as:
- Set clear targets to deal with fragmentation, overexploitation, pollution and unsustainable agricultural practices
- Plan to safeguard the rights of Indigenous peoples and their work as stewards of nature
- Get alignment of financial flows with nature to drive finances toward sustainable investments and away from environmentally harmful ones
These nature-related issues have become another important, complex item on board and leadership agendas worldwide. It is an area most will need help with. Our best-in-class ESG and Climate education programs are there to do just that.
1. Big in Japan. The ESG data industry is throwing its weight behind a code of conduct put forward by Japan that would be the first global set of regulations to set minimum standards in ESG data. Major ESG analytics providers including FTSE Russell, ISS ESG, Moody’s ESG, MSCI and Sustainalytics are backing the initiative. The Financial Services Agency of Japan, which released the original draft code, is now confident it could be finalized by the end of the year. The code includes measures that will increase transparency from providers, plus ways for companies to examine ESG data for errors before it is released, and full disclosures of data sources and methodologies.
2. Boardroom responsibilities. A new report by the World Benchmarking Alliance has shown how companies that have boards embracing responsibility for human rights deliver better corporate performance in that area. Due diligence is a key factor: three-quarters (75%) of the companies that have a clear human-rights focus have boards focused in this area. The companies that performed poorly on human rights had little or zero board involvement. There is much work still to be done on corporate boards in this sphere of ESG. Only a third (33%) of the companies surveyed had human rights in their code of conduct for suppliers, and just 2% actively assess human rights in their supply chains. In terms of stakeholder engagement, a remarkable 71% did not regularly engage with them on this issue. The report surveyed 120-plus companies in the food, agriculture, products (57 companies), technology and automotive manufacturing sectors.
3. Climate disclosures arrive in Switzerland. Major Swiss companies, banks, insurers and financial institutions must make public climate-related financial disclosures as of January 1, 2024. New legislation passed last week by the country’s Federal Council heralds a new era of accountability and transparency. Companies’ reports must follow the recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD), and they must produce a climate transition plan that aligns with overall Swiss climate goals. The new rules will apply to companies with 500 or more employees, at least CHF 20 million (US $21 million) in total assets or more than CHF 40 million in revenue. Companies will have to disclose all direct and indirect greenhouse gas emissions alongside emissions reduction targets and on how they plan to get there.
4. Investors weigh up climate risks. A new report by Nuveen has looked at the latest trends in the asset management industry, finding that the need to address climate change has never been greater, as well as sizing up the risks and opportunities that the transition to a low-carbon economy brings. Just under half (43%) of organizations surveyed worldwide address climate risk in their portfolios, with only 19% having no plans to look at the subject. The top five trends shaping investor portfolios are:
- Technology (51%)
- Climate risk (50%)
- Private markets (34%)
- Digital assets (30%)
- Activism (20%)
On top of that, the vast majority of asset owners (87%) now consider ESG factors when making investment decisions or plan to do so within the next year. Nuveen and CoreData surveyed 800 global institutions (700 asset owners and 100 consultants) worldwide, including senior figures at corporate, public and government pensions, insurance companies, superannuation funds, sovereign wealth funds and central banks.
5. Big step for gender equality: The European Parliament last week signed off on the new European Union (EU) law for gender balance on company boards. From 2026, companies must have 40% of its non-executive directors seats held by the underrepresented gender, or 33% of all directors. A recent survey by the European Institute for Gender Equality (EIGE) showed there was still some way to go. Although women make up the majority (60%) of university graduates in the EU, they only account for 31.5% of total corporate board members and just 8% of board chairs.
Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.Back To News & Views