By Ira Srivastava

1. Artificial intelligence takes centre stage at Davos. AI development and regulation were one of the biggest and most frequently discussed topics in Davos last week. Studies have shown that it could impact the jobs of 40-60% of employees, and half of economists surveyed by the World Economic Forum agree that “AI would become commercially disruptive in 2024”. With such a powerful tool that can potentially have huge ranging impacts, governments and businesses are at odds when it comes to regulation and AI governance. One option governments are considering is to include auditing algorithms for quality control, while some believe that it is simpler to regulate the effects of AI rather than the algorithms themselves. However, those in the AI sphere such as Andrew Ng, founder of Deeplearning.AI argued that “regulations that impose burdensome requirements… can hamper innovation [and] have anti-competitive effects that favour big tech”. 

2. Wall Street adapts to avoid ESG backlash. In response to growing anti-ESG sentiments, climate alliances across industries are making some changes. The Paris Aligned Asset Owners alliance worth US$3.3 trillion edited its website to make it clear that members “make individual commitments in line with their fiduciary obligations”. This change in language avoids backlash over coordinated emission reductions and emphasises the fact that these net-zero commitments are only being made to “protect asset values”. These changes are being made more frequently since joint industry efforts have been under attack by lawmakers who claim these companies are colluding and threatening to file antitrust lawsuits. The Net Zero Banking Alliance and Net Zero Asset Managers Initiative have also changed the wording on their websites in the past week.

3. The World Economic Forum’s Stakeholder Metrics are a success. The world of ESG disclosure frameworks is complicated, but the World Economic Forum’s Stakeholder Metrics can help standardise the process. These metrics “promote alignment among existing frameworks to create a set of data points that can be compared between companies”. They include human capital, prosperity, environmental, and governance metrics. Since 2021, over 160 companies have used these non-financial metrics to report on sustainability. Case studies on Stakeholder Metrics implementation from companies around the world can be found here.

4. ESG trends in 2023 and forecasts for 2024. 

  • Last year saw a surge in laws banning ESG investing, boycotts, anti-discrimination policies, and restrictions on government contractors. California’s mandatory disclosure laws made them a trailblazer in the world of ESG disclosures. However, more legislation will be required in 2024 to address issues in the initial bills with the hope of implementation in 2025. 
  • The SEC released new cyber-related disclosures and greenwashing rules, but there is uncertainty about when their long awaited climate rules will be released.
  • The European Union’s Corporate Sustainability Reporting Directive came into force this year changing the global ESG reporting landscape. The first round of reports will be due in 2025. 

Find more detailed insight into the ESG trends of 2023 and what to expect in the new year here

5. New initiative to fund developing countries’ energy transitions. The World Economic Forum launched the “Network to Mobilize Clean Energy Investment for the Global South” at Davos. This network aims to address the financial challenges that developing countries face while decarbonising. Currently, funding for developing countries sits at about US $770 billion. The network’s primary goal is to triple that and reach a target of approximately US $2.5 trillion in funding from developed to developing countries annually. This alliance is made up of CEOs and government officials from around the world, and members will work to “accelerate clean energy capital solutions in emerging market contexts”.

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

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