Behind the ESG headlines - July 8, 2022

By mathew-loup

Board directors and senior executives may take vacations, but climate change never sleeps. Sydney, Australia is reeling from its third extreme flooding event in 18 months. Some parts this week got their eight-month quota of rain in four days. This is simply not normal.

As 2022’s proxy season goes into the corporate rearview mirror, the environmental, social and governance (ESG) risks and opportunities should still be front and centre of the agenda for board directors and business leaders. 

The only way to address these is to be informed. And that starts with ESG education. Our Designation and Certificate programs are designed to help you have the knowledge and tools to make better decisions.

1. New standards. Pharmaceutical giant Pfizer is the latest major company to announce its net-zero goals. Pfiizer aims to achieve a 95% reduction in its greenhouse gas emissions along the way of achieving the Net Zero Standard by 2040, 10 years ahead of its industry requirements. The Net Zero Standard was established by the Science Based Targets initiative (SBTi) in 2021, and has rigorous standards around assessing and certifying a company’s emissions performance. As part of this process, Pfizer will also develop and implement a climate resilience plan.

2. Climate clock ticks louder. The latest MSCI Net Zero Tracker report for June 2022 makes for uncomfortable reading. Of the 2,900 major international listed companies tracked by the index, only 45% have a decarbonization target. As things currently stand, the listed companies are “on track to cause average global temperatures to rise by 2.9°C above preindustrial levels”. Just under half (46%) align with a rise of 2°C, while only 11% align with a 1.5°C increase, the target set in the 2015 Paris Agreement. With just 57 months left in the emissions budget to limit global temperature rises, the race is on. There is a huge amount of work needed by companies, investors and regulators to make a real change for the planet. That work starts with education.

3. Incentivizing ESG. Despite two-thirds (65%) of global investors wanting ESG risks and opportunities linked to executive pay, only 55% of business leaders actually think that’s a good idea. According to a survey conducted by PwC and the London Business School, social topics are the ones most commonly measured, such as diversity in the workplace, employee engagement and health and safety metrics. Fewer than three in 10 companies (28%) incorporate targets high on stakeholder wishlists, such as climate change and sustainability. The survey polled more than 600 business leaders in nine countries and 28 sectors.

4. Missing the mark. The United Kingdom is not going to achieve a successful net-zero transition, based on its current strategy. This was the damning conclusion by the Climate Change Committee (CCC) in its annual progress report last week. The government’s policy is falling short in some major areas, especially insulation in homes, which is one of the biggest single sources of carbon emissions. British homes are the draftiest in Europe, and the bills for heating those homes are skyrocketing, not helped by rampant inflation across the economy. On the plus side, the country’s adoption of electric vehicles is ahead of schedule.

5. Turning up the temperature. The US Supreme Court ruled last week that the Clean Air Act does not give the Environmental Protection Agency (EPA) any authority to enforce regulations on American power plants that contribute to global warming. This is not a light decision; those power plants account for 30% of carbon dioxide emissions in a country that is the world’s largest polluter. It also represents a major setback for President Joe Biden’s hopes for the US achieving a 50% reduction in greenhouse-gas emissions by 2030.

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

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