Behind the ESG headlines - May 27, 2022

By mathew-loup

The chocolate has been eaten, fondue sets put away and the kirsch put to one side: the in-person annual meeting of the World Economic Forum in Davos, Switzerland is over for another year. The five days yielded some amazing discussions, with environmental, social and governance (ESG) topics featuring in many.

Davos has been richly covered in other publications. Our weekly collection of news, opinion, videos and podcasts looks to fill the other gaps in your knowledge bank. It might even inspire you to sign up for one of our Designation or Certificate programs, too! 

Help us to help you: if you see a news story that should feature in this round-up and would be of interest to others, then please send it along to mathew.loup@competentboards.com.

1. Play to pay. More and more investors expect that senior leaders’ pay should be tied to ESG matters at their companies. A new report from IR Magazine reveals this is most pertinent in Europe, where 85% expect a direct link, and least of all in North America, where only 62% of investors have the same high expectations. With ESG under increasing attack from conservatives in the US, that percentage is likely to fall as 2022 plays out. The average proportion of executive pay tied to ESG ranges from five to 15%.

2. World will foot the bill. A new Deloitte report has some grim math for the future global economy. According to The Turning Point, if we continue on our current collective path and allow climate change to continue relatively unchecked to 2070, the cost will be US$178 trillion. Increasing numbers of extreme-weather disasters, failing crops, shrinking diversity, rising sea levels, extreme heat and millions of refugees will be some of the major factors. On the flip side, there is hope. The report concludes that if countries could unite to fully decarbonize by 2040, they could add US$43 trillion instead. As the report says in its intro: “Time is no longer running out. It’s up.”

3. Ch-ch-ch-changes. Environmental issues are in the top 10 considerations for CEOs and senior executives, according to a new survey from Gartner. For the first time ever in the annual Gartner CEO and Senior Business Executive Survey, environmental sustainability came in the top 10 responses. Just under three-quarters (74%) believe that if companies increase their ESG efforts they will attract more investors. The Russian invasion of Ukraine has also thrown the spotlight on macroeconomic issues, such as inflation.

4. New business responsibilities. Edelman released a special report to coincide with the delayed World Economic Forum annual meeting in Davos, Switzerland, this week. The Geopolitical Business looked at the increasing moral and business imperative for companies to take a stand on ethical, social and geopolitical issues. The findings were fascinating:

  • 77% believe that companies have societal responsibilities, including:
    • Providing training to employees
    • Supporting local communities
    • Providing trustworthy information
    • Addressing climate change, pollution, poverty, and food/water insecurity
    • Addressing discrimination, wage inequality, healthcare, and education
    • Promoting cooperation across political differences
  • 59% believe that companies have geopolitical responsibilities, including:
    • Cultivating admiration for their country’s values
    • Punishing countries that violate human rights and international law

Edelman surveyed more than 14,000 people in 14 countries for this special report. 

5. Missing the mark. Climate Action 100+, the world’s largest investor initiative, is nowhere close to a passing grade for its efforts on climate change. That’s according to ShareAction, a UK-based non-profit focused on responsible investment and climate change, which analyzed the efforts of Climate Action 100+ (CA 100+) over five years. The report findings were damning:

  • Climate engagement strategies are often inadequately articulated, or not at all
  • Aggregate engagement reporting is inconsistent and vague
  • Climate engagement case studies are of low quality
  • Forty-nine investors (82%) did not specify any objectives for climate change engagement, nor did they have any next steps for unsuccessful engagement

CA100+ comprises 700 investor members with total assets topping $68 trillion. Its stated objective is to make the world’s largest carbon-intensive companies take real action on climate change.

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