For the next two weeks, the eyes of the world will be on Sharm El Sheikh, Egypt, for COP27. The great and the good (with a few notable exceptions) are there to take much-needed action to address the climate-change crisis that is enveloping the world. Its goals and vision are to “accelerate global climate action through emissions reduction, scaled-up adaptation efforts and enhanced flows of appropriate finance”.

It has never been more important to get informed — as fast as possible — about the environmental, social and governance (ESG) risks and opportunities on the table. We at Competent Boards have the gold standard in ESG and Climate education programs that can help you get the knowledge that you need today to shape a better tomorrow. 

1. Helping hands needed. The effects of the climate crisis tend to hit the world’s poorest nations hardest. Not just in terms of lives lost and homes and livelihoods destroyed, but the sheer cost of rebuilding is daunting. With the COP27 meeting coming up next month, talk is again turning to climate reparations, with richer countries being compelled to redress the climate-related damage in other countries. A new report published last week, National attribution of historical climate damages, brings this data into sharp relief for the first time. Brazil, China, India, Russia and the US — the world’s largest emitters — have cost the world around 11% of average annual global GDP from 1990-2014. In other words, USD $6 trillion. Of that, the US alone is responsible for 16.5% of losses from climate change over the 25-year period. The effect of this is brutal. US emissions stunted economic growth in Pakistan by $33 billion. China’s emissions cut Bangladesh’s GDP by US$12.3 billion. And Russian emissions cost Nigeria US$38.4 billion in lost revenue.

2. Asset analysis. Morningstar took a deep dive last week into how large investors have implemented ESG in their portfolios. The Voice of Asset Owner Survey revealed that only 29% of the 500 global investors surveyed had considered ESG factors for more than half of their total assets. These investors have more than US $32.7 trillion assets under their management. The top barriers to using ESG were concerns over impact on returns, a lack of available products and the reluctance of their clients and stakeholders. However, most of the surveyed investors (85%) believed ESG factors are material to their investment policies, with over two-thirds (70%) indicating that ESG factors have become more material in the past five years. 

3. Waste not, want not. Methane emissions are a major concern for the climate crisis, because this is a more potent greenhouse gas than carbon dioxide. Waste contributes 20% of that global methane output, but a new report suggests that introducing “zero waste” systems in major cities could cut those emissions by 84% (1.4 billion tonnes), the equivalent of the emissions of 300 million cars. To do this, the report, published by the Global Alliance for Incinerator Alternatives (GAIA), has several recommendations:

  • Incorporate zero waste goals and policies into climate mitigation and adaptation plans.
  • Prioritize food waste prevention and single-use plastic bans
  • Institute separate collection and treatment of organic waste
  • Invest in waste management systems, recycling and composting capacity
  • Establish appropriate institutional frameworks for zero waste including regulations, educational and outreach programs, and provide financial incentives through subsidies to recycling and composting
  • Recognize the role of waste pickers and fully integrate them into the waste management system

4. Read the small print. A new analysis has put sustainability focused funds under the microscope, and the findings showed wide discrepancies between some of the funds’ labels and the data behind the investments. ESG Book published Always Check the Label last week, based on its ratings of more than 4,000 ETFs and 32,000 mutual funds. The analysis revealed that one in seven sustainable funds had a carbon emissions intensity that was higher than the average investment fund. On top of that, not a single climate-labelled fund had a portfolio that fully aligned with the Paris Agreement.

5. Quantity ahead of quality. With regulations piling up in Europe, the US and around the world, disclosures are increasingly on the minds of board directors and senior executives. However, according to the latest EY Global Climate Risk Barometer, although more companies are now getting passing grades on making disclosures, not enough are improving the quality of those disclosures and turning them into meaningful strategy or actions. In terms of decarbonization, many companies are struggling to get started: only 29% of companies surveyed report on the impact of climate change in their financial statements. On the plus side, barely half of the companies (49%) conducted scenario analysis around climate risks. The barometer is based on data published by more than 1,500 companies across 47 countries, based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD). As Dr. Matthew Bell, EY Global Leader of Climate Change and Sustainability Services, concludes in the report’s foreword: “Global temperatures continue to rise and yet we are still far from where we need to be, in terms of allocating capital to the transition process. While disclosure facilitates decarbonization, words alone cannot address the huge challenge we face. It is time to move from disclosure to action.”

Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.

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