By Ira Srivastava
1. Key Trends in ESG so far in 2024. Here are some of the key ESG trends of 2024 so far according to the Harvard Law School Forum on Corporate Governance.
- ESG activism is remaining high with an increasing number of ESG and climate lawsuits being brought against organizations so far this year. The Swiss and British governments were both successfully sued by activists for inadequate climate mitigation.
- Companies in the European Union voiced their displeasure with new corporate reporting and disclosure rules as American financial institutions backed out of climate coalitions such as the Climate Action 100+.
- Shareholder proposals regarding reducing emissions, increasing the rights of shareholders, and lowering voting requirements were the most widely-approved proposals.
- Countries around the world are publishing guidelines on how competitors in the same industry can navigate climate coalitions such as the Climate Action 100+.
2. ESG in the Middle East. PwC published its first Global Workforce ESG Preferences Study in April 2024, with a deep dive into data collected from Middle Eastern companies. Sustainability is being increasingly integrated into business operations with 80% of executives sharing that their organizations have implemented a concrete sustainability strategy. Compared to the global average, CEOs of Middle Eastern companies were more likely to name climate change as a significant concern. Despite this, employees were less likely to engage in sustainability practices, focusing only on their company’s sustainability practices after ensuring their financial and personal wellbeing were met first. 43% shared that they were primarily motivated by salary over sustainability, 38% valued sustainability policies but prioritised salary, with only 19% valuing ESG policies as much as, or more than salary. 99% of respondents said that financial reward was the most important factor in choosing where to work.
3. Investors still care about sustainability and ESG. An ESG backlash around the world has resulted in companies taking a step back from their sustainability commitments. Despite this, investors still expect organizations to reduce negative climate impacts, invest in renewables, and address climate risks. According to a survey conducted among more than 1,000 high-net-worth investors, they believe that companies should not let backlash take priority over investor’s climate concerns. Investors are aware that if companies do not address climate risks, it could significantly impact their portfolio. When presented with different climate change mitigation strategies companies could take, investors consistently favoured pro-climate strategies with 60% of investors supporting such strategies and only 15% opposing them.
4. New ISS ESG tool helps banks comply with climate disclosure requirements. ISS ESG, the responsible investment arm of Institutional Shareholder Services Inc., has launched an Industry Average Emission Intensity Data Set to help institutions estimate carbon emissions as mandated under regulations such as the European Union’s Corporate Sustainability Reporting Directive (CSRD). It will allow banks and insurance companies to estimate the emissions of SMEs, non-listed companies and other alternative investments, using industry averages. Banks are facing tighter and more stringent compliance requirements each year, and this new data set is a powerful tool to ensure that they are not running afoul of any disclosure frameworks.
5. Carbon credit standards are tightened. The Integrity Council for the Voluntary Carbon Market has conducted an assessment of current green energy technology and concluded that they “won’t qualify for the high-integrity Core Carbon Principles label”. This makes up 32% of today’s carbon market. Projects that were approved include those involving methane leak detection in the global South as well as methane recapture from garbage dumps. The importance of high-quality carbon credit methodologies cannot be overstated as companies around the world are relying on voluntary carbon markets to reduce their emissions.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.