The vast majority of the global population will be more than happy to see the back of 2022. War in Ukraine, rampant inflation, fires, floods, famines and the climate crisis have darkened so many days.
Environmental, social and governance (ESG) risks and opportunities are high on company lists worldwide. A new year always brings renewed hope. People look to the future and want to make it better, and that journey starts at the top. And there is no better way as board directors and business leaders to start your 2023 with a bang than taking one of our world-class ESG and Climate education programs.
As always, please keep your news leads and comments coming to mathew.loup@competentboards.com or join the conversation on LinkedIn when we post this weekly digest.
This weekly round-up is taking a seasonal pause, and will return for January 6, 2023.
1. Ending 2022 on a high note. Nearly 200 countries signed a historic deal at the biodiversity COP15 event in Montréal, Canada. This new global biodiversity framework aims to steer global conservation efforts, with a goal of species and ecosystems recovering around the world by the middle of this century. The framework commits governments to preserving 30% of the planet for nature by 2030 (30/30), reforming environmentally harmful subsidies, new measures for governments to police large transnational companies on “their risks, dependencies and impacts on biodiversity”, and a funding mechanism for digital sequence information (DSI). The framework also puts the rights and roles of Indigenous peoples in protecting nature globally at its heart. Several research studies have shown that Indigenous peoples, who represent 5% of the global population yet protect 80% of its biodiversity, are nature’s best stewards.
2. Looking for climate leaders. The annual survey by the Climate Disclosure Project (CDP) shows that companies around the world still have work to do on environmental transparency and data. On the plus side, the A List 2022 highlights more than 330 international companies, collectively worth nearly US$11 trillion, based on their climate change, forests and water security disclosures. Of those companies, more than 280 achieved grade A on climate disclosures, a 34% rise on the previous year, with the vast majority also having a clear climate transition plan. However, only 12 companies (1.3% achieved grade A in all three categories. For the first time, CDP included biodiversity questions, revealing that of the 31% of respondents that had made a public commitment and/or endorsed biodiversity-related initiatives, more than half (55%) had taken no action in the last 12 months to advance these goals. Of greater concern, more than two-thirds (69%) of the companies that took part in the survey still have no formal biodiversity objective in place. CDP runs the largest environmental database in the world and surveyed just under 15,000 companies for the 2022 list. However, nearly 30,000 other large companies, collectively worth US$25 trillion, did not answer its requests for information.
3. Plotting a path to change. The European Banking Authority (EBA) has just published its three-year plan for delivering mandates around sustainable finance and managing ESG risks. The Roadmap on Sustainable Finance highlights ways to improve transparency around ESG matters, making sure financial institutions integrate ESG-related risks into their risk management frameworks. Its seven key objectives are:
- Transparency and disclosures
- Risk management and supervision
- Prudential treatment of exposures
- Stress-testing, standards and labels
- Greenwashing
- Supervisory reporting
- ESG risks and sustainable finance monitoring
Other notable reference points on the roadmap include developing EU-level harmonized rules to ensure robust management of ESG risks by institutions, fleshing out climate stress tests, assessing ESG labels and standards, and using stress tests and scenario analysis for risk assessment and monitoring.
4. Taking a plunge. Sustainable investment assets in the US dropped by US$8.7 trillion up to the end of 2021. The 2022 report by the US Forum for Sustainable and Responsible Investment (US SIF) reveals that trillions of dollars in sustainable investments have been reassessed, taking away their ESG status and the total down to US$8.4 trillion. This decline means that sustainable investments now only make up 13% of the entire US$66.6 trillion investment market in America. The US SIF believes that this downward trend has been partially triggered by the crackdown on greenwashing and new climate disclosure regulations coming from the US Securities and Exchange Commission (SEC).
5. Going green Down Under: Australia has joined the growing list of countries by starting a consultation on climate-related financial disclosures. The initial focus is on larger publicly listed companies and financial institutions, but the scope will broaden as part of a broader sustainable finance strategy for 2023 and beyond. Mandatory reporting is on the table, plus whether the upcoming International Sustainability Standards Board (ISSB)’s disclosure standards should be adopted, levels of assurance, data gaps and other implantation problems. Interested parties have until February 17, 2023, to comment on the paper.
Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.
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