To paraphrase George Orwell: “All polluters are equal, but some are more equal than others.” The Climate Inequality Report 2023 highlights how the top 10% of polluting people in society create almost half of the world’s annual greenhouse gas emissions. Furthermore, the top 1% of global emitters have created nearly a quarter of the total growth in worldwide pollution between 1900 and 2019.
Researchers from the World Inequality Lab, led by French economist Thomas Picketty, have found that “carbon inequalities” within countries are now often greater than between countries. There is a rapidly growing divide between the “polluting elite” of rich people around the world, and the relatively low emissions caused by the rest of the population. The report says there is now a “strong incentive” for policies targeting this elite group.
The report will provide more food for thought for board directors and senior business executives as they look to address the myriad environmental, social and governance (ESG), including climate change and biodiversity, risks and opportunities facing them in the short, medium and long term.
Education is the key to this puzzle, with our world-class ESG and Climate & Biodiversity education programs, led by a global faculty of experts, delivering the sharpest and most up-to-date insights into these topics.
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1. Climate transition plans reveal data gaps. A new report by CDP shows that fewer than one in 200 companies (0.4% of those surveyed) who submit climate-change data actually have a credible transition plan. CDP analyzed the 2022 climate disclosures of more than 18,600 companies around the world. Although more than 4,000 of those surveyed claimed that they had a transition plan, only 81 could demonstrate best practice by disclosing against all 21 key indicators that make up a credible climate transition plan. According to CDP, a credible transition plan should include board-level oversight, scenario analysis, financial planning and policy engagement. Japan fared best, with 16 companies headquartered there disclosing to all key indicators. On the plus side, more than a third (35%) of the companies surveyed reported that they will develop a transition plan within two years.
2. Shareholders flex voting muscles. According to new research conducted by shareholder advisory firm Georgeson, only just over a quarter of investors (26%) believe that say-on-climate votes are important, with 37% reporting they are in fact important and the other 37% staying in the fence. More investors would prefer to apply pressure by voting against the reappointment of directors if they find the corporate climate transition plans unsatisfactory and not in line with restricting global warming to no more than 1.5C above pre-industrial levels. Georgeson interviewed 62 ESG analysts, who represented US$47 trillion in assets, for the research. This study follows Georgeson’s 2022 AGM season review, which revealed climate action resolutions tripled from 12 to 36 votes in France, Germany, Italy, Spain, Switzerland, the Netherlands and the United Kingdom, despite shareholder support declining six percentage points (97% to 91%).
3. Company audits under the microscope. The Financial Reporting Council (FRC), which regulates auditors, actuaries and accountants in the UK, has updated its Statement of Intent on ESG, which monitors the quality and accuracy of ESG information. The FRC will be keeping a closer eye on auditors’ compliance with ESG reporting requirements in company audits, believing that materiality is key to a solid package of ESG information in company reports. The FRC will also be closely monitoring auditors on work on the books of companies with significant climate risks. “Improving transparency on climate and wider ESG risks and opportunities, and related governance activities and behaviours, is a key priority for our work, benefitting all those stakeholders who demand decision useful reporting which underpins effective decision making in capital markets,” said Mark Babington, Executive Director of Regulatory Standards at the FRC, in a news release.
4. Asset management giants hesitate on climate. UK-based nonprofit ShareAction recently released its 2022 Voting Matters report, which takes a forensic look at how the world’s largest asset management firms viewed ESG resolutions. The four largest asset managers, Vanguard, Fidelity Investments, BlackRock and State Street Global Advisors, only supported 20% of ESG resolutions last year, a sharp drop from their support of 32% of those resolutions in 2021. Asset managers across the board were wary to back action-oriented resolutions, which would have the most transformative impact on environmental and social issues. In terms of climate, Vanguard and Fidelity voted in favour of only 8% and 4% of climate resolutions, respectively, a massive change from the previous year’s support of 39% and 22% of such resolutions at energy companies. The report focused on 68 major asset managers with an estimated US$103 trillion portfolio, including Schroders, Allianz Global Investors, Morgan Stanley Investment Management, BlackRock and Goldman Sachs Asset Management and how they voted on 252 ESG-related shareholder resolutions.
5. Deal us in. The European Union (EU) has officially unveiled its Green Deal Industrial Plan, which will form part of the overarching strategy to make Europe a centre for green technology and innovation. The plan centres on several key areas:
- Retraining European workers for the green transition
- Improving access to finance and investment
- Creating a simple regulatory framework for net zero focused industries
- Boosting trade cooperation around essential raw materials and clean technologies
To help Europe’s workforce develop new skills, new Net-Zero Industry Academies are planned, which will target relevant industries and will boost available jobs for young people, women and older workers. The EU also hopes this new plan will help keep Europe competitive with the US after the successful introduction of its Inflation Reduction Act in 2022.
Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.