A selection of this week’s major stories impacting ESG investors, in five easy pieces.
Progress this week on protecting oceans gave further evidence of the power of multilateralism to address systemic risks.
High time – After two decades of discussions, 193 countries agreed the High Seas Treaty on Sunday night in New York, which will safeguard oceans beyond national jurisdictions, enabling protection of 30% of international waters by 2030. Simultaneously, the deal means a big step forward for the goals of the Global Biodiversity Framework, with respect to preserving and restoring marine life. It also bolsters the battle against climate change and helps ensure profits from newly discovered resources will be shared equitably, while progress on deep-sea mining regulations and action against plastic pollution in oceans may be achieved later this year. Clearly, further action by governments will be needed, individually and collectively, while the steady flow of public funds to support ocean resilience, needs to be increased, alongside further private sector investment into the ‘blue economy’. But it’s also worth pausing to think on the recent multilateral progress, against a challenging geopolitical backdrop, that has been achieved recently, not just in New York, but in Montreal in December and Sharm El Sheikh in November, where further action was taken on loss and damage than anyone expected. The big test for multilateralism will come in September with the 2023 SDG Summit during the United Nations General Assembly high-level week. Tireless Secretary General António Guterres is taking nothing for granted with the release this week on policy briefs on factoring future generations into today’s policy decisions and better coordination in response to complex global shocks.
Forward or backwards – International Women’s Day on Wednesday saw a raft of data released on the progress being made toward gender equality, as well as warnings on the risks of reversal posed by a number of factors, including climate change. One threat of reversal comes through reproductive health, following the Dobbs’ ruling in the US Supreme Court, which overturned Roe vs Wade, ending the constitutional right to abortion protection. Eleven shareholder proposals went to the vote in the 2022 proxy season and this is certain to rise this year. These include a proposal at American Express, after it emerged this week that the firm’s appeal to have it struck out was rejected by the US Securities and Exchange Commission. More than 30 firms face proxy votes at AGMs, with investors and campaigners often requesting information on risks posed by restrictive state policies and any mitigation strategies. But they also concern corporate political spending, given the partisan nature of the issue, as well as data privacy, a key issue due to use of online records to track and prosecute women seeking abortion-related services.
Green competition – The catalytic impact of the Inflation Reduction Act on the US renewable energy transition is now well established, but its impacts are increasingly being felt in other key jurisdictions, notably Europe. Having led the world in laying out frameworks to channel sustainable investment, Europe is now preparing to borrow from the US playbook, not least to protect investment flows. Having presented its Green Deal Industrial Plan last month, the European Commission yesterday gave more details on its Net-Zero Industry Act, including subsidies for investments in renewable energy, industrial decarbonisation, hydrogen, zero-emission vehicles, and other clean technologies. More details are expected next week, adding to pressure for similar moves to accelerate energy transition from the UK in Wednesday’s budget statement.
Far from hypothetical – Further evidence of how deeply climate risk is being embedded in US government policy was provided this week when Secretary of the Treasury Janet Yellen laid out in stark terms the clear and present threats to the US financial system from the physical risks of climate change, at the first meeting of the Climate-related Financial Risk Advisory Committee, the first external advisory committee of the Financial Stability Oversight Council. “These impacts are not hypothetical,” she said, noting a five-fold increase in the annual number of billion-dollar disasters over the past five years compared to the 1980s, even after adjusting for inflation.
Learning process – Yellen noted the importance of building on “scientific consensus regarding the projected effects of climate change” and welcomed prominent academics to the new advisory committee. But sustainable finance remains an evolving discipline both in academia and industry. This point is underlined by London Business School’s Alex Edmans, in a recent paper suggesting academic research on ESG should take more note of existing insights. “Even though some ESG issues need to be answered by new research, existing research can provide substantial insights on others,” he notes.