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Take Five: Net Zero for Prime Minister

This week’s major stories impacting ESG investors, in five easy pieces. 

Temperatures soared, politically speaking, in the UK this week, but many were contemplating a chill wind from the east:  

Net Zero for Prime MinisterParliamentarians and policy experts have been trying to ascertain the intentions of candidates, as the Conservative Party tries to select a replacement for the UK’s greenest prime minister. Record weekend temperatures could well put net zero commitments on the ballot, but NZ4PM was a coincidence, sadly. With the Climate Change Committee noting large policy gaps, the UK green taxonomy still unannounced and Sustainability Disclosure Requirements delayed, the vacuum must be filled soon, as pre-COP27 commitments and an update to the UK Green Finance Strategy also loom. COP26 President and UK cabinet member Alok Sharma made his feelings known, but it was left to Nigel Topping, the UK’s High-level Climate Action Champion, to explain how net zero policies would also tackle the country’s short and longer-term challenges.  

Unequal progress – The World Economic Forum’s Global Gender Gap Report 2022 found that gender parity levels are struggling to recover after the damage wreaked by the pandemic. Across 146 economies, just one in five has managed to close the gender gap by at least 1% in the past year. Although there was stronger representation of women in leadership roles, gender parity in the labour force fell to its lowest level in the last 16 years. The report also warned the cost-of-living crisis was likely to impact women more severely. Efforts by investors to prioritise diversity and inclusion, both at investee firms and asset managers, appear to be more necessary than ever.  

Cold comfort – The start of an annual maintenance shutdown of Russia’s Nord Stream 1 sparked fears about whether the Russian gas pipeline would ever re-open, condemning many European countries to a cold winter and a possible economic freeze. Shell CEO Ben van Beurden did little to calm nerves by asserting fuel rationing was a real possibility, calling on governments to put “very significant contingency plans” in place. The International Renewable Energy Agency underlined the economic argument for a clean energy transition, pointing out that almost two-thirds of renewable power capacity added last year had lower costs than the cheapest fossil fuel options in G20 countries, while Allianz argued Russia’s actions could accelerate German’s push for renewables.  

Shareholder support? – The US Securities and Exchange Commission ruled in favour of investor scrutiny with changes to rules around proxy advisory firms and shareholder resolutions. Consultation on the latter aims to clarify grounds on which shareholders may submit resolutions and follows an AGM season which saw a fall in the number of proposals withdrawn, following changes to interpretive guidance. The 2022 AGM season also saw a number of climate-related shareholder proposals achieve lower levels of support as some asset managers withdrew support from overly “prescriptive or constraining” demands from shareholders. 

Silent spring – Launching its assessment report on the valuation of nature, a companion to its work on wild species use, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services decried a “dominant global focus on short-term profits and economic growth”. The theme was taken up by Sir James Bevan, Chief Executive of the UK Environment Agency, when publishing a report on the scale of change needed to halt the biodiversity crisis in England. Bevan warned of the ‘silent spring’ that awaits unless tougher action is taken by businesses, government and individuals. Bevan’s erstwhile colleague, Environment Agency Chair Emma Howard Boyd, highlighted broken promises by politicians in her final speech in the role. She hoped to one day read how the impending heatwave would impact the trajectory of the current UK leadership election. For now – we’ll just have to get through it,” she said.  

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