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Commentary

Take Five: Pressure Points

A selection of this week’s major stories impacting ESG investors, in five easy pieces. 

From Stockholm to Vancouver, developments this week pointed to some of the challenges awaiting climate negotiators in Dubai.

Water, stressed – Stockholm hosted World Water Week, four days of discussions dedicated to realising SDG6, attended by scientists, policy experts, government officials, foundations and corporates. Focused on solutions and innovations, speakers were consciously offering actions and proposals to be taken up at more high-profile gatherings, such as next month’s SDG Summit and COP28 in December. This is certainly needed: at least 50% of the world’s population live under highly water-stressed conditions for at least one month of the year, according to the World Resources Institute. Investors are taking action: many are upping engagement, utilising new tools to quantify water costs and risks in their portfolios. But policy action is slow and uneven: while the first UN water conference in 50 years wrought a long list of commitments (despite a lack of engagement at senior governmental levels) under the Water Action Agenda, these can be overtaken or offset by events; albeit typically ones less dramatic than those seen in Japan this week.

Sowing the seeds – The seventh quadrennial assembly of the 184 members of the Global Environment Facility (GEF) also gave us a taste of things to come in New York and Dubai. One of the key agenda items in Vancouver was the formal approval of the Global Biodiversity Framework Fund, to be managed within the existing GEF. Dedicated to supporting the implementation of the GBF, the new fund is designed to quickly and efficiently receive and disburse funding, “with enhanced access for indigenous peoples and local communities, according to their own priorities”, according to David Cooper, Acting Executive Secretary of the Convention on Biological Diversity.  Although many shared his enthusiasm – overcoming reservations voiced at COP15 in Montreal last December, when GEF’s role in the new fund was formally proposed – several caveats and warnings were made. Representatives from Uganda to Belize to Samoa called for independence and equitable representation in the management of the fund, and for ongoing and increased inflows from the developed world – public and private – to ensure essential local action can be pursued in the most nature-rich of locations. With a fair degree of certainty, we can say such points will be repeated, perhaps with even greater urgency, when the subject of the Loss and Damage fund is discussed at COP28.

Summer of standards – Even as those of us in the northern hemisphere cling to the fast-receding vestiges of the summer holidays, much frantic work has been going on behind the scenes, especially by those caught in the weeds of new sustainability disclosure rules and standards. Last week, the UK’s Department of Business called time on its consultation on non-financial reporting and got down to reviewing feedback that, among other things, reinforced the need to give deep thought and clear guidance on matters of materiality. Having committed to a double materiality lens, more or less, this week saw EFRAG, the European Union’s financial reporting advisory body, wrestle with its materiality assessment guidance to firms not used to sustainability reporting ahead of the impending introduction of the Corporate Sustainable Reporting Directive. According to at least one account, there is still still room for improvement “in the text’s readability and understanding”. Those neither sated nor satisfied by such efforts may find a blueprint more to their liking in the International Foundation on Valuing Impacts’ recently released exposure draft for a general methodology for impact accounting (consultation closes 16 October).

100 days and counting – A key milestone in the countdown to COP28, numerically at least, was marked in a variety of different ways this week. The COP28 UAE Presidency called for the world to prepare for “transformational and practical progress”. COP28 President-Designate Sultan bin Ahmed Al Jaber, also UAE Minister of Industry and Advanced Technology, reinforced his message of four pillars for the summit: fast-tracking the energy transition, fixing climate finance, focusing on people, lives and livelihoods and “reinforcing everything with full inclusivity”. It’s hard to argue with Al Jaber’s message that all have a role to play, so it was disappointing if predictable that the British press used the UK actors’ union’s #GreenRider initiative – aimed at cutting emissions in film and TV production – as excuse for some old-fashioned luvvie-bashing.

Carbon and credit – Speaking of the UK media, The Guardian continued its long-standing campaign against the carbon credits industry this week with more evidence of offsetting projects overstating their conservation impact, noting also the risk to global corporates of substantial losses from stranded assets, as reported by Bloomberg. There is no doubt that the credibility and transparency of the voluntary carbon markets has to improve, and that serious failings of the past should continue to be highlighted. But equally we should recognise that through changes to technology, methodology and industry guidelines, the voluntary carbon market is recognising its responsibilities. Just as importantly, it’s increasingly likely that the countries that are already net removers of CO2 stand to gain the most.

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