With a rush and a push, many politicians cleared their in-trays this week.
It is a truth universally acknowledged that journalists only really begin to function when a deadline hoves into view. The same clearly applies to politicians. We’re not talking about 2050, of course, nor even COP26, barely 15 weeks away (or even CBD COP15 in October). No, it is the impending summer break in the northern hemisphere we largely have to thank for the avalanche of legislative proposals, policy papers and transition frameworks issued in recent weeks.
Hot on the heels of last week’s updated Sustainable Finance Strategy, the European Commission published this week a raft of proposals to reduce Europe’s carbon emissions by 55% by 2030, compared to 1990 levels. Covering everything from transport to energy efficiency to agriculture to renewables, it inevitably received mixed reviews.
Its ambition was praised by many, but holes were picked in the detail, including proposals for a Carbon Border Adjustment Mechanism. The latter would not be necessary if countries could agree a global carbon price, but that remains a distant hope, despite backing by G20 finance ministers and central bank governors last weekend.
Those that don’t feel the new package goes far enough or find inconsistencies in its detail may have greater scope for legal redress, through amends to the Aarhus Regulation. One initiative potentially subject to challenge is the EU Taxonomy, already delayed due to clashes over inclusion criteria. Plans for additional brown / transitional and social taxonomies outlined by the Platform on Sustainable Finance will excite further debate and scrutiny. Also now delayed is Level 2 of the Sustainable Finance Disclosure Regulation, but its roll-out still doesn’t quite dovetail with new plans to regulate ESG scores and rating providers.
The pace has been barely slower elsewhere. The UK government unveiled its Transport Decarbonisation Plan, an Independent Green Jobs Taskforce report and a National Food Strategy, all with far-reaching consequences for businesses, consumers and investors. The Bank of Japan issued a climate change policy, including zero-interest loans to support transition, and shifts in its approach to monetary policy and financial stability.
Meanwhile, events in the US reflected the challenges of emerging from Trump-induced torpor, with Treasury Secretary Janet Yellen leading a regulatory review of climate risks to the US finance system, but President Joe Biden criticised for high levels of approvals for oil and gas drilling permits. Rising shareholder activism, including on plastic pollution, still suggests a corner has been turned.
As public policy activity accelerates, urgency is also evident among businesses and their investors tackling the practical challenges of setting and monitoring ESG-related targets. The Science-Based Targets initiative confirmed its commitment to 1.5 degree climate scenarios, while the Global Impact Investing Network highlighted the growing scope for asset owners to use quantitative targets beyond climate.
Integrating ESG factors into existing processes and decisions is rarely simple, whether we’re talking about pension schemes’ reporting requirements or executive compensation structures. They should have been there all along. But it’s no surprise that the politicians aren’t the only ones showing signs of cognitive dissonance.