March 4, 2022 - ESG and Climate News

It’s difficult to write this newsletter without ruminating on what’s happening in Ukraine. The horror of innocents losing their lives while defending their homes strikes at our shared humanity. 

Thomas Friedman conceives three ways the conflict could end – with better outcomes less likely to occur. Paul Krugman likens the folly of Russian aggression to Hilter’s occupation of European territories – pausing briefly on the madness of finding such a reference applicable. More echoes of World War II emerged as Ukrainian President Zelenskyy has been compared to Churchill – defiant in the face of overwhelming force when he responded to a US offer to evacuate with “I need ammunition - not a ride.”

We struggle to compartmentalize the work we must do today with the specter of escalating conflict. Yet, under the surface, we realize that we are all connected by this planet we call home. 

IPCC - The climate is changing quicker than we are

Jumping from one global crisis to the next; the window we have to adapt to the climate crisis is rapidly closing. This is the warning from the Intergovernmental Panel on Climate Change’s (IPCC) most recent assessment report. 

As the second of the three installments of the IPCC's sixth assessment, the Climate Change 2022: Impacts, Adaptation, and Vulnerability report is their most extensive yet. Written by 270 researchers across 67 countries, it concludes that our inaction has led to a climate that is changing quicker than we can adapt. António Guterres, the United Nations Secretary-General, says the report is “a damning indictment of failed climate leadership.” 

Here are five key takeaways from the IPCC report:

1. "Adapt or Die”

Although dismal, this is a very real choice we face. Approximately 3.3 to 3.6 billion people live in areas that are highly vulnerable to climate change. For many of these communities, there will be a point where adaptation is no longer effective if temperatures continue to rise.

Adaptation is happening, but remains too incremental, short-term, and localized to enact the transformational global changes needed. The IPCC report highlights a growing “adaptation gap” between communities who can afford costly adaptation projects and those who cannot. And while developed nations have promised to help finance climate-vulnerable nations in their adaptation, pledges are slow to materialize. 

2. The least fortunate are the most vulnerable

The report confirms that climate change disproportionately affects indigenous peoples, small island nations, and those living below the poverty line – the populations who have done the least to cause the problem. It states with high confidence that mortality from climate disasters was 15 times higher for “highly vulnerable” regions over the past decade.

In response, NGOs and activists are calling for trackable climate reparations, especially as industrialized countries have failed to meet the $100 billion per year climate finance target set at COP19 back in 2013.

3. Blowing past 1.5C 

The report focused on the risks of surpassing an average 1.5C global temperature increase - the target set by the IPCC in 2018. Crossing the 1.5C threshold increases human health threats, water and food scarcity, biodiversity and species loss, and our risk of irreversible ‘tipping points.’  It looks likely this threshold will be exceeded. The first installment of this report, forecasts the probability of exceeding 1.5C in the next 20 years is greater than 50%. 

4. A need for climate-resilient development

Climate resilient development combines the strategies of adaptation to climate change and mitigation of emissions that worsen climate change. According to the report, our window to deliver climate resilience is still open, but it is closing fast. 

5. There is hope

In the midst of dire warnings, there were glimmers of hope. The IPCC proposes feasible and effective solutions like restoring ecosystems to build natural carbon sinks and implementing climate-resilient development in cities. The reports themselves are becoming more inclusive: acknowledging the historical influence of colonialism on climate vulnerability, valuing indigenous perspectives, and including more women authors than ever in the current installment. 

Overall, the report underscores the bottom line that has been clear for some time: we have a brief window to decarbonize our economy to avoid the worst effects of climate change. As Greta Thurnberg put it, “Literally everything is at stake.”

Notable news items of the week:

• The US Securities and Exchange Commission is set to combat greenwashing. They will enforce ESG reporting standards with the same rigor as other corporate reporting, said SEC Commissioner Allison Herren Lee. 

• Brian Komar and I discussed the "Impacting Together" collaboration hosted by Salesforce which will help in uniting activists, policymakers, and standard-setters to achieve similar sustainability-related objectives. The connectivity thesis underlying the coalition has been on full display as ESG issues are moving from activism to the mainstream.

• In the most recent round of comments about climate disclosure, the SEC has drilled down on materiality. Namely, by asking companies to “show their work” in their responses by providing quantitative details/explanations to justify why they would not disclose certain matters.

• My company, Persefoni, announced a strategic partnership with Novata to provide private equity firms with a comprehensive ESG solution to understand and tackle climate impact and risks. In collaboration, we released a new white paper, "Making Sense of Climate Disclosure," to highlight key players in the sustainability reporting ecosystem, outline key reporting frameworks, and provide details on the software tools needed to disclose environmental impact data.

• Biden’s climate agenda is back in the courts. The US Supreme Court heard arguments to restrict the Environmental Protection Agency’s legal authority to limit carbon pollution from power plants.

• Bloomberg examined the choice 'To Divest or Not to Divest' in an article this week, discussing the longstanding dichotomy between climate-focused investing done for “moral” reasons versus “financial” reasons.

• The European Council has agreed on its approach to the European Commission’s proposal for a corporate sustainability reporting directive (CSRD). The CSRD will require any company with over 250 employees in the European Union to report their ESG policy and metrics in standardized and certified documents.

• In an act of sustainability rebellion, a Ukrainian electric car charging company left a back door in the charging station software. Hackers have now disabled these chargers for Russian EV drivers and left anti-Putin messaging on them.

Notable Podcasts

• Climate Tech with Kentaro is a new podcast featuring the brightest minds and most influential voices in climate technology. Now into its sophomore release, Kentaro talked to Bain & Co's Dan Kuzmic and Torsten Lichtenau about everything from how they are leading efforts to help their clients decarbonize their business, to “woke” capitalism, and plant-based mac and cheese.

• I was on the BDO in the Boardroom, a podcast for board members and corporate governance, where I discussed with Amy Rojik the maturation of sustainability into the mainstream and now taking priority in corporate reporting and strategy. 

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Missed last week's ESG & Climate News? Check it out now and stay in the know: February 24, 2022.