Pakistan Floods, California Acts, John Oliver Laughs - September 2, 2022
Officials declared a climate catastrophe as floodwaters submerged about a third of Pakistan. Flooding has killed more than 1,100 people and displaced hundreds of thousands in what has become a humanitarian and environmental disaster, far more deadly than a normal monsoon season. As rivers overrun their banks and flood entire villages and cities, Pakistan’s National Disaster Management Authority says the floods are impacting 33 million people – a seventh of the country’s population.
Adding to record rainfall, the Pakistan floods were made worse by glacial melt in the country’s icy northern region. Pakistan is home to over 7,000 glaciers – the most anywhere in the world outside of the polar regions. The rapidly warming climate accelerated glacial melting that, when combined with monsoon rainfall, resulted in epic floods.
U.N. Secretary-General Antonio Guterres launched a worldwide appeal for assistance for Pakistan, calling for $160 million in aid to be sent to bolster the country’s ailing emergency response to the floods. Guterres joined a growing chorus of climate scientists in warning “Let's stop sleepwalking towards the destruction of our planet by climate change. Today, it's Pakistan. Tomorrow, it could be your country.”
It’s Always Sunny in California!
If California were a sovereign nation, it would rank as the world's fifth largest economy, behind Germany and ahead of India. Matching its massive scale, the state has a long history of environmental leadership - from fuel efficiency standards for cars to strong smog control.
California did it again this week by approving five bills which added a record $54 billion in climate spending. California’s action helps close the gaps left by the $370 billion in climate spending in the recently enacted Inflation Reduction Act at the federal level.
This news came on the heels of a ban on the sale of new gasoline-powered cars in California by 2035, a policy that could be adopted by other states and is widely expected to accelerate the global transition toward cleaner electric vehicles.
But, not all went well for supporters of climate action. Business interests mustered enough support to scuttle California’s tough climate disclosure bill - SB 260. The bill would have required California companies with over $1 billion in revenue to measure and report their Scope 1, 2, and (if material) 3 emissions. Even with more ayes (37) than nays (25), the 18 lawmakers who did not vote led to its failure.
One Standard to Rule them All?
Frustration boiled over this week as 65 organizations representing a combined $121.3 trillion in assets called for harmonized standards for reporting ESG information.
A quick refresher on this rapidly evolving space: the European Union is poised to require about 50,000 companies to disclose sustainability information in its new Corporate Sustainability Reporting Directive. Simultaneously, the International Sustainability Standards Board (ISSB), is developing international standards for the same issues. The ISSB standards are likely to be adopted by most of the world.
The problem is that the EU and ISSB requirements are different. This means that companies will have to report their ESG results differently depending on the countries they do business in. This will not only increase costs and confusion, but it diminishes the purpose of using the information to advance sustainable development. As a veteran of the movement to harmonize sustainability standards, hopefully they will get it right this time.
“BullS*!&” Carbon Offsets
In a recent episode of comedian John Oliver’s Last Week Tonight show, he took a satirical swipe at the voluntary carbon offset markets. The episode claims that carbon offsets are “bullS*!&” and are an attempt to allow enterprises to greenwash their way to ‘net zero.’ While hilarious, Oliver's jokes exploited the weaknesses of a developing field but he ignored the good work being done.
Some of what John Oliver said was relevant and some missed the mark, as pointed out in this GreenBiz response to his claims. He was spot on about the studies which show the fallacy of protecting forests that have never been under threat of logging, but he left viewers thinking that offsets are only ever used to greenwash, which ignores their important role in the energy transition.
Verra - a carbon offset standard setter - pushed back hard with a post on their website stating: “it is easy to cherry-pick items that help make a point or get a good laugh, but given the gravity of the climate crisis it is disappointing that he and his team built their episode around half-truths, outlier views, and selective evidence that distort the way the voluntary carbon market supports action on climate change” claiming that Oliver “put punchlines over the truth.”
Mary Grady, Executive Director of the American Carbon Registry (ACR), a group that took the brunt of the show's ire, said the bit “missed the critical role that well-designed carbon markets and high quality offset credits have to play to support urgently needed climate action by corporations and governments.” The ACR, issued a detailed rebuttal on each of the show's claims.
Pay Versus Performance
The often overlooked G in ESG made headlines this week as the SEC issued final rules implementing the ‘pay versus performance’ provision on executive compensation. The rule will require companies to disclose executive pay compared against financial performance for the companies’ five most recent fiscal years. Listed companies will have to provide information on the relationship between financial performance and the compensation it pays its executives.
This has been on the SEC’s radar for a while, actualizing a provision in the 2010 Dodd-Frank Act which aimed to provide greater transparency and better align top execs' pay with corporate results. The commissioners voted 3-2 to finalize the rule, with two Republican commissioners criticizing the economic analysis and costs for companies.
“Today’s rule makes it easier for shareholders to assess a public company’s decision-making with respect to its executive compensation policies,” said SEC Chair Gary Gensler. Registrants will begin to include these measurements in proxy and information statements for fiscal years ending on or after December 16, 2022.
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