- Evelyn Moore
Global ESG Trends - 2023
As 2023 is well underway, the news cycles have focused heavily on the continuing war in Ukraine, escalating inflationary pressures on global economies, the effect of China’s strategies in the Indo-Pacific, and increasing natural disasters across Turkey, Syria, New Zealand, and the USA.
So, have these current global impacts diminished the impetus for companies to reduce emissions across their operations and provide “transparent data” on their GhG emissions and climate risk disclosure?
The simple answer is …NO.
The global financial markets demand for transparent ESG data and reporting hasn’t tempered and is expected to escalate as markets assess long-term capital allocation decisions based on ESG data transparency and risk management. 2023 sees the introduction of new legislation and guidelines in the USA, UK, EU, and Canada, to standardise ESG reporting for organisations operating in and exporting to these regions. Litigation over biodiversity impacts, ESG claims, and ‘greenwashing’ is expected to follow and increase.
Further, with renewables forecast to pass coal as the world’s largest electricity source by 2025, it is recognised that a new focus on Scope 3 emissions and the adoption of the UN’s Biodiversity Framework will impose new regulations and reporting requirements on corporations globally.
Overall, the responsibility for compliance and reporting sits squarely with the board and C-level management. Gone are the days of simply producing ESG policies for compliance, made available on a company’s website. Today full disclosure of an organisation’s sustainability practices and operational performance against ESG targets over time is standardising under TCFD and GhG Protocol. Moving forward, auditing of ESG performance data will become a requirement for not just public companies, but for all organisations seeking investment and capital.
This is why utilising an ESG Sustainability platform like Green2View can assist organisations, irrespective of size.
Over the coming weeks, we will share more posts on the key target areas for 2023 and the potential impacts for organisations. As an overview, we have included some of our thoughts below.
Global ESG Reporting Standards – TCFD and GhG Protocol
The pressure on companies to comply with greater multinational climate-related disclosure requirements in 2023 commenced last year with regulators in the USA, the UK, Canada, and the EU taking action to standardise ESG reporting standards globally. The TCFD and GhG Protocol will provide the foundational principles for future reporting practices and the International Sustainability Standards Board will play an integral role in managing and auditing these standards.
GREENWASHING - Litigation will Intensify
With one of the highest numbers of climate litigation cases globally, Australia will see a growing number of climate litigation cases in 2023, with state governments and large corporates held to account for climate-related pledges and actions.
o February 2023 ASIC commenced legal action against Mercer Superannuation in the Federal Court for allegedly making misleading statements about the sustainability of some of its investment products.[i]
o In October 2022 ASIC issued its first Greenwashing fine to Tlou Energy[ii] and three infringement notices to investment manager Vanguard Investments Australia Limited relating to greenwashing[iii].
o The Australasian Centre for Corporate Responsibility has commenced proceedings against Santos, alleging false and misleading claims about producing clean energy.[iv]
Global Shift to Renewable Energy
One of the lasting global effects of Russia’s invasion of Ukraine has been a dramatic shift worldwide toward renewable energy with renewables expected to pass coal as the world’s largest electricity source by 2025 (Ref: International Energy Agency).[v]
Capital Markets – Investor demands
Globally, the importance of clearer and standardised emissions reporting is being driven by both investors and stakeholders.
o Investors seeking to minimize risk and eliminate investment in exposed or ‘stranded assets’ through stricter reporting and access to consistent data.
o Fund Managers aimed at decreasing the mispricing of ‘climate risk’ to ensure investors have comparable data for investment across a portfolio of companies.
Scope 3 Emissions Reporting
Although extremely difficult for companies to gather accurate data from across the supply chain, increasing accountability and disclosure requirements will be a focus in 2023 and the coming years as the size of Scope 3 emissions is massive.
Biodiversity (GBF) – Halt and Reverse Bio-diversity loss
The Kunming-Montreal Global Biodiversity Framework (GBF) was adopted at the UN Biodiversity Conference (COP15) in December 2022. This is a major commitment by over 170 countries, including Australia, to halt and reverse biodiversity loss and protect indigenous rights by 2030.
The ensuing impact for companies and institutions will be the requirement to assess and measure their impacts, set targets, and disclose their performance. Several frameworks and initiatives are defining the global practices for companies, including the Taskforce for Nature-Related Financial Disclosures, the Science-Based Target Network, the Partnership for Biodiversity Accounting Financials, and Align.
[i] https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-043mr-asic-launches-first-court-proceedings-alleging-greenwashing/ [ii] https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-294mr-asic-acts-against-greenwashing-by-energy-company/ [iii] https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-336mr-asic-issues-infringement-notices-against-investment-manager-for-greenwashing/ [iv] https://www.accr.org.au/news/australasian-centre-for-corporate-responsibility-expands-landmark-federal-court-case-against-santos/ [vi] https://www.iea.org/reports/renewables-2022/executive-summary).