More than 100 countries had just pledged to spend $19bn of public and private money to reverse forest loss. “We have lost 3tn trees on our planet,” Benioff said, punctuating his words with a clap.“We need to plant a trillion trees.” This amount, he added, would absorb 200 gigatonnes of carbon — the equivalent of two-thirds of existing human-made emissions.
Their intentions are commendable: draw down carbon, nourish biodiversity and improve livelihoods by returning trees to planet Earth. But the simple idea is now rubbing against a complex reality, as some scientists raise myriad concerns — from a dearth of free land to the unreliability of new trees when it comes to carbon storage.
The Intergovernmental Panel on Climate Change says protecting and restoring the world’s forests is critical for limiting the global temperature rise to 1.5C above pre-industrial levels, but many argue political and business leaders are focusing too much on “restoring” rather than “protecting”, and latching on to methods they hope will offset emissions rather than prevent them.
The northern polar jet stream is weakening in strength as a result of climate change. That’s causing the band of wind to sway off course. Meteorologist Marion Maturilli is carrying out research to understand the wide-ranging impact of this trend.
2022 is wrapping up on many levels as the most challenging year financially since the Global Financial Crisis, geo-politically since 9/11, and politically since the McCarthy years, when the country was divided over fears of a fifth-column, communist invasion.
One casualty in this bubbling cauldron of uncertainty has been what has become known in the past few years as ESG investing. 2022 marked the first year of negative outflows in over a decade with investors pulling $13.2 billion out of ESG funds through November 2022, according to Lipper. Even when considering the broader universe of fund outflows this year, ESG outperformed and not in a good way.
The secular headwinds are obvious at this stage: in Europe the Ukraine War and the implosion of its energy market. In the U.S., rampant inflation. In the emerging markets, the insidious and growing activism of authoritarian regimes on the world stage, namely China, Russia, Iran and North Korea.
Certain factions in the United States have seized on this backdrop of uncertainty and placed a portion of the blame on the ESG movement, characterizing it as woke, damaging to the middle class and harmful to the economy.
Exhibit A: Blackrock has seen over $2 trillion in assets flow out, particularly from a wave of public pensions that have fallen under state legislation banning ESG investments.
Exhibit B: Vanguard announced recently its intention to back away from the NetZero Alliance to address “confusion” over its ESG positions as a leading indexer.
While a political backlash in the U.S. seems to be the norm these days on just about any issue, this has marked a sea-change in the ESG movement, just as the SEC pursues stronger mandates to enforce greenwashing claims.
This has no doubt made for a tougher business environment for ESG investing.
All that being said, beneath the subterfuge is real underlying progress developing, and it is happening in the places that matter most: companies. A confluence of rationalization happening at the ESG standards level, in the form of the International Sustainability Standards Board, combined with pending rules on SEC climate-related financial disclosure has lit a fire, and companies are not backing away.
Data science is leading the way, and companies that are measuring are finding that they can also manage. Capital markets will remain part of the equation, providing some additional carrots and sticks, but the real traction will only happen with companies that find ways to innovate ourselves into a new carbon pathway, as one example.
This is also I think bringing some new life to the whole rationale where I think ESG as an investing experience has found itself marooned. For too long investment managers have fallen back on this idea that ESG is a risk management exercise. This may be true, and certainly can be argued, but it only carries us so far. People wanting to do the right thing and have a passion for doing the right thing, is where the whole idea of good corporate citizenship started. ESG investing has failed with investors who thought this concept could be simply rationalized and outsourced. As we are finding out, doing sustainability is a roll up the sleeves activity that is best placed when as an integral part of doing business.
To decarbonize and electrify America’s economy, the head of the nation’s biggest public power utility thinks several hundred new nuclear reactors may be needed in the next generation, including 20 or so new smaller reactors across the Tennessee Valley.
In a talk to business investors and nuclear power leaders this week, TVA President Jeff Lyash said the utility’s initial efforts to build small modular reactors near Oak Ridge will serve as a model to construct more than a dozen other such reactors in TVA’s seven-state region. The reactors will help provide around-the-clock, carbon-free energy needed to meet TVA’s goal of operating a carbon-free power grid by 2050.
ESG Courses at Marquette University are available for professionals to attend today!
New environmental, social, and governance (ESG) courses to serve as preparatory courses for industry-driven certifications for accounting, investment professionals and ESG leaders, offered to professional learners in an asynchronous format, with one course on a hybrid online/live platform. The timeliness of these offerings coincides with the new SEC Climate Disclosure rules.
In the U.S., not just public companies will be subject to the SEC requirements; “Scope 2 and 3” reporting will impact thousands of private companies, too, who contribute as suppliers and partners to these companies. Corporations are in a unique position today to elevate ESG practices in partnership with Marquette University. Prepare your organization today for the ESG requirements of tomorrow!
Vouchers are included for participants to access the Fundamentals of Sustainability Accounting (FSA) Credential™ (FSA I, FSA II teaching to the SASB Standards) by the IFRS Foundation, and the Certificate in ESG Investing by the CFA Institute.
Swedish climate activist Greta Thunberg has broken ranks with the German Green Party on the subject of atomic energy and urged the government not to abandon the technology.
Registration is now open for the Marquette Sustainability 2.0 Conference (Oct. 26/27), the Midwest’s destination conference for senior executives and investment professionals! If there were ever a time to hear from experts on the energy transition, both challenges and opportunities, this is the year! Plus we will have dedicated panels on water, DEI, ESG and impact investing and much more!
