Climate Accountability and Truth (Part 3 of 3)
Michael Asadoorian - Feb 17, 2023
Environmental, Social and Governance (ESG) is by no means a perfect way to score companies or think about fighting climate change – however it is progress.
"Progress means getting nearer to the place you want to be" – C.S. Lewis
In this writing, we're going to talk about a few ways that progress is continuing under the surface and let you know what's coming next – increased transparency.
In a recent article written by Dustyn Lanz (link at the bottom of the page), he outlined several changes coming to the ESG landscape in 2023:
- Corporate Climate Disclosures – climate governance, strategy, risk management, metrics and targets
- Investment Fund ESG Disclosures – fund managers will need to disclose the type of ESG strategy, environmental factors associated with the fund, describe the "impact" their fund hopes to achieve and measure the progress
- Pension Fund ESG Disclosures – in the Statement of Investment Policies and Procedures (SIPP), there needs to be a clear definition of what ESG means to the pension fund, how they are participating (or not) and the outcomes they hope to achieve…more disclosures to follow
What does all of this mean? The "greenwashing" imposters will slowly start to be weeded out as a result of this increased transparency. "A flight to quality ESG" is on the horizon and…this could be good news for those of you who have some Responsible Investments already – we've done our homework and are confident in the fund managers we've chosen.
Another interesting progress note is in the area of Green Bonds. Originally, they were only issued by companies whose focus was on positive change…now that has opened up to companies looking to transition their business (i.e. energy companies).
Company credit ratings will soon include a climate vulnerability score that will focus on "transition risk", not just physical risk. Why does this matter? In a world of constant and rapid change, many companies issue bonds that are re-payable in 10+ years. There's a lot of risk to the holder of those bonds when you think of some large corporate bankruptcies in recent years – Sears, Toys R Us and Target to name a few.
Climate risks span well beyond thinking about the weather, it can have a tremendous impact on our lifestyle, consumer behaviour, the food we eat, the way we travel, the way we work and where we live. It's up to you whether you want to be part of the problem or part of the solution.
One final quote to end off our final piece on Climate Accountability and Truth:
"There are risks and costs to action. But they are far less than the long range risks of comfortable inaction" – John F. Kennedy
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