Corporations’ zero emission pronouncements seem visionary, lucid, and authentic. They’re the kind of businesses we want to support, right? However, investors and governments are beginning to question the accuracy of certain corporate environmental disclosures. Stakeholders are no longer blindly endorsing corporate claims about grand ways they’re addressing environmental concerns. Many constituents are taking the time to examine the differences between what companies claim and what they actually do. These discrepancies are the basis for ESG lawsuits seeking redress.
2021 saw a significant increase in investor demand for ESG portfolios. ESG is the acronym. Environmental, Social, as well (Corporate). Governance. These three categories are a comfortable area for socially responsible people to direct their investments. They include stocks or funds that reflect their values and concerns and not just seek to increase profitability.
A key challenge for market participants in 2022 is to manage that ESG growth in a way that combats rising concerns about greenwashing — when a company says it is environmentally conscious for marketing purposes but actually isn’t making adequate, actionable sustainability efforts. Companies may be using disclosures and sustainability-related labels on products and services as a marketing tool, for example, to appear more proactive on those issues than they truly are.
Today’s corporate leaders face more scrutiny than ever to demonstrate that they are walking the talk — that they are deeply invested in mitigating climate change, protecting human rights, and alleviating social unrest. SP GlobalThis indicates that there is increasing convergence between data, metrics and reporting requirements. There is also rising pressure to ensure these metrics measure ESG impacts, not just inputs.
The most serious existential threat to our environment is climate change. But inflationary trends and higher energy costs are threatening the climate agenda. We need to pay more attention to managing the social consequences of the ESG Transition.
Global growth is expected decrease from 5.9% to 4.4% in 2021, half a percentage point less than in the October World Economic Outlook. This is due to the forecast markdowns of the two largest economies. The revised assumption of removing the Build back Better fiscal policy package was removed from the baseline. Continued supply shortages led to a downward revision in the US’s GDP estimate of 1.2 percentage points. International Monetary Fund.
Even though governments and businesses invest heavily in low-carbon energy sources like solar power and wind, the world will continue to be heavily dependent on fossil fuels for many years. Only a very small percentage of people are aware of this. A carefully managed economic landscapeThis can reduce the impact of volatile oil prices and other disruptions, which can in turn soften support for policies to lower greenhouse gas emissions.
And then there was yesterday’s newest UN Climate Change ReportThat revealed how the 2021 increase of global CO2 emissions by more than 2 million tonnes was the largest ever recorded in absolute terms. However, renewables-based generation hit an all-time high in 2021, surpassing 8000 terawatt hours (TWh), a record 500 TWh higher than its 2020 level. While output from solar PV was up by 270 TWh and 170TWh, respectively hydro generation suffered from drought-related effects, especially in Brazil and the US.
Meticulous Climate Impact Analysis is Needed — & Quickly
A new StudyFederal agencies fail to adequately consider climate change impacts in reviews under the National Environmental Policy Act.
“Evaluation of Climate Risk in NEPA Reviews: Current Practices, and Recommendations For Reform” finds that, in order to meet NEPAs requirement that federal agencies take a hard look at the environmental effects of proposed actions, agencies must consider how the changing weather and environmental conditions brought by climate change might impact an action and alter its environmental effects.
However, NoneThe 65 Environmental Impact Statements issued by agencies in relation to offshore energy activities between 2016 and 2020 included sufficient comprehensive, specific, and actionable climate impacts analysis to support agency decision-making.
The report recommends:
- The Council on Environmental Quality should revise its NEPA implementing rules to explicitly require climate impact analysis. They should also identify best practices in this analysis in updates for their climate guidance.
- To ensure robust climate impact analysis, other federal agencies should also update their NEPA regulations and practices.
- The Council on Environmental Quality needs to coordinate federal agencies with relevant experts and create or encourage the creation of a database of information about climate impacts.
Climate-Related Lawsuits Against Fossil Fuel Companies
More than a dozen federal cases have been filed against oil corporations seeking damages for their role causing climate change. Many of these cases were brought forward by states or local governments, who claim that their citizens are also suffering from climate change.
- ActionMassachusetts attorney general claimed that Exxon Mobil Corporation had engaged in deceptive acts against Massachusetts investors and customers, including by failing disclose climate change risks. ESG sued Exxon alleging that it deliberately misrepresented and omitted information regarding the risks of climate changes and that Exxon was involved in commerce or trade when it made the deceptive statements. The court found that the Commonwealth’s misleading advertising claims were not based on Exxon’s false representations of particular fuel products. It was only that they were misleading.
- A Forensics brought by the City of Annapolis against fossil fuel companies sought damages and other relief based on the companies’ alleged concealment of information about their products’ contribution to climate change. Concerning prejudice to parties, the district court stated that this lawsuit could not reverse the course of the ecological and atmospheric processes that defendants have allegedly helped to set in motion. [t]Plaintiffs interest in a swift determination of federal jurisdiction in this lawsuit is distinct from the urgency of climate change.
- A Forensic ProceedingsFor alleged actions that the City and County Honolulu believe has caused climate change, they seek damages and other relief from fossil fuel corporations. Although the causes of action may appear new, they are actually common due to the unprecedented allegations regarding climate change and fossil fuels. The common law attempts to adapt to new circumstances historically.
Often, the results of ESG lawsuits aren’t financial but, rather, strategic and operational. These ESG lawsuits are more about structural changes in business practices than financial restitution. In fact, Those who seek policy changes, not compensation.Those who have corresponding criminal/regulatory enforcement action have been more successful.
New technology to help investors achieve their ESG goals
New technology tools, in addition to investor scrutiny of corporate stocks for greenwashing by individual investors, are helping to unravel truth to power in environmental reporting.
One such perk for technology is the Sustainable Development Investments Asset Owner Platform.SDI AOP). Together QontigoSDI AOP, the exclusive distributor, has announced that asset manager NN Investment Partners has subscribed the SDI AOP dataset. This data allows users to improve their investment decision-making with data on the UN Sustainable Development Goals (SDGs). APG, AustralianSuper and British Colombia Investment Management created the SDI AOP platform in 2020 to promote the standard for investing in the SDGs.
These asset owners form the Design Authority. They are responsible for defining the taxonomy and rules and classifying them. Then, they translate the unstructured and structured data into taxonomy.
To help investors and governments determine whether greenwashing is occurring and how it affects zero-emissions climate goals, more technology applications are needed. In the meantime, let’s take a critical moment when we hear too-good-to-be-true statements from companies that have sniffed at the coattails of Big Oil. In our hearts, we know better, don’t we?
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