Week 14: The climate emergency is personal

In this issue: ▸ The ice shelves and you ▸ We have so much to lose ▸ The last time was… never ▸ Is it personal for bankers too? ▸ Are current ESG practices sufficient? ▸ And more

Dear all,

I hope everyone is well and ready for a new edition of ‘ESG on a Sunday’. 

This week I would like to take you on a small personal journey through the newsfeed.

The ice shelves and you

Another week has passed in our world of increasing COVID numbers, vaccine discussions, geopolitical tensions and climate emergency signals that are, despite their acute nature, becoming more and more like “just another news” in a flow of “negativities” that we have to deal with on a daily basis. Or not.

It is a very much a personal choice how you approach all of this and find some kind of balance in your daily life. Normally, when things become personal, action or reaction is expected. Well, the climate emergency should be a very personal ‘thing’ for all of us.

For example, this article describes how scientists warn that a third of Antarctic ice shelves will collapse amid 4C global heating, and how unimaginable amounts of water will flow into oceans if that temperature rise occurs and ice buffers vanish. At first look, it’s not relevant for ‘me’ since this may or may not happen and I don’t live even close to Antarctica.

But read the article and think about it for a minute or two. Try to imagine what it will mean. For the planet and for you. This is personal.

We have so much to lose

After such a sensation, we typically (myself included) turn to the frontal lobe for some reasoning that can calm us down and tell us that everything is in order. “Well, yes, there is a risk, but maybe not that big, and if we manage to slow down emissions we could probably avoid it anyway.” And so I feel some kind of hope despite what we just read.

And why shouldn’t we be able to solve this? We are a smart species. We have space explorations and scientific progress in all areas of our lives. The world is a better place than it was 200 years ago. And we are simply too narcissistic to let this happen, we have so much to lose.

People get this. Or at least people with huge wealth get this. Here, I’m thinking of the 162 billionaires who have the same wealth as half of humanity.  If anyone, they should be scared about this.

The last time was… never

So, there’s reason to keep the spirit up and stay in the comfort zone. But then another piece of negative climate emergency news hits us: Carbon dioxide levels have reach the highest point in human history!

Last Friday, carbon concentrations at Hawaii’s Mauna Loa Observatory topped 415 ppm. The last time humans experienced levels this high was… never. Humans didn’t exist.

OK, then. But let’s stay positive. I mean, there are many risks and there are many maybes, and soon we have a world fleet of EVs and green steel, and we have all the net-zero targets. I mean, it can’t go wrong, and even if it does it will take time.

China is leading, Biden is in power, we build back better, all of us. We are in this together and it is personal for each one of us. Together, yes.

Is it personal for bankers too?

But then, in my small journey through the newsfeed, I come across this: According to a DeSmog investigation, the majority of directors at the world’s biggest banks have affiliations to polluting companies and organisations. Their analysis found 65 percent of directors from 39 banks had 940 past or current connections to industries that could be considered climate-conflicted.

Wait a minute. I mean, it’s not criminal to sit at the board of legit public companies that provide energy and jobs for millions of people. Bankers are humans too. They have families and kids and know that the transition to a sustainable future is needed. It is personal for them too. They know this.

I take a short break, coffee, a short walk around the flat, looking out the window at the April snowflakes. At least April is as we know it, unpredictable and moody.

Now the frontal lobe is back in action. But this time it has weakened. This time the feelings are more uncomfortable. Is this climate emergency thing personal or not? Is it just professional, stripped of unnecessary emotional attachments, cold, calculated, rational, based on evidence?

Well, time will tell, I guess. At least time has a very personal character for each one of us. Time is very unprofessional. 

Are current ESG practices sufficient?

Now this. Do environmental, social, and governance (ESG) and impact investing practices in their current forms provide investors with sufficient tools to play a meaningful role in “Building Back Better” following the COVID-19 crisis?

Many of our existing ESG and impact investing frameworks focus on issues at the portfolio company level, but they do not take into account potential negative impacts from capital structures and investors’ influence in shaping them.

In this paper, the Predistribution Initiative (PDI) explores how the growth of institutional investors (asset owners and allocators) and certain asset allocation strategies can be in conflict with ESG objectives.

The conflict materializes in various interconnected ways, particularly from institutional investors’ role in increasing global debt levels and fund manager and corporate consolidation.

You can also read a very good interview on this with one of the authors here.

Why we must always do our homework

So, the save-the-world bond markets are exploding, but the global standards are lacking. And some of the practices are still not so… professional.

For example, the oil and gas sector’s first green bond was issued by Repsol in May 2017 raising €500m euros, with the Spanish giant claiming the finance would help it cut CO2 emissions by 1.2 million tonnes within three years.

However, as it turns out, the money went upwards, to upgrade and make their existing fossil fuel refineries more efficient. Not exactly what was promised, and yet another sign that investors and asset managers must do their homework to assess a bond issuer’s credentials and targets and to monitor sustainable outcomes.

That would be all. Have a great week!

Kind regards,
Sasja