Discover more from ESG on a Sunday
Week 6: The climate destruction is personal
In this issue: ▸ It's personal ▸ Suing the directors of Shell ▸ Imagine what going “personal” could mean ▸ Just 81 out of 18,600 disclosed climate data ▸ And much more...
Climate slavery. A new term. But the fundamentals have not changed for centuries. 80 million people belching out 16% of the world’s total emissions. It’s personal. Like a clenched whisper growing into a full blown roar. It is here. The gloves are off. It carries millions of voices from those who never get the air-time, from those seriously affected by the consequences, from those who are not yet born. They don’t sit in the board rooms, behind Bloomberg screens, in the open workspaces sipping lattes. And they pay. Every day. Pain is personal, stock prices are not. Damn personal. When it hits you, takes aways your livelihood, makes your life dysfunctional, shatters your life into a zillion fragments and the only thing you can do is silently watch it all, in slow motion.
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When they tell you it is not personal, it is. When they tell you it is just business, it is personal. And it will become even more personal. This is just the beginning of a reconning where the people, flesh and blood, behind business decisions, wherever they are, will be held accountable for the decisions they make. As persons. Finally.
Destruction will have a face and a name. We are the system, yes, each one of us, and most of us have a choice to make decisions that can impact not only our own well-being but the collective. This is about us, all of us. Now.
Suing the directors of Shell, personally
The directors of oil major Shell are being personally sued over their climate strategy, which the claimants say is inadequate to meet climate targets and puts the company at risk as the world switches to clean energy. Environmental lawyers ClientEarth have filed the lawsuit against the 11 directors at the high court in England. It is the first case in the world seeking to hold corporate directors liable for failing to properly prepare their company for the net zero transition, ClientEarth said.
ClientEarth, which has a token shareholding in Shell, is suing under the UK Companies Act, and is supported by a group of large pension funds and other institutional investors. It argues that a global transition to low-carbon energy is inevitable as world governments act to end the climate crisis and that Shell’s failure to move fast enough threatens the company’s success and would waste its investors’ money on unneeded fossil fuel projects.
“Shell may be making record profits now, but the writing is on the wall for fossil fuels long term,” said ClientEarth lawyer Paul Benson. “The shift to a low-carbon economy is not just inevitable, it’s already happening. Yet the board is persisting with a transition strategy that is fundamentally flawed, despite the board’s legal duty to manage those risks.“
Long term, it is in the best interests of the company, its employees and its shareholders – as well as the planet – for Shell to reduce its emissions harder and faster than the board is currently planning. The International Energy Agency said in 2021 that no new oil and gas projects were compatible with net zero emissions by 2050. “Doubling down [by Shell] on new oil and gas projects isn’t a credible plan – it’s a recipe for stranded assets,” Benson said.
Nest, the UK’s largest workplace pension scheme with 10 million members, has backed the lawsuit. “Investors want to see action in line with the risk climate change presents and will challenge those who aren’t doing enough to transition their business,” said Mark Fawcett, Nest’s chief investment officer. “We hope the whole energy industry sits up and takes notice.”
Imagine what “going personal” could mean
Imagine how, down the line, all of this will scale up. Imagine the transition this can create, a personal transition, for business decisions, for companies, for societies.
Being the CEO or a board member in 2040 will certainly be a very different game and entail a rather interesting job description. Imagine the faces of senior executives when they are told “… and in addition to your day-to-day responsibilities you can also be held personally accountable for the decisions you make that have a severe impact on this very planet you live on and for the people you live with on this planet.”
(I’m sure the insurance industry will find new ways to develop new insurance solutions for personal climate liability for senior executives. If that is not the case already, it soon will be…).
Well, Shell did respond to this, and this is what they said and how they said it: “We do not accept ClientEarth’s allegations. Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company. We believe our climate targets are aligned with the more ambitious [1.5C] goal of the Paris agreement. Our shareholders strongly support the progress we are making on our energy transition strategy, with 80% voting in favour of this strategy at our last AGM,” a Shell spokesperson said.
Legal duties and the best interest of the company. Understandable. This is how the current system works. This is the reason why we need to change the corporate charters that regulate the responsibilities of boards and senior executives. Without that change, the current form of capitalism will never change.
Just 81 out of 18,600 companies disclosed climate data
Let me give you one of the most recent examples. Fewer than one in 200 companies who submit climate change-related data to a leading environmental disclosure platform have credible climate transition plans, the non-profit platform CDP said on Wednesday in its latest review of corporate submissions.
The data underlines the scale of the gap between company pledges to transition to net-zero carbon emissions, and the detailed plans that show how a firm will align its entire business model to meeting those targets. Of 18,600 companies which provided CDP with data only 81 – or 0.4% – disclosed information against 21 key indicators that CDP includes in a questionnaire and which it says represents a credible plan.
Companies headquartered in Japan ranked highest with 16 firms disclosing against the 21 indicators.
Why the Global South can't go green
If we move on to the frontiers enabling the very sustainable transition that the world is shouting for, governments are developing targets for, and companies are developing products and services for, we see that the Global South is on its knees.
The Global North is currently extracting $2 trillion annually from the Global South, a number which far outstrips the annual $100 billion in climate finance promised by the Global North at Copenhagen’s COP in 2009. OECD countries have fallen short on that paltry promise of funds every year.
Simply, the Global South must be liberated. Not only do these countries deserve the sovereignty to establish their own national futures, the climate crisis is so urgent and catastrophic that we need all hands on deck to figure it out. The Global South must no longer take the brunt of the Global North’s consumption, emissions, demands and fear.
Carbon footprints of the richest 1% is set to be 30 times greater than the level compatible with the 1.5°C goal of the Paris Agreement by 2030. That’s just 80 million people belching out 16% of the world’s total emissions.
In this very good article you can read more about the climate slavery.
BP – a transformative energy company 🙄
Speaking of the oil and gas industry, there we find another oil major who sees itself as a transformative energy company. They say they “want to help the world reach net zero and improve people’s lives”.
Well, I guess the energy transition was always going to be a dirty business. Because BP, the “transformative energy company”, this week rowed back from its 2020 climate commitments, including the headline pledge to cut production by 40 per cent by 2040.
Given that those promises were three years ago dubbed “cynical” by Friends of the Earth, the oil and gas major may rather have proved the environmental campaigners’ point.
Now, it will invest in and produce more fossil fuels in the near term, and sell fewer of its assets, so that production falls only about a quarter by 2030 compared to 2019. Emissions from its oil and gas business will drop 20 percent to 30 percent, rather than 35 percent to 40 percent.
Fossil fuels to peak around 2030
But there is still hope. Also when we look at future (or lack thereof) for fossil fuels.
The IEA said in its annual World Energy Outlook report, published late last year, that it now sees investments in clean energy rising by about 50 percent by the end of the decade to $2tn a year, or more than double the amount invested annually in fossil fuels today.
Fatih Birol, head of the IEA, said the world was fast approaching a “pivotal moment in energy history” as demand for the fossil fuels that have underpinned the modern economy since the advent of the industrial evolution nears an inflection point.
“After rapid growth in gas consumption in the last 10 years, we think the golden age of gas is coming to an end,” Birol said in an interview. “Together with the decline in coal and oil that we were already expecting, we now see a peak around 2030 for all fossil fuels.
While the IEA expects global emissions to peak by 2025, they would remain well above levels needed to limit the rise in average temperatures to 1.5C – as targeted by the Paris climate agreement, which came into effect in 2016. Fossil fuel demand would decline only “steadily from the mid-2020s to 2050 by an annual average roughly equivalent to the lifetime output of a large oilfield”.
Inverted ESG analysis, anyone?
As for the inverted ESG analysis case I mentioned last week…
In my newsletter last Sunday, I presented a concept of inverted ESG analysis, and from the reactions to it – only a few to be honest – that concept is either too complex or just not relevant.
So, for all those who would like to receive an inverted ESG analysis case, please email me on sasjab[at]icloud[dot]com.
In the meantime, here are the core questions of the inverted ESG approach. Now, it’s no longer 5 pages long!
What areas of the business, markets, client segments are not relevant from an ESG perspective for company X in order for the company to reach its financial and ESG targets?
What material ESG areas of the company’s business are not relevant given the sector it operates in, the markets it operates in, the client segments it has, the products and services it produces in order to reach its financial and ESG targets?
What is not the ESG stock value of company X year 2026?
What internal ESG policy frameworks are not relevant to company X to deliver on its financial and ESG targets?
What ESG KPI’s are not relevant for company X to reach its financial and ESG targets?
How are the current ESG activities from company X not relevant for the pricing and sales strategy?
What part of the ESG activities do not have implications for balance sheet of the company?
What part of climate risk accounting in the overall financial accounting is not relevant for the company?
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