What's Happening in Sustainability & ESG (2023 Recap) 🌎

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This week’s read time: 6 minutes

Welcome to this edition of Green Digest, where you will get updated about everything happening in the sustainability & ESG space in less than 10 minutes. 🌎We go through tons of articles and data from the most reliable sources, filter & simplify them, and serve them to you in bite-sized chunks every week. 🍀

This week, we decided to do a special edition, compiling the most interesting and important news that characterized 2023. 🌍

And, we also wanted to say thank you. Thank you for supporting us, reading our newsletter, and being an integral part of our community! 💚

⭐️ 2023’s Highlights:

🌍 Representatives from nearly 200 countries reached a deal to begin reducing global consumption of fossil fuels at COP28

The agreement aimed to signal a united effort to break away from fossil fuels and combat climate change. While some countries celebrated the deal, small island states and advocates for phasing out fossil fuels expressed disappointment, and the OPEC-led oil producer group resisted language targeting specific fuels. The deal calls for transitioning away from fossil fuels, tripling renewable energy capacity, reducing coal use, and advancing carbon capture and storage technologies.

Other key takeaways from COP28:

• Over $85 billion mobilized across the climate agenda (Energy, Finance, Lives & Livelihoods, Inclusion, Green Climate Fund, etc.)

• 118 governments committed to tripling renewables and doubling the rate of energy efficiency improvements by 2030.

• The Global Cooling Pledge, signed by over 60 countries, aimed at reducing emissions from cooling by 68% by 2050.

• The O&G Decarbonization Charter, signed by 50 companies accounting for more than 40% of global oil and gas production. The signatories committed to net-zero operations by 2050 across Scope 1 and 2 emissions, near-zero methane in upstream operations by 2030, zero routine flaring by 2030, and increased transparency in emissions reporting.

• An agreement to operationalize a new Loss & Damage Fund to assist poor nations in dealing with climate disasters, with several countries, including the US, Japan, and the UAE, announcing contributions ($725 million in pledges secured so far).

🌡️ 2023 likely to be the hottest year on record

The EU’s Copernicus Climate Change Service said that 2023 is on track to become the hottest year on record since at least 1940. Climate change and the El Nino weather pattern have contributed to the record-breaking temperatures. The global average temperature for January-September was 0.52 degrees Celsius higher than the reference period of 1991-2020, and 1.4 degrees Celsius higher than the pre-industrial period.

🇺🇸 US Inflation Reduction Act (IRA) created 170,000 new clean energy jobs

Since the passage of the Inflation Reduction Act (IRA) in the US in August 2022, the Biden-Harris administration declared that 170,000 new clean energy jobs were created and more than $270 billion in planned clean energy investments from companies were committed up until the end of 2023.

🔴 Republicans in the US started an anti-ESG campaign

Republicans in the US launched an anti-ESG alliance of 18 states aimed at coordinating actions to "protect individuals from the ESG movement", led by Florida Governor Ron DeSantis. He signed into law a series of sweeping anti-ESG measures, prohibiting the consideration of any ESG factors in state and local investment decisions or procurement processes. Republicans in the US Congress also introduced a series of bills aimed at reducing the influence of ESG initiatives in capital and financial markets, including proposals to derail ESG and climate-related disclosure requirements on companies, reduce the ability of investors to engage with companies on sustainability issues and limit the SEC's authority to regulate shareholder proposals.

🇬🇧 UK’s Prime Minister announced a U-turn on key green targets

UK Prime Minister Rishi Sunak announced a U-turn on the government's climate commitments, delaying the ban on the sale of new petrol and diesel cars and the phasing out of gas boilers. The decision drew criticism from various stakeholders, including investors, climate change experts, energy analysts, trade unions, and environmental organizations, who argued that it will cost consumers more in the long run and threaten the UK's global leadership on climate action. Sunak defended the decision, stating that it was a pragmatic approach to bring the country along and save families money.

🛢️ The oil and gas industry underwent significant consolidation, with acquisitions worth $135 billion

The oil and gas industry underwent significant consolidation in 2023, with major companies like Exxon Mobil, Chevron Corp, and Occidental Petroleum making acquisitions worth a total of $135 billion. The focus of these acquisitions was on securing lower-cost reserves, particularly in the Permian Basin, and preparing for future industry upheavals. This consolidation is expected to have spillover effects on oilfield servicers and pipeline operators, with fewer customers having more power over pricing. Despite the move towards renewable fuels and energy efficiency, global oil demand has been rising, tightening global stocks and supporting prices. However, big oil companies are shifting their focus towards boosting cash flow rather than production, leading to slower output growth in the coming years.

🟢 IFRS launched new global sustainability and climate disclosure standards

The IFRS Foundation’s International Sustainability Standards Board (ISSB) launched new global sustainability and climate disclosure standards, which form the basis for emerging sustainability reporting requirements by regulators around the world. The new standards included “IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information,” and “IFRS S2 Climate-related Disclosures,” and will begin applying for annual reporting periods beginning as of January 2024, with companies beginning to issue disclosures against the standards in 2025.

🇪🇺 EU published the final version of the European Sustainability Reporting Standards (ESRS)

The European Commission adopted the final version of the European Sustainability Reporting Standards (ESRS), which will require companies to report on sustainability-related impacts, opportunities, and risks under the EU’s Corporate Sustainable Reporting Directive (CSRD). The CSRD will expand the number of companies required to provide sustainability disclosures to over 50,000 and introduce more detailed reporting requirements on company impacts on the environment, human rights, and social standards and sustainability-related risk. Reporting is set to begin for some companies as soon as the 2024 financial year.

EU lawmakers also approved the world’s first carbon import tax

The EU launched the first phase of the world's first carbon border tariff on October 1, 2023. The Carbon Border Adjustment Mechanism (CBAM) requires importers to report GHG emissions and purchase certificates to cover CO2 emissions. The main purpose of CBAM is to avoid "carbon leakage," and will equalize the price of carbon paid for EU products with those produced in other countries. CBAM will initially apply to specific products from carbon-intensive sectors, with importer obligations limited to reporting product emissions during the transition phase until 2026. The UK government also announced plans to implement a carbon import levy on certain products by 2027. 

🇺🇸 The US SEC is expected to release its final climate disclosure rules in April 2024

The lack of climate reporting rules in the US could expose thousands of US companies to more stringent reporting requirements in the EU, warned the Securities and Exchange Commission (SEC) Chair Gary Gensler. He added that without a US rule, companies may have to comply with the EU's CSRD, which has more comprehensive requirements than the SEC's proposal. The SEC has proposed climate disclosure rules but its final rule is expected to be released in April 2024. Gensler suggests that even if the US rule differs from Europe, discussions on "substituted compliance" could be possible.

Meanwhile, California Governor Gavin Newsom signed two new climate-related disclosure bills that require more than 5,300 companies that operate in California and make more than $1 billion in annual revenues to report both their direct and indirect emissions.

🟢 TNFD released its final recommendations for reporting on nature-related risks and opportunities

The Taskforce on Nature-related Financial Disclosures (TNFD) released its final recommendations for reporting on nature-related risks and opportunities. The guidelines are expected to shape future sustainability disclosure standards and have been endorsed by organizations such as the ISSB and CDP.

That’s it for this week, thanks for making it to the end! If you enjoyed reading this newsletter, please don’t forget to subscribe and share it 🍀