Looking Back at 2020 and Into 2021-Disruptions, Changes, But Consistency in Climate Change Challenges

January 11 2021

by Hank BoernerChair & Chief StrategistG&A Institute

Seems like just yesterday we were celebrating the great promise of the 21st Century – the Paris Accord (or “Agreement”) on climate change. Can you believe, it is now five years on (260 weeks or so this past December) since the meeting in the “City of Lights” of the Conference of Parties (“COP 21”, a/k/a the U.N. Paris Climate Conference). This was the 21st meeting of the global assemblage focused on climate change challenges.

For most of us the calendar years are neat delineations of time and space – helps us remember “what” and “when” in near and far-times. But often important trends will not fit neatly in a given year. There is for example so much uncertainty in 2020 that continues in 2021.

As we cheered and toasted each other on 31 December 2019 around the world (with tooting horns, fireworks, lighted spheres dropping on famed Times Square in New York City and fireworks on the Thames in London) we probably were looking eagerly into the new year 2020 and the promise of things to come. Oh well.

Now here we are embarked into new year 2021, starting the third decade of the 21st Century, and groping our way toward the “next normal”.  What ever that may have in store for us.

The next normal for when the Coronavirus, now taking many lives and infecting hundreds of millions of us…at last subsides. For when the economies of the world stabilize and everyone can get back to work, in whatever the workspace configurations may be. For when the long-term issues that are generating civil unrest and widespread – and now very violent! — protests can be addressed and we can begin to resolve inequality et al.

Our world has certainly been dramatically interrupted as the calendar changed in both 2020 and now as we begin year 2021.

One consistency, however, has been in our business and personal lives in all of the recent years and is accelerating in 2021: the effort to address the challenges of climate change, with all sectors of our society engaged in the effort.

There is greater effort now to limit global warming and the impact on society in the business sector (especially for large companies); in the public sector (at local, state, and national levels, among the almost 200 nations that are parties to the Paris Agreement); for NGOs; leaders of philanthropies; and we as individuals doing our part.

We all have a role to play in the collective striving to limit the rising temperatures of seas and atmosphere and forestall worldwide great tragedy and cataclysmic events if we fail.

And so now on to 2021. The Top Stories we’ve selected for you, and additional content in the various silos, focus our attention on what has been accomplished in 2019 and 2020 — and what challenges we need to address the challenges of 2021 and beyond.

As we assembled this week’s G&A Institute’s Highlights newsletter, we learned from the U.S. National Oceanic and Atmospheric Administration (NOAA) that the year 2020 just ended was a period (neatly marked in “2020” for our historical records) of historic weather extremes that saw many billion-dollar weather and climate disasters…smashing prior records.

There were 22 separate billion-dollar events costing the United States of America almost US$100 billion in damages in just the 12 months of 2020.

And this troubling news: in 2020 Arctic air temps continued their long-term warming streak, recording the second warmest year on record. (Since 2000 Arctic temperatures have been more than twice as far as the average for Earth as a whole). When air and sea continue to warm, massive ice fields melt and ocean seas rise, ocean circulation patterns change, and more. Learn more at climate.gov.

Our selection of news and shared perspectives here bridge 2020 and 2021 trends and events. We can expect in the weeks ahead to be sharing content with you focused on climate change, diversity & inclusion, corporate purpose discussions, risk management, corporate governance, ESG matters, corporate reporting & disclosures, sustainable investing…and much more!

Best wishes to you for 2021 from the G&A Institute team. We’re beginning the second decade of publishing this newsletter as well – let us know how we are doing and how we can improve the G&A Institute “sharing”.

If you are not receiving the G&A Institute Sustainability Highlights(TM) newsletter on a regular basis, you can sign up here: https://www.ga-institute.com/newsletter.html

 

TOP STORIES

A year in review and looking ahead to 2021:

Picking Up Speed – Adoption of the FSB’s TCFD Recommendations…

January 21 2021

by Hank BoernerChair & Chief StrategistG&A Institute

Countries around the world are tuning in to the TCFD and exploring ways to guide the business sector to report on ever more important climate related disclosures.  Embracing of the Task Force recommendations is a key policy move by governments around the world.

After the 2008 global financial crisis, the major economies that are member-nations of the “G20” formed the Financial Stability Board (FSB) to serve a collective think tank and forum for the world’s leading developed countries to develop strong regulatory, supervisory, and other financial sector policies (guidance, legislation, regulations, rules).

Member-nations can adopt the policies or concepts for same developed collectively in the FSB setting back in their home nations to help to address financial sector issues with new legislative and/or adopted/adjusted rules, and issue guidance to key market players. The FSB collaborates with other bodies such as the International Monetary Fund (the IMF).

FSB operates “by moral suasion and peer pressure” to set internationally-agreed to policies and minimum standards that member nations then can implement at home. In the USA, members include the SEC, Treasury Department and Federal Reserve System.

In December 2015, as climate change issues moved to center stage and the Paris Agreement (at COP 21) was reached by 196 nations, the FSB created the Task Force on Climate-related Financial Disclosures, with Michael Bloomberg as chair.  The “TCFD” then set out to develop guidelines for corporate disclosure on climate change-related issues and topics.

These recommendations were released in 2017, and since then some 1,700 organizations endorsed the recommendations (as signatories); these included companies, governments, investors, NGOs, and others.

Individual countries are taking measures within their borders to encourage corporations to adopt disclosure and reporting recommendations. There are four pillars -– governance, strategy, risk management, and metrics & targets.

A growing number of publicly-traded companies have been adopting these recommendations in various ways and publishing standalone reports or including TCFD information and data in their Proxy Statements, 10-ks, and in sustainability reports.

The key challenge many companies face is the recommendations for rigorous scenario testing to gauge the resiliency of the enterprise (and ability to succeed!) in the 2C degree environment (and beyond, to 4C and even 6C),,,over the rest of the decades of this 21st Century.

Many eyes are on Europe where corporate sustainability reporting first became a “must do” for business enterprises, in the process setting the pace for other regions.  So – what is going on now in the region with the most experienced of corporate reporters are based?  Some recent news:

The Federal Council of Switzerland called on the country’s corporations to implement the TCFD recommendations on a voluntary basis to report on climate change issues.

Consider the leading corporations of that nation — Nestle, ABB, Novartis, Roche, LarfargeHolcim, Glencore — their sustainability reporting often sets the pace for peers and industry or sector categories worldwide.

Switzerland — noted the council — could strengthen the reputation of the nation as global leader in sustainable financial services. A bill is pending now to make the recommendations binding.

The Amsterdam-based Global Reporting Initiative (GRI) is backing an EU Commission proposal for the European Financial Reporting Advisory Group (EFRAG) to consider what would be needed to create non-financial reporting standards (the group now advises on financial standards only). The dual track efforts to help to standardize the disparate methods of non-financial reporting that exist today.

The move could help to create a Europe-wide standard. The GRI suggests that its Global Sustainability Standards Board (GSSB) could make important contributions to the European standard-setting initiative.

And, notes GRI, the GSSB could help to address the critical need for one global set of sustainability reporting standards.  To keep in mind:  the GRI standards today are the most widely-used worldwide for corporate sustainability reporting (the effort began with the first corporate reports being published following the “G1” guidelines back in 1999-2000).

The United Kingdom is the first country to make disclosures about the business impacts of climate change using TCFD mandatory by 2025.

The U.K. is now a “former member” of the European Union (upon the recent completion of “Brexit” process), but in many ways is considered to be a part of the European region. The UK move should be viewed in the context of more investors and sovereign nations demanding that corporations curb their GhG emissions and help society move toward the low-carbon economy.

In the U.K., the influential royal, Prince Charles — formally titled as the Prince of Wales — has also launched a new charter to promote sustainable practices within the private sector.  He has been a champion of addressing climate challenges for decades.

The “Terra Carta” charter sets out a 10-point action plan designed to reduce the carbon footprint of the business sector by year 2030.  This is part of the Sustainable Markets Initiative launched by the prince at the January 2020 meeting in Davos, Switzerland at the World Economic Forum gathering.

Prince Charles called on world leaders to support the charter “to bring prosperity into harmony with nature, people and planet”. This could be the basis of global value creation, he explains, with the power of nature combined with the transformative innovation and resources of the private sector.

We closely monitor developments in Europe and the U.K. to examine the trends in the region that shape corporate sustainability reporting — and that could gain momentum to become global standards.  Or, at least help to shape the disclosure and reporting activities of North American, Latin American, Asia-Pacific, and African companies.

It is expected that the policies that will come from the Biden-Harris Administration in the United States of America will more strenuously align North American public sector (and by influence, the corporate sector and financial markets) with what is going on in Europe and the United Kingdom.  Stay Tuned!

TOP STORIES FOR YOU FROM THE UK AND EUROPE

Items of interest — non-financial reporting development in Europe: