Warnings! – World Scientists Raise Red Flags on the Climate Crisis in IPCC Report

August 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Superstorms with drenching downpours.  Wildfires consuming vast stretches of western-lands forest in the U.S. and parts of Europe. Hurricanes coming ashore in both Atlantic and Pacific Oceans with devastating effects, during and after the storm.  Once-in-a-hundred-year weather occurrences happening last year and the year before and…

The signs of climate change are now everywhere and all at once. The careful analysis of what all of this means to the future of human life, flora and fauna, the land, the seas, our atmosphere, are being made abundantly clear.

We need to continue  increasing our understanding of what is happening and what we have to do to meet the challenges of what President Joe Biden has positioned as “the climate crisis”.

The latest body of evidence comes to us now in summary form from the Intergovernmental Panel on Climate Change (IPCC).

This is the United Nations body organized in 1998 by the UN and the World Meteorological Organization (WMO) to analyze and assess the science information that the public sector needs at all levels, in all locations, to create and manage their climate-related policies. There are 195 organizational members of the IPCC — and literally thousands of scientists and experts who contribute to the organization’s work.

Many scientific papers are published each year by IPCC volunteers and a comprehensive summary is published from time-to-time (the “Synthesis Report”).  The sixth assessment (AR6) will be published in 2022.  The world’s scientists are not waiting for next year to publish grave warnings for humankind.

There are three parts to the ongoing efforts of the IPCC:

(1) Working Group I, on Physical Science of Climate Change;

(2) Working Group II, Impacts, Adaptation and Vulnerability: and

(3) Working Group III, Mitigation of Climate Change.

There is also a Task Force on National Greenhouse Gas Inventories (TFI).

These groups are busily contributing now to the planned publication of the Sixth Assessment Report (AR6) next year.  IPCC is sharing dramatic findings on an urgent basis right now to help broaden public understanding of the climate change crisis.

We are bringing you news and background of the Working Group summaries and other findings that IPCC is sharing.  Warning:  Reading the news and opinion and perspectives shared is scary stuff, indeed!  And there will be more news and commentaries to come as we move toward the COP 26 climate change leaders’ gathering in November in Glasgow, Scotland.

The G&A Institute team has been sharing many research findings, news and commentaries about the growing dangers inherent in climate change since our founding in 2007.

Our G&A Sustainability Highlights newsletter is now well beyond its 500th issue, and has been content shared in the thousands to help broaden understanding about climate change issues.

This blog post is a brief but solid recap for you of the latest news centered on the IPCC summary (as we outlined in an August newsletter). Stay Tuned for more to come, and please contact us with any questions about what your company can be doing to prepare for the future.

Top Story/Stories

Pressure is Building on the C-Suite – to Start or Advance the Enterprise’s Sustainability Journey

July 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Pressure points:  The corporate executive suite in recent months has experienced pressure from both inside and outside the organization in terms of rising expectations related to corporate sustainability, responsibility, citizenship, ESG, and so on.

For example, asset owners and external asset managers are asking many more questions now about the sustainability journey of the companies they are invested in, including the company’s ESG strategies, actions, performance, metrics, outcomes, external recognitions, and more.

The customer base for a growing number of companies is now an important consideration related to the supplier/provider’s positioning in its sustainability journey.

The working principle here:  the large customer especially considers the supply chain “partners” to be part of their own ESG footprint.  Third-party organizations pose questions to supply chain partners on behalf of their client base (Ecovadis being an excellent example of this practice).

Consider, too, that the Federal government is the largest buyer of goods and services in the U.S. and the Biden Administration has instituted sweeping sustainability policies on sourcing of many kinds.

Regulators of different sorts are moving towards strongly urging companies to disclose more about their sustainability journeys and considering mandates to help ensure more comparable, accurate, complete, decision-worthy data and narrative disclosures to help providers of capital (investors, lenders, insurers) in their own portfolio management.  We see that now in the U.S. and in the European Union.

There is peer pressure – corporate issuers moving ahead to leadership positions in sustainability put pressure on industry peers to perform better, disclose more, and attain at least middle-of-the-pack positions. And laggards (those not yet on their journeys) are under even greater pressure today.

One place where the leader board really counts is in the now-numerous ESG ratings and rankings provided to institutional investors by the likes of MSCI, Sustainalytics, Institutional Shareholder Services, and other ESG rankers and raters.

And then there is the internal pressure point – employees want to work for a company demonstrating leadership in sustainability and responsibility.  They want to be an integral part of the journey and be a part of the team making great things happen. All this counts in recruitment, retention, and motivating the workforce.

This week we pulled together some of the contours of these pressures on boards and executive and management teams.  As you read this, thousands of people are gathering virtually for the UN Global Compact Leaders’ Summit to discuss the growing pressure on governments, companies, investors, and other stakeholders to take action on climate change and sustainability issues.  The UNGC released the 2021 Survey of Companies & CEOs ahead of the gathering.

Top line results:  Business interests need to transition to more sustainable business models.  Over the past three years corporate leaders have been experiencing the pressures to do this; and 75 percent of survey respondents expect the next three years to be times of increased pressure on boardrooms and executive suites.

Where is pressure coming from?  Certainly, from the investor side.  For example, 450+ investors managing US$45 trillion in assets released a joint statement calling on world governments to create a race-to-the-top on climate policies…

This is the “2021 Global Investor Statement to Governments on the Climate Crisis” that asks for climate-related financial reporting to be mandatory, recognizing the climate crisis.

Seven investment management partners created “The Investor Agenda” to be shared at the recent G7 meeting to encourage advocacy for “ambitious climate policy action” leading up to the Glasgow, Scotland meeting of “The Conference of the Parties” (COP 26) in November.

The Investor Agenda is in the Top Stories below for your reading, along with comments from heads of NYS Common Fund, State Street/SSgA, Alliance Bernstein, Legal and General Investment Management, Fidelity International, and others.

In the U.S., 160 investors with U$2.7 trillion in AUM joined by 155 corporate leaders and 58 not-for-profit organizations are advocating for the Securities & Exchange Commission to protect investors from risks including systemic and financial risks related to climate change by mandating climate disclosure.

By doing this, corporate issuers can clarify the risks they should measure and disclose so that investors can make sound investment decisions.  SEC rules are needed, say the advocates, to provide comparable and consistent information.

Who are these advocates?  A group of state financial officers —  Illinois State Treasurer Michael Frerichs, California State Controller Betty Yee, New York State Comptroller Tom DiNapoli – as well as Steven Rothstein, Managing Director for the Ceres Accelerator for Sustainable Capital Markets and others.  Their suggestions for moving to an SEC mandate is another Top Story selection for you.

G&A is closely monitoring the various pressure points being placed on organizations to start or advance your sustainability journey, and you can detect other pressure points in the story selections in the topic silos.

TOP STORIES

Public Debate & Actions – Determining Future Directions of Today’s Important Fuels / Energy Sources

June 5 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Eons ago as then-existent forms of life on Earth died off, decomposing remains became fossils…or relevant to current “heated” conversations about the future of energy, the stuff of today’s “fossil fuels.” Coal, crude oil, natural gas. 

As National Geographic explains for us, these fuels found in the Earth’s crust contain important amounts of carbon and hydrogen, which can be burned to create the energy we need in our modern times.  Consider:

Coal – we have long been extracting the deposits found in sedimentary rock – is the important foundational fuel source for the industrial era of at least the past two centuries.

Oil, more recently (since the mid-1800s) has been pumped out of ample reservoirs deep beneath the Earth’s crust. Or today, from closer deposits found in sedimentary rock, such as in shale layers (see: fracking – hydraulic fracturing).

Natural gas? Often described as a “transition” fuel (between fossilized sources and renewable energy sources) is extracted from the deposits near the deeper oil deposits. Natural gas is mostly comprised of methane, providing significant energy when burned – and also identified as one of the more potent Greenhouse Gases (GhG).

NatGeo tells us that the National Academy of Sciences charts 81 percent of total energy used in the U.S. as coming from these three fuel sources – responsible for three-fourths of global emissions over the recent decades.

So, what to do about the future directions of fossil fuels as primary energy sources, as leaders and institutions of the U.S. and other nations look beyond fossil fuels to create the energy needed to power business, homes, transportation, and more?

The debate about all of this (the “beyond fossil fuels discussion”) plays out in the era of the 2015 Paris Agreement to hold the Earth’s temperatures to below 2-degrees Celsius rise in this century compared to the level of pre-industrial days.

Reducing the use of fossil fuels is one of the ways to accomplish this, say climate change activists; more reliance of renewable fuel sources is being widely embraced as an important transition.

About transition: the industrial era got a big boost in the 1860s when the first oil wells were drilled in Pennsylvania and resulting processed kerosene began quickly knocking off the U.S. whaling oil business…coal extraction was already an important source of energy for industry.

The public debate about the fate of fossil fuel use in many nations, and the future direction of the many companies involved in the extraction, processing, and distribution of these fuels, is ongoing and involves many constituencies with a stake in the outcome of public policy and actions to address the issue…especially in the context of the commitment of almost 200 nations to comply with the terms of the Paris Agreement.

In this week’s G&A Institute’s newsletter (Sustainability Highlights), we shared important developments in the discussion about climate change and energy sources, as investors take action in proxy votes at Exxon and Chevron, and leaders call for “Energy Compacts” (by country, business interest, city) to achieve the goal of clean affordable energy by year 2030 (see SDG 7) and “net zero emissions” by 2050.

Of course, today’s energy source enterprises have to play a significant role in the process; energy transition that will be discussed by the UN’s High-level Dialogue on Energy.

Details on all of this are in the selections for Top Stories and in other of the content silos…and more is on the G&A Institute’s SHQ web information sharing platform: www.sustainabilityhq.com.

TOP STORIES

Note:
The National Geographic content on fossil fuels is in the organization’s Resource Library – this is excellent material for discussing fossil fuels with students (What is a fossil fuel and what is being done to make fossil fuels more environmentally-friendly?). 

More Details Roll Out – Biden-Harris Administration’s “Whole of Government” Climate Policies & Actions

June 2021  – This is a biggie!

by Hank Boerner – Chair & Chief Strategist, G&A Institute

The Biden-Harris Administration continues to roll out details of new or proposed or adjusted policies, rules, programs, Federal government financing and various actions to address what the leaders characterize as “the climate crisis”.

What we have now more details of the “Whole of Government” approach for these United States in addressing a widening range of climate change issues. 

In most crisis situations for large organizations, dramatic changes-of-course are always necessary – new paths must be followed.  And so we see…

President Joe Biden certainly being ambitious in navigating the way forward for the public sector in meeting the many climate change challenges (for actions by Federal, state, region, local governments).

President Biden signed yet another order for policy changes and various actions by the many agencies of the national government: “Executive Order #14030 on Climate-Related Financial Risk”.

The new EO #14030 sets out policy and actions to be taken by the whole of America’s public sector, a number of actions intended to be implemented in partnership with state & local governments and financial services sector institutions, and corporate and business interests…”designed to “better protect workers’ hard-earned savings, create good paying jobs, and position America to lead the global economy”.

EO  #14030 builds on the framework for climate change policies and actions set out in President Biden’s January 27th action: “Tackling the Climate Crisis at Home and Abroad” (that is EO #14008).

This and other execute branch orders are designed to “…spur creation of well-paying jobs and achieve a net-zero emissions economy no later than 2050”.

The new EO is intended to “…bolster the resilience of financial institutions and rural and urban communities, States, Tribes, territories…by marshalling the creativity, courage and capital of the United States…and address the climate crisis and not exacerbate its causes to position the U.S. to lead the global economy to a more prosperous and sustainable future…”

The latest order addresses the need for greater financial transparency of the Financial Services Sector — addressing banking, insurance, fiduciary duties of those managing assets — as well as addressing the aspects of Federal financing for business, governments and institutions, and Federal government budgeting both short- and long-term.

For example, the Secretary of the Treasury as chair is instructed to work with the other members of the Financial Stability Oversight Council (FSOC) to assess climate-related risk to the stability of the U.S. financial system; to facilitate sharing of climate-related financial risk data among the members of FSOC; to publish a report in six months on actions / recommendations related to oversight of Financial Institutions.

FSOC members are the influential of Financial Services regulation and oversight:  Treasury Department; the Office of Comptroller of the Currency (inside Treasury, overseeing national banks and foreign banks operating in the USA); chair of Securities & Exchange Commission; chair of the Federal Reserve System; head of FDIC; head of Commodity Futures Trading Commission; as well as a state insurance commissioner; a state banking commissioner; a state securities commissioner.

Addressed in the Executive Order:

  • disclosure and reporting by publicly-traded entities;
  • insurance industry “gaps” of climate-change issues that need to be addressed at Federal and state levels for private insurance;
  • the protection of “worker savings and pensions” (with ERISA and the Department of Labor in focus);
  • Federal level lending and underwriting, including financial aid, loans, grants of such agencies as the Department of Agriculture (farm aid);, and
  • Housing and Urban Development (funneling funds to local and state agencies as well as Federal level financial transactions); and,
  • Department of Veterans Affairs.

For companies providing services and products to the Federal government (largest buyer in the United States), there are numerous policy changes and actions to be taken by agencies that will affect many businesses in the U.S. and abroad.

For many companies this will mean much more disclosure on GHG emissions data, adoption of Science-based Emissions Reduction Targets, and disclosure of ESG policies and actions.

Federal agencies will be guided by policies to look more favorably on companies that bid on contracts [and have] more robust climate change policies and targets in place.

We are bringing here you news coverage and shared perspectives on the important new order and a link to the White House Executive Order in our Top Stories (below).

G&A Institute Perspective:  This EO builds on standing orders of recent years by prior presidents and the orders issued “since Day One” of the Biden-Harris Administration to address what is characterized as the “climate crisis” by President Joe Biden in his campaigning and since taking office.

There are announcements of actions taken and new and proposed policy changes just about every day now, following out of cabinet departments and other agencies of the Federal government.

This is all of the “Whole of Government Approach” to addressing climate change challenges, short- and long-term.

We’re seeing both significant and subtle changes taking place throughout the public sector, at Federal, State and local levels, actions that will increase the pressure on the corporate sector and capital market players to start or to enhance their “sustainability journey” and greatly increase the flow of ESG data and information out to both shareholders and stakeholders/constituencies.

The disclosure and reporting practices of publicly-traded and privately owned/managed corporate entities will be addressed through a variety of Federal agencies, including of course the Securities & Exchange Commission.

SEC has an invitation out to individual and organizations to suggest ways to enhance reporting of the corporate sustainability journey (or lack thereof).

The instructions to Federal agencies in the latest EO will result in stepped up demands by Federal agencies for companies to disclosure more ESG information, such as in bidding on projects and contracts, or seeking financing of various types.

There are many more details in the G&A Institute’s Resource Paper, click here to download a copy.

Let our team know what questions you have!

Top Stories

And related information:  The International Energy Agency (IEA) Report coverage:

The United States of America Moves Forward with the Biden-Harris “Climate Crisis Agenda” for Federal Government Actions

March 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

As he assumed the post of the highest elected public officer of the United States, President Joseph Biden characterized his [as the] “Climate Administration” — and immediately (the fabled Day One actions) set out a very ambitious “climate crisis” policy agenda for action by the many arms of the Federal government agencies under his control. (Notably, all cabinet offices with their great reach into all corners of the American Society.)

As a current commentary in the influential Harvard Business Review explains: “Biden put the environment squarely at the heart of U.S. federal policy, and for good reason. The future competitiveness of the U.S. economy is at stake, and climate action is an effective way to boost jobs, prevent future systemic shocks, and secure a prosperous future.”

In the commentary by Maria Mendiluce, CEO of the We Mean Business coalition, she posits at least seven important implications for corporate sector and other business leaders:

  • Climate regulation is coming (with a “net zero emissions” goal envisioned by 2050). Climate-focused regulations are being adopted around the world and we can expect to see some in the near term in the United States of America. The U.K. is an example – 2030 is the end date for sales of gasoline-powered autos.
  • Corporations will be in the vanguard in moving society in transitioning to the net zero ambitions (companies can help to scale up solutions for de-carbonizing society). Examples cited include Amazon, Apple, Ford, Microsoft, Walmart, Uber, and Verizon.
  • There’s risk for companies that delay climate action. Watch out if your enterprise is not “de-carbonizing” and transitioning from “black-to-a-green” energy company.
  • As we are seeing, investors are looking with favor on companies that taking action on climate matters – portfolio managers are moving away from high polluting firms. Asset managers like BlackRock are leading the way in pushing corporate leaders to adopt net zero targets. Capital is “looking” for greener businesses to invest in.
  • Soon, we can expect climate risk disclosures and reporting on GHG emissions to become mandatory. The Commodity Futures Trading Commission (CFTC) has warned that financial regulators must recognize climate change poses risk to the U.S. financial system. The head of that federal agency is now talked about as prospective Chair of the Securities & Exchange Commission in the Biden-Harris Administration.
  • While there has been discussion about carbon pricing schemes, and a bit of action in Europe, we can expect to see that discussion to increase in tempo and a price put on pollution.
  • Public sector investment in clean energy is on the rise (look at the volume of “green bonds” in recent months). In the United States, the new administration pledged to invest US$2 trillion in clean energy and infrastructure and the many Trump-Pence Administration rollbacks of environmental regulations are being put back in place by Biden-Harris actions.

We can expect to see more presidential Executive Orders, more administration, corporate and public sector pledges and commitments, and more Biden-Harris administration policy definitions related to climate action in 2021.

President Biden plans to convene a Leaders Summit for Earth Day and have the U.S. government back at the table at COP 26, the global confab for climate negotiations. “The USA is back” is the theme for 2021.

Concludes Maria Mendiluce: “This is a turning point for the U.S. and the world. It’s not too late for companies to adapt to the new net zero economy and support a green recovery. There is also no time to lose.”

We have selected her essay in HBR for the Top Story category of the G&A Newsletter this week, along with relevant developments in the “Climate Administration” of President Joe Biden and VP Kamala Harris.

The “We Mean Business” coalition has 1,596 companies involved with collective market cap of almost $25 trillion; these firms have made 2,000-plus “bold action climate commitments” to date. There is more information at: https://www.wemeanbusinesscoalition.org/

TOP STORIES

Federal Policymakers & Regulators Embrace or Reject ESG / Sustainability Factors – a Complicated Story of To & Fro

March 23, 3021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Federal policymaking and regulation with respect to investor risk and opportunity in the United States of America is a complicated story played out over almost a century. 

The modern era of laws passed/rules adopted to implement got underway in earnest in 1933 and 1934 following the October 1929 “Black Tuesday” stock market crash and subsequent failure of Wall Street firms and banks.

The Securities Act of 1933 and The Exchange Act of 1934 are the solid foundations of most of the investor protection laws and rules that have followed.

For example, the comprehensive package of changes and reforms that comprised the Sarbanes-Oxley Act of 2002 (assembled as “Public Companies Accounting Reform and Investor Protection Act” in the US Senate [and] “Corporate and Auditing Accountability, Responsibility, and Transparency Act” in the House of Representatives, with 11 separate “titles” in what we today call “Sarbanes-Oxley”) was in part constructed on the solid foundation of the 1934 legislation.

An important driver for SOX moving ahead in the Congress were the collapse of Enron and WorldCom and other firms – dramatically impacting many investors who clamored for change.  (Ah, such crisis events – quicken the pulse and move legislators do the their job.)

The passage of the Employee Retirement Income Security Act of 1974 (“ERISA” for shorthand) following collapse of some retirement plans and reports of negative practices at others was intended to protect plans and participants and address fiduciary duties; included was provision for greater transparency for (private industry) retirement and health plans and those who manage them.

Part of ERISA provides fiduciary responsibilities for managers / those who are in control of plan assets. The agency responsible for enforcing the rules:  The U.S. Department of Labor, a cabinet office of the Executive Branch. And subject, of course, to the political winds of the day.

It’s important to note that the critical elements of the above sweep of Federal government policymaking (enacting laws, assigning responsible arms of government, developing rules, procedures, interpretations & guidance for players involved) are protection. 

The independent Securities & Exchange Commission, as example, was established in 1934 under The Exchange Act to enforce both the ’33 and ’34 acts — essentially to protect investors.

Protection – Guidance:  All good and well.  But these important creations of political bodies are subject to the politics of the time, the era, the whims of people elected to high office and the people they in turn appoint to manage regulatory agencies.

And so, we come to today’s sustainable investing and corporate sustainability topics.

We ask:  are the operating rules, guidance, enforcement, agency management philosophies…keeping up with important changes? Like the emergence of investor preference for sustainable products, including in their retirement and health plans?

Many eyes are on the SEC these days with the Biden-Harris Administration putting forth an aggressive “climate crisis” agenda; with the Federal Reserve System adopting climate change-related policies; and a few days with the easing-off-leading-to-reversal policy of the US DOL with regard to guidance on consideration of ESG in investment decision-making by fiduciaries of plans.

The last is in focus for our Top Stories in this issue of the G&A Institute weekly newsletter.

As a brief example of the to and fro of political positioning by regulatory agencies – from Trump-era decision to Biden-era decision (reversal).

The changes moved quickly at Labor (November 2020 to March 2021).  The decisions to be made at the SEC, sought by many investors to address both ESG risk (protection) and opportunity for investors is a much more complicated story.  No doubt in weeks to come there’ll be welcome news there to share with you in the newsletter.

The sturdy foundations of the ’33, ‘34’ ’74, ’02, and 2010 and other laws and rules can be built on to address both corporate and investor ESG needs & wants in 2021.

For now – take a look at the to and fro of current ESG policies at the US Department of Labor ERISA situation.

TOP STORIES

Pre-crisis, Critical Event(s) / In Crisis! / Prevention, Mitigation – Where Will the World Act in the Context of Climate Change?

March 29  2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

At certain times, an unknown unknown may strike, rapidly triggering a serious crisis situation.  Think of a tsunami or earthquake.

Many other times the crisis situation occurs and there are at least a dozen, maybe even dozens of precursor events or activities that over time / if neglected by leadership set up the going over the cliff situation.

The G&A Institute team members have collectively helped to manage literally hundreds of critical events or crisis situations over the years for corporate, fiduciary, social sector and other clients.

Alas, we have seen many critical issues and/or events spin into dramatic crisis situations over time — but none with the scale of the dangers posed to humanity and planet by climate change.  Ignoring this is not an option for humankind.

The crisis situations that can be pretty accurately projected or forecast are often years in the buildup.

Leaders may ignore unpleasant situations until things do spin out of control.  There is the powerful human capacity for denial – this can’t be happening / this won’t happen / there are slim chances that “this” will go wrong, and we will lose control of things.

Until things do go terribly wrong.

Think of the September 11th 2001 terrorist attacks – 20 years ago this year.

What could have been to prevent these? Read the many pages of the report on the attacks published by the US government — you will see page-after-page of factors that illustrate the points made here.

Or, the damages of Hurricane Katrina.  Things were going well in New Orleans – until they were not.

There is the unbelievable, tragic opioid epidemic in the USA. Was anyone tuned in to the unbelievable flow of opiods in the State of West Virginia and other locales?  Many many doses per resident – who was consuming them and why?

Right now – there is the still-out-of-control, worldwide Covid pandemic. There will be abundant case histories published on this in the years to come.

Think about the Exxon Valdez oil tanker spill crisis in vulnerable Alaskan waters 30 plus years back — and what could have been addressed in preventative measures. (We did numerous corporate management workshops on this event, walking through two dozen clearly-visible precursor events.  One factor impacted another than another. And another.

Think about what could have been addressed up front to address these situations and other classic crisis situations well ahead of time to prevent or limit the human and physical costs.  The good news?

We have time today to address the unbelievable potential harm to human and widespread physical damages that we will see in the worst cases in global climate changes.

It takes recognition of these serious risks and dangers, the political will to act, widening public support of the leaders’ actions, and considerable financial investment.  So – ask yourself – are we on target with limiting of damages, mitigation for the worse of possible outcomes, and most important, in taking prevention strategies and actions?

Each of us must answer the question and then take action.  The encouraging news is that collective action is now clearly building in volume and momentum – that’s the focus of some of the Top Stories we selected for you in the current newsletter.  There are valuable perspectives shared in these stories.

The world stands at critical point, said UN Deputy Secretary-General Amina Mohammed to European Parliament Vice President Heidi Hautalan, referencing the 2030 Agenda for Sustainable Development.

The United Nations is working to strengthen its partnership with the EU to deliver on the 17 Sustainable Development Goals (SDGs – with 169 targets for action). “The work is more urgent than ever” was the message.  This is the decade for multilateral engagement and action – we are but nine years away from a tipping point on climate disasters.

Many companies in North America, Europe, Asia-Pacific and other regions have publicly declared their support of the SDGs – but now how are they doing on the follow up “action steps” – especially concrete strategies and actions to implement their statements (walking-the-talk on SDGs)?

The Visual Capitalist provides answers with a neat infographic from MSCI; the powerhouse ESG ratings & rankings organization sets out the SDG alignment of 8550 companies worldwide.

Are they “strongly aligned” or “aligned” or “misaligned” or “strongly misaligned”?  Looking at this important research effort by MSCI, we learn that 598 companies are “strongly misaligned” on Responsible Consumption and Production” (Goal 12) – the highest of all goals.

Could we as individual consumers and/or investors and/or employees of these firms help to change things in time?  (Back to the proposition — Think about what could have been addressed up front to address these situations and other classic crisis situations well ahead of time to prevent or limit the human and physical costs.)

Are we willing to make tough decisions about these enterprises – about the climate crisis overall?

And this from the world’s largest asset manager, BlackRock:  The firm will push companies to step up their efforts to protect the environment from deforestation, biodiversity loss and pollution of the oceans and freshwater resources.  T

his from guidelines recently published by the firm, including the readiness to vote against directors if companies have not effectively managed or disclosed risks related to the depletion of natural capital – the globe’s natural resources.

President Joe Biden, in office now for just over two months, has a full plate of crisis, pre-crisis and post-crisis situations to deal with.

Intervention is key, of course, President Biden and VP Kamala Harris have set out the “Climate Crisis Agenda” for our consideration.  One of the big challenges?  Our oceans – and the incoming head of the National Oceanic and Atmospheric Administration (NOAA) will be on point for this part of the agenda.

NPR Radio had interesting perspectives to share on the warming of the oceans and what can be done to prevent further damage.

We bring you the details of all the above in our selections of Top Stories for this week’s newsletter.  Of course, there is action being taken.  Is it enough to prevent global disasters as the climate changes?

Your answers and actions (as well as “ours”) can help to determine the answers!

TOP STORIES for you…

Eyes on Financial Accounting and Reporting Standards – IASB & FASB Consider “Convergence” and Separate Actions

by Hank Boerner – Chair & Chief Strategist – G&A Institute

March 2021

Investors Call For More Non-Financial Standards for Corporate Reporting, Less Confusion in “Voluntary” Disclosure.

Should there be more clarity in the rules for corporate sustainability accounting and reporting as many more investors embrace ESG/Sustainable analysis and portfolio management approaches?

Many investors around the world think so and have called for less confusion, more comparability, more credible and complete corporate disclosure for ESG matters.

Accounting firms are part of the chorus of supporters for global non-financial disclosure standards development.

Where and how might such rules be developed? There are two major financial accounting/reporting organizations whose work investors and stakeholder rely on: The International Accounting Standards Board (IASB) and in the United States of America, the Financial Accounting Standards Board (FASB). Both organizations develop financial reporting standards for publicly traded companies.

There are similarities and significant differences in their work. The US system is “rules-based” while the IASB’s approach has been more “principles-based” The differences have been diminishing to some degree with the US Securities & Exchange Commission more recently embracing some principles-based reporting.

By acts of the US Congress, FASB (a not-for-profit) was created and has governmental authority to impose new accounting rules — while the IASB rules are more voluntary.

The US system has “GAAP” – Generally Accepted Accounting Principles for guidance in disclosure. The adoption of IFRS is up to individual countries around the world (144 nations have adopted IFRS).

The IASB standards are global; these are the “IFRS” (International Financial Reporting Standards) issued by the IASB.

The FASB standards are used by US-based companies. For years, the two organizations have tried to better align their work to achieve a global financial reporting standard – “convergence”.

The IFRS Foundation is based in the United States and has the mission of developing a single set of “high-quality, understandable, enforceable and globally-accepted accounting standards (the IFRS), which are set by IASB.

In 2022 IASB and FASB will have a joint conference (“Accounting in an Ever-Changing World”) in New York City to “…strengthen connections between the academic and standard-setting communities…” and explore differences and similarities between US GAAP and IFRS Standards.

Consider that the Financial Stability Board (FSB), which launched the TCFD, is on record in support of a single set of high-quality global accounting standards.

Convergence. In the USA, the “whole of government” approach to the climate crisis by the Biden-Harris Administration may result in encouragement, perhaps even rules for, corporate ESG disclosure. The IASB is not waiting.

The IFRS Foundation Trustees are conducting analysis to see whether or not to create another board that would issue global standards for sustainability accounting and reporting.

A proposal will come by the time of the UN Climate Change Conference this fall. Should the IFRS foundation play a role? The International Federation of Accountants (IFAC) thinks so.

Many questions remain for IASB and FASB to address, of course. This is a complex situation, and we bring you some relevant news in the newsletter this week.

TOP STORIES

Here’s an update from the IFRS Foundation and what is being considered:

Meanwhile, the European Commission separately is exploring how to strengthen “non-financial” reporting – there’s the possibility that there could be EU standards developed:

Helpful information about the FASB-IASB differences:

Expanding Public Debates About the “What” & “How” of Corporate ESG Disclosure

by Hank Boerner – Chair & Chief Strategist – G&A Institute

March 2, 2021

Corporate sustainability / ESG reporting — What to disclose? How to frame the disclosures (context matters!)? What frameworks or standards to use?  Questions, questions, and more questions for corporate managers to consider as ESG disclosures steadily expand.

We are tuning in now to many more lively discussions going on about corporate ESG / sustainability et al public disclosures and structured reporting practices — and the growing complexity of all this disclosure effort, resulting often in disclosure fatigue for corporate practitioners!

Corporate managers ponder the important question:  which of the growing number of ESG frameworks or standards to use for disclosures? (The World Economic Forum (WEF) describes some 600 ESG guidelines, 600 reporting frameworks and 360 accounting standards that companies could use for reporting.  These do vary in scope, quantity, and quality of metrics.)

In deciding the what and how for their reporting, public companies consider then the specifics of relevant metrics and the all-important accompanying narrative to be shared to meet users’ rising information needs…in this era of emergent “stakeholder capitalism”.

Of course, there is the question for most companies of which or what existing or anticipated public sector reporting mandates will have to be met in various geographies, for various sectors and industries, for which stakeholders.

We here questions such as — how to get ahead of anticipated mandates in the United States if the Securities & Exchange Commission (SEC) does move ahead with adoption of new rules or at least strong guidance for corporate (and investor) sustainability reporting.

The European Union is today ahead in this area, but we can reasonably expect the USA to make important moves in the “Biden Climate Administration” era.  (The accounting standards boards are important players here as well as regulatory agencies in the sovereign states.)

Company boards, executive committees, professional staff, sustainability team managers wrestle with this complex environmental (for ESG disclosure) as their enterprises develop strategies, organize data flows, set in place data measurement protocols, and assemble the ESG-related content for public disclosure. (And, for expanded “private sharing” with ESG ratings agencies, credit risk agencies, benchmark/index managers, to meet customer ESG data requests, and more).

The list of issues and topics of “what” to disclose is constantly expanding, especially as institutional investors (asset owners and their managers) develop their “asks” of companies.

Climate change topics disclosure is at the top of most investor lists for 2021. Human Capital Management issues have been steadily rising in importance as the COVID-19 pandemic (and spread of variants) affects many business enterprises around the globe.

In the USA, SEC has new guidance for corporate HCM disclosures.  Political unrest is an issue for companies.  Anti-corruption measures are being closely examined.

Diversity & Inclusion (including in the board room and C-suite) is growing in importance to investors.

Also, physical risk to corporate assets in the era of superstorms and changing weather patterns – what are companies examining and then reporting on?  Exec compensation with metrics tied to performance in ESG issues is an area of growing interest.

We are monitoring and/or involved in multiple discussions and organized initiatives in the quest to develop more global, uniform, comparable, reliable, timely, complete, and assured corporate sustainability metrics, and accompanying narrative.  And, to provide the all-important context (of reported data) – what does the data mean?  It’s a complicated journey for all involved!

This week we devote the content of this week’s Highlights newsletter to various elements of the public discussions about the many aspects of the journey.

Here at G&A Institute, our team’s recommended best practice:  use multiple frameworks & standards that are relevant to the business and meet user needs; these are typically then disclosed in hybridized report where multiple standards are harmonized and customized for the relevant industries and sectors of the specific company’s operations and reflect the progress (or even lack of) of the enterprise toward leadership in sustainability matters.

This approach helps to reduce disclosure fatigue for internal corporate teams challenged to choose “which” framework or standard and the gathering of data and other content for this year’s and next year’s ESG disclosures.

We shared our thoughts in a special issue of NIRI IR Update, published by the National Investor Relations Institute, the important organization for corporate investor relations officers:


Here are our top selections in the content silos for this week that reflect the complexity of even the public debates about corporate ESG disclosure and where we are in early-2021.

TOP STORIES

The ever-evolving world of ESG investing from a few different points of view. What are the providers of capital examining today for their portfolio or investable product decision-making?  Here are some shared perspectives:

Game Changing News on Climate Crisis Actions – President Biden Announces “Whole of Government” Plans

By Hank Boerner – Chair and Chief Strategist – G&A Institute

What a time to be a sustainability advocate – January 2021 is it!  There was significant news in the USA on matters related to meeting climate change challenges. Start with the Biden-Harris Administration bold moves on addressing the climate crisis…

President Joseph R Biden, in his first days in office signed Executive Orders to commit the “whole of government” to addressing the climate crisis in the USA — and around the world.

The President of the United States of America has broad, sweeping powers as the elected head of the Executive Branch of government.  Presidential EO”s must be anchored in the existing laws of the land (such as the Clean Air Act), be within the powers of the presidency as set out by the Constitution of the United States, and serve as the “directives” and instructions (as well as memoranda and “findings” and more) from the head of the Executive Branch to the organs of the Federal government of the United States of America.

The American Historical Institute explains the EO serves to deliver direct orders, intrepretation of law, provide guidance for future regulatory actions, structure government institutions or processes, and make political statements (foundations of policy). This is an often-used approach creating policy.

American heads of state have used the EO process at least 20,000 times dating back to the days of President George Washington – these orders can be challenged by the other two branches of the U.S. government (Judicial and Legislative).

The Biden Executive Orders are assembled in “Tackling the Climate Crisis at Home and Abroad” – the EOs issued “take bold steps” to combat the climate crisis at home in the USA and throughout the world with many elements included (starting with rejoining the Paris Agreement). Consider:

  • The climate crisis will be “centered” now in U.S. foreign policy and in national security considerations.
  • There will be a climate leaders’ summit in the USA on Earth Day (in April 2021).
  • The Major Economies Forum will be re-convened.
  • A new Special Presidential Envoy is appointed (former Secretary of State John Kerry).
  • The USA’s process to address the “Nationally Determined Contribution” (NDC) called for in the Paris Accord is now underway.
  • The National Intelligence Estimate on security implications of climate change is to be prepared by the Director of National Intelligence for the White House.
  • The White House Office of Domestic Climate Policy is established (headed by former US EPA Administrator Gina McCarthy).
  • Important: the National Climate Task Force is created; this brings the top leaders of the Federal government across 21 agencies (all Cabinet officers) to implement the president’s climate agenda.
  • Clean energy job creation is an important objective – this to be part of the “Build Back Better” initiatives.
  • “Made in America” for manufacturing is a pillar; the Order directs all agencies to buy “carbon-pollution-free” electricity for all government facilities and clean, zero-emission vehicles to help create good paying, union jobs and stimulate clean energy industries.

There’s more – rebuilding infrastructure (focus on “green” here); advancing conservation; reforestation; revitalizing communities left behind as the transition to clean energy displaced workers in fossil fuel extraction and processing; developing approaches to secure “environmental justice” for communities; spurring economic growth; bringing science back into climate change discussions; creating a Presidential Council of Advisors on Science and Technology.

The White House is now reviewing more than 100 of the Executive Orders of the prior administration to reinstate protections for air, water, land and communities.

This is sweeping and presents abundant opportunities and risks for both the corporate community and the capital markets. (As the EOs were being announced, General Motors unveiled its plan to “go all electric” in vehicle manufacture by 2035!)

We have prepared a Resource Paper to explain and explore the many implications for the Biden-Harris Administration moves to address the climate crisis. You can download the paper here: https://www.ga-institute.com/research-reports/resource-papers/biden-harris-white-house-actions-a-ga-resource-paper.html

In the days ahead we will be preparing numerous commentaries for this blog on the many (!) developments aligned with, and supporting, the presidential moves of this week. Stay Tuned!