Unlocking Profitability Through ESG: IBM Study Debunks Myths and Highlights Opportunities
Weekly ESG Policy Roundup: Progress in Sustainability and Climate Action
This week in ESG policy, we cover a wide range of topics, from the Biden administration's bold plan to curb power plant emissions in the United States to a ground-breaking IBM study that reveals the profitability of ESG initiatives.
The Environmental Protection Agency's (EPA) proposal requiring power plants to significantly reduce their greenhouse gas emissions by 2040, targeting one of the largest contributors to climate change in the US.
A recent IBM study that debunks the myth that ESG initiatives hinder profitability, revealing that over 70% of executives view ESG as a revenue enabler and consumers increasingly factor in sustainability when making decisions.
In Asia, China and Singapore have joined forces to boost green finance in the region through the China-Singapore Green Finance Taskforce (GFTF). The GFTF aims to facilitate public-private collaboration and finance Asia's low-carbon transition, signalling a commitment by both countries to collaborate on green and transition finance.
The European Parliament has adopted key laws, including reforms to the EU Emissions Trading System (ETS), to reach its ambitious 2030 climate target of reducing greenhouse gas emissions by at least 55% compared to 1990 levels.
The Institutional Investors Group on Climate Change (IIGCC) has introduced a Net Zero Standard for Oil and Gas, offering investors a framework to assess oil and gas firms' commitments to achieving net zero emissions.
Join us as we delve into these developments, showcasing progress in the ESG landscape and highlighting the ongoing efforts to drive sustainable growth and combat climate change.
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EPA Unveils Bold Plan to Curb Power Plant Emissions by 2040
The Biden Administration is set to introduce a proposal requiring power plants to dramatically reduce their greenhouse gas emissions by 2040, targeting one of the largest contributors to climate change in the United States.
The proposed rule by the Environmental Protection Agency (EPA) would likely necessitate the implementation of carbon-capture technology or a switch to alternative fuels, such as hydrogen, in fossil-fuel-burning power plants.
While the electric power sector's emissions have been decreasing, it remained the country's second-largest contributor to climate change in 2021, accounting for a quarter of nationwide emissions.
President Biden previously promised to eliminate power plant emissions by 2035, and the new proposal is a significant step in that direction, although it extends the timeline to 2040.
The EPA's proposal, if implemented, would mark a major milestone in the Biden administration's fight against climate change. However, the plan is expected to face legal challenges and could be modified before its completion. As the proposal moves forward, environmental groups are likely to push for a faster timeline and stronger measures in line with the president's initial promise.
ESG Initiatives Prove Profitable for Businesses, IBM Study Reveals
A recent IBM study debunks the myth that ESG initiatives hinder profitability, revealing that over 70% of executives view ESG as a revenue enabler and consumers increasingly factor in sustainability when making decisions.
The study, which surveyed over 20,000 consumers and 2,500 executives, found that 76% of respondents consider ESG central to their business strategy and 45% expect improved profitability from ESG efforts.
ESG leaders reported greater impact on profitability, improved customer engagement, better risk management, and easier access to finance compared to companies with low ESG maturity.
Consumers prioritize environmental sustainability and social responsibility, with over 70% more likely to apply for a job at a sustainable company and over 50% paying a premium for eco-friendly products.
The IBM study highlights the growing importance of ESG initiatives for both businesses and consumers. However, data-related challenges still need to be addressed for companies to achieve sustainability goals and maintain transparency. This demonstrates the need for businesses to prioritize ESG data management and improve communication with stakeholders.
China and Singapore Join Forces to Boost Green Finance in Asia
The central banks of Singapore and China have launched the China-Singapore Green Finance Taskforce (GFTF) to deepen cooperation on green and transition finance, aiming to facilitate public-private collaboration and finance Asia's low-carbon transition.
The GFTF, co-chaired by Gillian Tan from MAS and Dr. Ma Jun from the China Green Finance Committee, consists of senior representatives and sustainable finance experts from both countries' financial institutions and green FinTech companies.
Priority areas for the taskforce include taxonomies and definitions, products and instruments, and technology, with initiatives announced to achieve interoperability between Singapore and China's taxonomies and strengthen sustainability bond market connectivity.
Singapore-based Metaverse Green Exchange and the Beijing Green Exchange will establish a technology-focused workstream to facilitate sustainable finance adoption, including a pilot initiative for digital green bonds with carbon credits.
The establishment of the GFTF signals a commitment by China and Singapore to collaborate on green and transition finance, fostering public-private partnerships and driving capital flows to support a sustainable, low-carbon future for the region. The taskforce will play a crucial role in catalysing concrete initiatives and promoting knowledge exchange among stakeholders in both countries.
EU Parliament Passes Major Legislation to Achieve 2030 Climate Goals
The European Parliament has adopted key laws, including reforms to the EU Emissions Trading System (ETS), to reach its ambitious 2030 climate target of reducing greenhouse gas emissions by at least 55% compared to 1990 levels.
ETS reform includes phasing out free allowances for companies between 2026 and 2034 and establishing a separate ETS II for road transport and building fuel, which will price GHG emissions from these sectors starting in 2027 or 2028.
The maritime sector's GHG emissions will be included in the ETS for the first time, while the ETS for aviation will be revised, phasing out free allowances by 2026 and promoting sustainable aviation fuels.
The EU Carbon Border Adjustment Mechanism (CBAM) aims to incentivize non-EU countries to increase their climate ambition and prevent production relocation from the EU to countries with less stringent policies.
The EU Social Climate Fund (SCF) will be established in 2026 to ensure a fair and socially inclusive climate transition, providing support to vulnerable households, micro-enterprises, and transport users affected by energy and transport poverty.
The European Parliament's adoption of these critical legislations demonstrates the EU's commitment to achieving its 2030 climate targets. The reforms to the ETS, the introduction of the CBAM, and the creation of the SCF all work together to ensure a comprehensive, fair, and ambitious approach to combat climate change and promote sustainable growth.
IIGCC Unveils Net Zero Standard to Evaluate Oil and Gas Firms' Transition Plans
The Institutional Investors Group on Climate Change (IIGCC) has introduced a Net Zero Standard for Oil and Gas, offering investors a framework to assess oil and gas firms' commitments to achieving net zero emissions.
The standard "levels the playing field" on disclosure, enabling investors to identify companies with a genuine intention to transition and increasing scrutiny on the sector's transition commitments.
Developed in collaboration with the Transition Pathway Initiative, investors, and regional investor groups, the standard is designed to complement the Climate Action 100+ (CA100+) Net Zero Company Benchmark.
Results from a pilot study show increased transparency over decarbonization plans, but emphasize the need for continued improvement in aligning targets and plans with 1.5°C scenario benchmarks.
The standard provides clarity around investors' expectations on offsets, target-setting, just transition, and climate lobbying, while helping assess the credibility of a company's transition plan during AGM votes.
The IIGCC's new Net Zero Standard for Oil and Gas represents a significant step in holding companies accountable for their transition commitments. By providing a rigorous framework to evaluate the credibility of these plans, the standard empowers investors to make more informed decisions and promote alignment with 1.5°C climate scenarios, ultimately driving the sector towards a more sustainable future.