Our guest for Quick Takes episode #3 is Doug Miller. Doug has had several roles in the renewable energy space, combined with blockchain. After four years at Energy Web developing blockchain solutions for energy transition needs, he recently became deputy director at the Clean Energy Buyers Association (CEBA) and is a co-founder of Zero Labs, a new startup grown out of Energy Web. Zero Labs will proceed to build a public tokenized renewable energy marketplace to boost market access, starting with crypto buyers. Check his twitter for the latest updates.
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The Task Force on Climate Related Financial Disclosures (TCFD) was established in 2015 by the Financial Stability Board to develop recommendations for more effective climate related disclosures. In 2017, the TCFD published a set of recommendations to guide companies in providing better climate related reporting, which has since become the global standard for climate disclosures. The TCFD Alignment Barometer, delivered through ESG Book, supports corporates and investors in understanding the TCFD recommendations and the reporting landscape.
Since the birth of civilisation, language has been one of humanity’s greatest tools. Developing alongside human society, language has become more than simple communication and education, having the power to shape perspectives and attitudes towards the subject at hand.
As early as the 18th century, when shipbuilding and mining were consuming increasing amounts of wood , people in Europe have been conscious about resource sustainability. Then, in 1975, US scientist Wallace Broecker brought the term ‘global warming’ into the public’s consciousness after including it in the title of one of his papers . Public awareness of the issues around sustainability and climate change has existed for decades, even centuries, but has never been as widespread as it is today. This growing recognition can be explored by taking a deeper look at how the language of climate change has evolved and the importance that this has.
Talking About Climate Change
The concepts of climate change and global warming originated with the scientific community. Consequently, important evidence-based information is often communicated to the general public in scientific and technical language that hinders accessibility and understanding. The recent talk of the town of keeping global warming to less than 2 degrees Celsius by 2100, for example, bears little meaning unless it is put in context. This temperature increase could cause more than 90% of global coastlines to experience a 20cm sea level rise, increasing coastal flooding and reducing a third of per capita crop production in Southeast Asia, it could cause the annual reoccurrence of the 2015 heatwave in India and Pakistan, which killed nearly 1700 people in two of India’s worst-hit states alone , and it has the potential to kill all coral reefs . That being said, many of these extreme events have not yet been experienced, and their future consequences can only be conjured by our imagination.
The effects of global warming are often discussed to be materialising decades into the future. Such language reinforces the distinction between our present selves and our future selves. This separation is problematic, as studies have found that we experience difficulties forming bonds with our future selves. In fact, we have as much connection with our future selves as we do with a stranger that we pass by . This future-based discussion of climate change consequently fortifies the idea that climate change is somebody else’s problem, even though our actions now will directly impact and shape the world we will be living in in the future.
Another problematic observation of how we use language is the creation of a false dichotomy between us and nature. Phrases like ‘impact on the environment’ create the distinction that the environment is separate from us, whereas the phrase ‘impact on our environment’ emphasises that we exist as a part of it . This language use cumulates in the concerning situation where climate change becomes out of sight, out of mind.
What is more, there seems to be active underreporting with regards to climate change by some news outlets. A report on American media, for example, found that an entire year of climate news coverage was lower than what was received by the British royal baby Archie in a single week .
Figure 1: Word cloud of the commonly used words related to climate change in the Guardian from 2017 to 2020. Data obtained from The GDELT Project.
Taking A Closer Look: Climate Change In The Eyes Of Oil And Gas Companies
Oil and gas companies have been among the most vigorous opponents of climate related policies, with expenditure on climate lobbying reaching up to $53 million a year . This defensive stance against climate change mitigation carries through in their annual reporting. An analysis of the corporate social responsibility and environmental reports from 2000 to 2013 highlights a few linguistic techniques oil and gas giants use to deflect having to take actions to mitigate climate change.
Preference for ‘climate change’ as opposed to ‘global warming’
‘Climate change’, while being a more scientifically comprehensive description , is a neutral term, whereas ‘global warming’ implies a direct consequence – the warming of the planet. Furthermore, the Oxford English Dictionary definition for ‘global warming’ assigns human activity as the cause, while human agency is omitted from the definition for ‘climate change’.
Downplaying the strength of scientific evidence
While scientists often use uncertainty estimates to convey their confidence levels in the accuracy of their data, companies can misconstrue this uncertainty, turning it into scepticism of the evidence presented. In phrases such as ‘the risk of eventual climate change caused by anthropogenic emission’, the use of the hedge ‘eventual’ also serves to decrease the causal relationship between emissions and climate change.
Magnifying the importance of meeting energy demand
Although companies acknowledge the importance of managing emissions, they often introduce growing energy demand as a factor of equal importance, as ‘meeting the enormous energy demand growth and managing the risk of GHG emissions are the twin challenges of our time.’ This then construes that companies need to balance climate change mitigation efforts with their need to meet increasing energy demand, which is a favourable strategy for the oil and gas industry.
By including other stakeholders such as governments and consumers when addressing climate mitigation, companies shift the responsibility away from themselves towards a shared accountability with other societal actors. This downplays companies’ responsibility to change their behaviour or even lead the change.
Nevertheless, a more recent analysis of the reports of three energy companies highlights that these companies have acknowledged that climate change poses a business risk. One company has even embraced it as a business opportunity, hinting at a positive shift in how the energy industry views climate change .
Putting Climate Change At The Forefront Again
Figure 2: Use of the phrase ‘Climate Change’ compared to ‘Climate Crisis’ and ‘Climate Emergency’ from January 2015 to April 2021 in the UK parliament. Data obtained from Hansard.
As the years pass, the negative consequences of climate change become ever more apparent. The need for us to adapt our behaviour to prevent fur ther environmental damage has been stated time and time again through protests and individual activists such as Extinction Rebellion and Greta Thunberg. The media has also taken considerable steps to change how they repor t on climate change issues, a move that has significant effects given the media’s wide reach.
In 2019, the Guardian made a climate pledge to make six changes to the language used in their reporting. These include the rebranding of ‘climate change’ to ‘climate emergency’ or ‘climate crisis’ to reflect the urgency with which we need to take action as well as replacing ‘climate sceptic’ with ‘climate science denier’ to emphasise the robustness of scientific evidence . A study of US news media content also revealed a positive shift in the language used in regards to climate change reporting. Research has found that there has been a decline in framing climate change as economically costly as well as a sharp decrease in communicating the uncertainties associated with climate science, both of which reduce an individual’s inclination to support and engage in climate action . In contrast, language conducive to climate action engagement has been on the rise. These include emphasising the economic benefits of climate action and communicating climate risk in the present tense. As American feminist writer, Rita Mae Brown says, ‘language exerts hidden power, like the moon on the tides.’ Let us be mindful of and actively use this power to make a positive change in our environment.
The proliferation of sustainability data has come at a (not so trivial) cost to data preparers (who are usually the reporting companies themselves), investors, NGOs, academia and other stakeholders like regulators and policymakers. In light of the relatively nascent nature and obscurity of sustainability disclosures, it comes as no surprise that the collection, systematization and analysis of Environmental, Social and Governance (ESG) data metrics entails significant time resources and financial expenditure.
As spending on ESG data continues to grow at an annual rate of 20%, it is projected to reach USD 1 billion by the end of 2021 . This in turn has created arbitrage opportunities for incumbents and established market players who seek to profit from limited transparency and the high barriers to entry related to ESG data provision.
With the reliance on ESG data intensifying, there are significant opportunities for lowering the costs involved in accessing ESG data – both for reporting entities, as well as for end-users of the data. With more eyes watching, further integration of sustainability metrics in financial markets would benefit the quality and impact of sustainability information. This blog explores the idea of ESG data as freely accessible information.
Using and reporting ESG data are costly exercises (for now)
In a study undertaken by the European Commission on the anticipated costs of compliance for upcoming corporate disclosures under the new EU Corporate Sustainability Reporting Directive (CSRD), policymakers expect that the annual reporting cost of such disclosures for the 49,000 European companies in scope of the Directive will amount to no less than EUR 3.6 billion, with EUR 1.2 billion in one-off implementation costs.
These rising data and compliance expenditures will fall disproportionately on smaller companies that are not as well-equipped with sophisticated corporate social responsibility (CSR) or sustainability departments, like their large counterparts.
On the flipside, as ESG becomes increasingly relevant and disclosures – more sophisticated with more companies and other market players reporting, consuming ESG data is also becoming resource-intensive. The imperative of taking ESG into account has intensified in recent years, for reporting entities and end-users alike: ESG is truly entering the mainstream. Yet, the costs of accessing ESG data have not dropped as fast as the demand for ESG data scaled up.
Open-sourcing ESG data
What if ESG data became a public good? More accessible ESG data can serve the needs of market participants towards making better-informed and sustainability-driven investment decisions. At the same time, having ESG information as a universally available public good can empower individuals and consumers to make the right choices when it comes to the products and services they buy and invest in daily.
Of course, not everyone is interested (or capable) to keep track of sustainability information for their investments or purchases. But like public companies’ standard financial information, the ease of accessing standardized company data makes a world of difference. Newspapers and other media outlets facilitate information efficiency in financial markets and the economy also because the financial data of listed companies is considered a public good.
Practically, the right technology and efficiency-saving tools can reduce the marginal cost of standardized ESG data reporting and access. While it is unlikely that such a transition can take place overnight, enabling stakeholders to streamline their sustainability disclosures, centralize reporting and optimize for standardized data access can result in significant economies of scale. Capacity-building and technology will be at the heart of a better functioning sustainability data landscape that also tackles concerns of ‘greenwashing’ and misrepresentation of a company’s sustainability credentials.
Sustainability information could fall under a ‘digital global commons’ designation, meaning that this type of data is so important for achieving our global sustainable development agenda that it should be provided and accessible for free by members of the public and the contributing community, similar to the concept of cyberspace being available and accessible to all to use. Think Wikipedia, but for ESG data.
In the words of Mayo Fuster Morell, digital global commons info tends to be “non-exclusive, that is, be (generally freely) available to third parties. Thus, they are oriented to favor use and reuse, rather than to exchange as a commodity. Additionally, the community of people building them can intervene in the governing of their interaction processes and of their shared resources.” 
Further to that, in October 2020 the European Commission adopted its new Open Source Software Strategy 2020-2023. The key objective of the strategy is the possibility to reach European-wide digital sovereignty, enabling Europe to maintain its digital autonomy and spur innovation, creativity and breakthrough technological advances.
The benefits of publicly available sustainability data
Can we consider sustainability data as a digital global commons? To optimize for the number of viewpoints and impact, there is strength in the argument for making sure that basic access to ESG data and reporting should be better accessible to everyone, from the world’s largest publicly listed companies to the smallest family-owned enterprises. This level of transparency and freedom of information and disclosure would in turn enable the more efficient flow of capital towards businesses that truly meet the criteria for sustainable investing.
ESG data has its limits and greenwashing is a real issue. Some sustainability efforts fall under the marketing umbrella to appease consumers and investors who are willing and able to pay for an ESG ‘label’. Detailed and customized ESG analysis can become complex. Knowledge of ESG data can’t be free in all circumstances, but lowering the barrier to report and access ESG information would contribute to our joint understanding of how sustainability topics can affect our economies and long-term investment decisions. A better feedback loop between sustainability data providers (or reporting entities) and end-users would help address some of the pressing challenges behind integrating ESG data. It is an ongoing process of information retrievals, corrections and updates. Technology-driven transparency can highlight those organizations that do in fact take ESG seriously – and have them set the norm for others to follow.
 These figures are additional to any EU Taxonomy related disclosure costs of EUR 1.2 – 3.7 bn in one-off costs, as well as EUR 600 – 1.500 million in recurring costs per year. Proposal for a DIRECTIVE OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting.
 Fuster Morell, M. (2010, p. 5). Dissertation: Governance of online creation communities: Provision of infrastructure for the building of digital commons.
Social media and online news have fundamentally changed the way people interact with companies. Posts on platforms like Twitter or LinkedIn, along with blogs and online news articles, provide accounts of stakeholder experiences with companies and their perception of corporate behaviour and allow for the rapid spread of these views. The latter shapes stakeholder perspectives and informs stakeholder actions. As such, social media and online news quickly mirrors and shapes corporate reputation, societal legitimacy, social license to operate, and stakeholder trust . An illustrative example is H&M’s “trashgate” scandal, where store personnel were found to be damaging and dumping unsold clothes in the garbage instead of donating them. Starting with an article in the New York Times, public outrage quickly spread across social media . It was one of the top-three trending topics on Twitter and remained so for several days. Only after the outrage, H&M decided to address the issue. After investigations, it was discovered that the particular New York store was violating the company’s policy which was to donate unsold clothing to charity. “Trashgate” was one of the first examples to show the ways in which social media could raise issues to news coverage, affect corporate publicity, and force companies to change their actions . It also illustrates how social monitoring can be a powerful asset in the world of sustainability, especially in terms of evaluating Environmental, Social and Governance (“ESG”) risk.
Over recent years, the use of ESG data and analytics has boomed in capital markets . Real-time news and social media data are receiving increasing attention in cutting-edge decision-making strategies. This popularity is grounded in the ability of ESG data to provide insights that are absent from typical financial data. Traditional financial information has limited usefulness to investors today as it allows for data that is both backwards-looking and that only encompasses a narrow financial base. As such, it is insufficient on its own to assess a company’s ability for future profit. For example, financial data did not indicate potential unethical behaviour by H&M, and it only picked up on the reputational (and financial) damage thereof once it had already happened. Therefore, both retail and institutional investors increasingly focus on ESG factors to assess companies. This is supported by ESG research that shows the positive relationship between a firm’s profitability and its ESG metrics  and illustrates that ESG data can help reduce portfolio risk .
However, ESG data in mainstream investing has three main challenges: most ESG data is qualitative, the landscape of corporate disclosures is incomplete and inconsistent, and disclosures are generally voluntary with sparse available data . Many pertinent issues do not manifest in disclosures or regulatory filings and, if they do, the delays caused by reporting and publication cycles can cause relevant data to be out of date by the time it is in the public domain. There is also a significant bottleneck in assessing ESG performance due to the manual effort in continuously sourcing and validating disclosure data. This bottleneck is even more prominent when dealing with large volumes of unstructured text data, such as social media or news. As demand for ESG increases, the need for accurate and near real-time responses to ESG issues becomes clear, and the ability to detect and represent such issues through data sources beyond a company’s filings is paramount. In the ever-changing investment landscape, news and social media data utilisation have become critical to ESG investment strategies.
To properly realise the potential of news data, millions of articles need to be processed daily, and one must look towards the power and capability of Machine Learning (“ML”). Latest advances in Natural Language Processing (“NLP”) increase/strengthen our ability to process unstructured text data. Moving away from pre-determined text/keyword ontologies of the past , advances in the field of deep learning have pushed the state-of-the-art towards Transformer-based architectures such as BERT . The key advantage here is leveraging context in decision making. Language is complex – for example, homographs exist, words whose meaning is entirely dependent on context. Without contextual understanding, false positives are likely, and many prominent classical methods are known to fall into this trap. Such approaches have focused on words and the frequency of their occurrence, with words weighted by how often they appear. For example, if a corpus of articles frequently mentions the word ‘exploitation’, such techniques can systematically discount its relevance. Similarly, identifying the difference between the word ‘carbon’ in the context of greenhouse gas emissions or when discussing carbon allotropes is critical in understanding the text in question. In other words, “context is king”.
Across the investment community, researchers and engineers are using machine learning in new and disruptive ways, analysing linguistic information from content, using ESG and sentiment data to determine a company’s commitment to ESG, and evaluating the impact of this commitment on stakeholders.  Sokolov et al.  show how BERT can be used as a classifier to aid in ESG Scoring, with aggregation approaches used on the output to construct a score. Such scores allow investors to recognise and understand what drives high and low ESG performance among their holdings, informing their approach for engagement. For instance, reflecting the impact of “trashgate” in their decision-making process for H&M. These also supplement brand and reputational risk management with a specific focus on sustainability issues and controversies.
At Arabesque S-Ray, we are committed to providing innovative tools and incisive insight into ESG data to empower businesses and investors. This includes substantial focus on applied NLP research, perfecting cutting-edge techniques and deepening sustainability expertise to provide granular insight into corporate behaviours. We are working to design the leading NLP-powered ESG-focused tools that will transform the way investors access and use social and traditional media signals in sustainable investing and aiding responsible business.
 – Pekka Aula, (2010),”Social media, reputation risk and ambient publicity management”, Strategy & Leadership, Vol. 38 Iss: 6 pp. 43 – 49
 – ‘‘Reputational risk in digital publicity’’ presented at the Viestinna¨n tutkimuksen pa¨iva¨t, February 12th, 2010, Tampere, Helsinki.
 – Laaksonen SM. Hybrid narratives: Organizational reputation in the hybrid media system. Publications of the Faculty of Social Sciences. 2017 Jun 16.
 – Lev, B., & Zarowin, P. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting Research, 37(2), 353-385.
 – Clark, Gordon L. and Feiner, Andreas and Viehs, Michael, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (March 5, 2015)
 – Friede, G., T. Busch, and A. Bassen. 2015. “ESG and Financial Performance: Aggregated Evidence from More Than 2000 Empirical Studies.” Journal of Sustainable Finance & Investment 5 (4): 210–233
 – Park, Andrew & Ravenel, Curtis. (2013). Integrating Sustainability Into Capital Markets: Bloomberg LP And ESG’s Quantitative Legitimacy. Journal of Applied Corporate Finance
 – Henriksson, R., J. Livnat, P. Pfeifer, and M. Stump. 2019. “Integrating ESG in Portfolio Construction.” The Journal of Portfolio Management 45 (4): 67–81.
 – Lee Y. H., W. J. Tsao, and T. H. Chu. “Use of Ontology to Support Concept-Based Text Categorization.” In Designing E-Business Systems. Markets, Services, and Networks, edited by C. Weinhardt, S. Luckner, and J. Stößer, 201-213. WEB 2008. Lecture Notes in Business Information Processing, vol 22. Berlin, Heidelberg: Springer. 2009.
 – Jacob Devlin, Ming-Wei Chang, Kenton Lee, and Kristina Toutanova. 2018. BERT: Pre-training of Deep Bidirectional Transformers for Language Understanding.
Producing reliable environmental, social, and governance (ESG) data has become paramount for companies in the last few years. With it, they can demonstrate how they are reducing their carbon footprint, protecting their social capital, or complying with the booming disclosure landscape.
Reliable ESG data helps companies identify potential risks, manage resources, and remain compliant with regulation. But it can be much more than a backwards looking tool. The most ambitious companies that we work with at Arabesque are looking to transform ESG data into a competitive advantage, producing actionable business intelligence which will set them apart from their competitors.
The biggest hurdle to this is perhaps the most obvious. How can I ensure that I have access to reliable ESG data? What does it look like, and how can I gather it? These are the sort of questions which have, until recently, puzzled business leaders. They’re also the questions that we are answering at Arabesque.
Looking at the first frameworks to regulate ESG data disclosure is like looking at an early map of the first railways. A hodgepodge of private enterprises, many overlapping and intertwining, suffering from a lack of unification. Today, companies have a confusing mixture of compulsory and voluntary frameworks to report against. Even if they fulfil their obligations, most reporting companies do not disclose the same data in the same way. Some are simply unaware of their obligations.
Cutting through all this noise is crucial. Investors, underwriters, regulators (not to mention companies themselves) stand to benefit enormously from a market and supply chain greased with the oil of reliable data. But it is impossible for the vast majority of organisations to confidently gather the information required under their own steam.
This is why companies look to the likes of Arabesque to supply global markets with transparent, accessible and coherent ESG information; to help investors respond to customer values, enable corporates to meet a growing wave of disclosure requirements, and to provide the wider market with meaningful signals that enable an informed allocation of capital.
Our team prioritises Artificial Intelligence to help achieve this. We gather a vast amount of data; from traditional, more structured data, to a wide range of alternative sources of information such as the press, social media, or NGO activity. AI allows us to make sense of this highly complex mix of disclosed information and short-term signals. It can rationalise thousands of competing and overlapping sustainability metrics into a high-quality picture of a company’s ESG credentials.
As the volume of sustainability data increases – in the next eighteen months we will see a slew of new regulatory requirements – it will become increasingly important for investors to work confidently with AI to make truly sustainable investment decisions.
Customisation is now the next stage of the journey. Being able to take a detailed look at the underlying information which companies disclose, and filter through the thousands of data points to reach the specific insight which a business requires is swiftly becoming not a ‘nice to have’, but a business necessity for organisations looking to balance consumer demand with maximising returns. Arabesque’s ‘Temperature Score’ is just one example of this.
Sustainability data will only become more important in years to come. The onus is now on companies to ready themselves with the tools needed to be leaders in using it.
In the months following last November’s COP summit, a welcome urgency has entered the conversation surrounding financial markets and their role in slowing climate change. But alongside this, a growing schism is emerging that pits clean, ‘green’, investible assets against dirty, ‘brown’, soon-to-be stranded ones. We must nip this facile outlook in the bud, or risk foregoing an opportunity to rapidly reduce emissions across a vast majority of the investible universe.
To view the world’s companies as either green or brown is to throw the net-zero baby out with the bathwater. By fixating on the extremities of this spectrum, we disregard the trillions of dollars of resource that the companies in between could deploy towards not only reducing their impact on the planet, but in some cases actively mitigating climate change elsewhere in the economy. It is time we engaged in a more grown-up conversation about the practicalities of a successful climate transition.
Remembering that the world’s 100 biggest companies are responsible for more than 70% of global emissions it is clear that, important as it is, we cannot rely on fuelling ‘pure green’ companies to do more good as the sole solution. It is also critical that we mobilise capital to help the rest to do less bad.
This is not permissiveness, or a concession. The global race to prevent irreversible damage to our planet is formed of multiple heats. One of these sprints, characterised by initiatives like the EU Taxonomy, is to rapidly channel capital to companies that directly slow climate change through their operations. However, another is to help companies with the resource and means to reduce their own impacts on the planet do so too.
Out of 30,000 of the world’s biggest listed companies, only 1% of their collective revenues are derived from pure green activities as defined by the EU Taxonomy in its current form, and 12% from brown. Putting aside the wider issue of the potential bubble this may point towards, these figures demonstrate that the world’s ‘pure green’ businesses do not yet have the capacity to deploy the volumes of capital currently invested elsewhere. There simply isn’t enough room on the green bandwagon for the number of investors clamouring to get on board.
So how can we put the remaining 87% of economic activity to good use? If we are to truly engage with those companies that are neither green nor brown, then markets need confidence that the transition is underway for them. Data and technology can and already do tell us this.
Data show us that since the Paris Accord was signed in 2015, the share of companies in the FTSE 100 whose environmental impact is aligned to a 1.5C temperature rise limit rose from 57% to 66%. Among the S&P 500, that figure grew from 28% to 46%. With the UN’s climate panel warning that emissions must fall by half by 2030, these improvements are clearly not enough, but it is a signal that with the correct data and a market focus on these transition companies, net emission volumes among the world’s biggest companies will continue to fall.
There are promising signs that this transition is gaining momentum. The volume of companies disclosing the sustainability data that enable markets to gauge their progress is growing. There are glimmers of harmonisation at the regulatory level, with disclosure frameworks like the TCFD being adopted by more countries. At a technical level, the International Financial Reporting Standards foundation, whose accounting standards are used by most of the world, is developing a framework for simple and consistent sustainability reporting.
With these initiatives falling into place, the infrastructure will be there for financial markets to play their part in mitigating the climate crisis and meeting the many heady goals and ambitions set out in at COP. But to do this, we must recognise that whether we like it or not, we need more than a few companies being perfectly sustainable: we also need millions doing it imperfectly.
“At The Crossroads – Leadership in the Age of Climate Change“ by Jouni Keronen and Mari Pantsar is a very timely book that offers a deep dive into the history and the causes of climate change and the available options to combat it at this late hour. The two Finish authors bring their lifelong experiences to bear, both as thinkers and as practitioners. In clear and simple language, they succeed in weaving together a compelling and solid narrative as they unpack and explain the scientific, historical, technological, economic and social aspects of manmade climate change.
A central element of the book is that humans, who depend on a somewhat stable climate for their survival, health, safety and progress, have in recent decades become a geophysical force. We have overstepped natural boundaries by dumping billions of emissions into the atmosphere. Our wasteful lifestyles poison soil and water and destroy natural habitats, causing climate disasters and destruction of the natural environment.
The authors pointedly probe the question what kind and what size of climate-related disasters will have to occur before the massive change efforts that are required to avoid the worst outcomes will be mobilized. Solutions for decarbonizing critical economic sectors are available. Environmental threats such as ozone depletion, urban pollution and acid rain have successfully been dealt with in the past. Effective carbon carbon pricing in particular would greatly accelerate the many efforts already under way.
The authors explain why policy makers and societies have failed so far and lay out the case for immediate systemic and massive actions. As the latest IPCC report has shown, the window of opportunity to avert dangerous warming is closing. We are at a crossroads and our actions today will decide about humanity’s future. There are three possible future scenarios, depending on the actions we take now:
The worst case is a hot house earth with much human suffering and chaos if we continue to postpone massive actions; a healthy and prosperous future can be achieved if we immediately start to employ systemic solutions such as effective carbon pricing; lastly, carrying forward incremental changes only will lead to a disorderly transition where governments eventually will be forced to take bold actions – the “ ban economy”.
“At The Crossroads”, which is available free of charge, has great educational value. It is to be hoped that policymakers, business leaders, educators and laypeople will read it and absorb its message, as climate leadership has to be everybody’s concern.
The book also provokes reflections. Here are my two cents’ worth:
My own generation, the baby boomers, have failed. We saw the writing on the wall but we did not take sufficient action. We found it convenient to ignore or postpone changes. We have built an enormous liability for our children and it is now our duty to correct our mistakes and to change course at the personal level and through the influence we still have.
Business and investors have at last started to take climate threats seriously. Decarbonization and circular material flows are becoming strategic guideposts for market success. But it is near-term action rather than long-term goal setting that needs to move center stage now. Decarbonizing the assets that were created in the past is one challenge. Moving ahead, however, we also need to ensure that we no longer build or maintain liabilities for the future, but instead mobilize investments that lead us to a carbon-neutral economy.
Policymakers need to wake up and understand the costs of inaction. Pretending that we can subsidize our way into the future without changing values and valuations will not work. It is time to be honest and to explain why systemic solutions – especially effective carbon pricing – are needed, to change the framework conditions in favor of decarbonization. Policymakers should not be allowed to hide behind cowardly and cynical arguments, such as that more ambitious actions would disadvantage the poorer segments of society. The opposite is true. The poor will suffer most from climate impacts. It is irresponsible not to protect society and the poor in particular. Moreover, the richest segments of societies have the biggest environmental footprint. If social concerns were truly the reason for postponing climate action, then clearly these concerns could easily be addressed as part of the transformation agenda.
Humanity as a whole needs to re-establish a healthy relationship with the natural environment. We all have a role to play and we all can make a contribution through our behavior. The choices we make on an individual level – how we travel, what we consume and how we invest – will be critical to change values and valuations. The book drives this message home.
We need to rediscover international cooperation. The United Nations itself can only do what big powers allow it to do. Paris was a success because of smart French diplomacy, European Union advocacy and, above all, the willingness by China and the United States to cooperate through the United Nations. The European Union has recently made great strides in laying the foundations for tackling the climate challenge through its expansion of the Emissions Trading System (ETS) and the willingness to link it with trade. Winning over other major powers to join a climate club that sets a minimum carbon price and phases out destructive subsidies for fossil fuels is one way to go. But rich countries have depleted most of the available carbon budget and therefore also have a responsibility to support developing countries in this transition. The promise made in Paris to provide climate finance to developing countries needs to be honored and more needs to be done. And maybe, just maybe, one day – hopefully soon – outdated foreign policy and power concepts will give way to planetary stewardship and climate politics based on the simple recognition that humanity has only one planet and that the real enemy is us.
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