© REUTERS

One thing to start: another day, another round of nail-biting drama in Washington. as Moral Money went to press, speculation was sky-high about whether Congress would press ahead with the impeachment of Donald Trump.

But while the world waits to see what would happen next, on Tuesday night the US Chamber of Commerce joined other business groups in warning that it would yank donations from politicians linked with Trump. Is this too little, too late? Or is business finally using its muscle to take a stand? Opinions are mixed, The one thing that is crystal clear is that political tumult has put a new spotlight on the “S” in ESG. Read on.

Chiefs find a licence to lead as trust in other institutions crumbles

For more than two decades, the Edelman Trust Barometer has helped set the agenda for business leaders gathering in Davos each January. This year’s World Economic Forum annual meeting is a virtual one, but there’s as much food for thought as ever in the 28-country study. 

Much of the study covers how governments squandered the shortlived surge in public trust they enjoyed early in the pandemic. But the flipside of this, is that business has now emerged as by far the most trusted institution in most countries — more than governments, NGOs or, dare we say it, media. 

According to Richard Edelman, the PR company chief executive who Moral Money’s Gillian Tett will be interviewing today, this gives business a licence to lead on social issues. 

With people expressing more trust in their bosses than their elected leaders, he says, “CEOs have to be willing to act and not wait for government when there’s a lack of clarity”, whether that be about reopening plans or vaccinations. 

And with an “infodemic” raging in which there is little trust in the information coming from governments or media sources, he adds, “I think business has to take on the responsibility for being a quality source of information”. 

The survey suggests large majorities support chiefs stepping in when governments do not fix societal problems. However, readers may also want to note that there was far less support for business leaders holding governments to account or speaking out on civil unrest. (Andrew Edgecliffe-Johnson)

Picks and shovels for the ESG gold rush

© Getty Images

Yesterday, Switzerland joined the growing list of countries throwing support behind the Taskforce on Climate-Related Financial Disclosures (TCFD), the reporting framework designed to provide a clear look at whether companies are on track to meet the Paris climate accord’s goals.

This will be welcome news for investors, who are increasingly demanding environmental, social and governance information. Some companies, on the other hand, might not be so excited.

The Swiss did not go as far as the UK or New Zealand, which made these disclosures mandatory, but their TCFD endorsement is a strong signal that companies everywhere are going to need to start preparing these disclosures.

The problem, however, is that such reporting takes up a lot of time and resources. And the market is still fragmented, meaning a TCFD report is just one of many they may be expected to produce.

There may be help on the way. There are strong indications that the world of ESG standard setters is coalescing. Even if things stay as they are, technology companies are stepping into the picture.

US-based Persefoni made a splash at the beginning of the year hiring Tim Mohin, the former chief executive of the Global Reporting Initiative, which is one of the heaviest hitters in the ESG data market. Persefoni is also working with private equity company TPG to help ascertain the carbon impact of its portfolio companies.

By integrating with a company’s existing enterprise software, such as SAP or Oracle, Persefoni extracts sustainability data from the information they are already tracking to create new reports. It also provides suggestions on how companies can cut their emissions.

This is no small undertaking. The necessary data often comes from disparate sources — and tracking them all is something smaller companies struggle with. But the key to making it work is the Greenhouse Gas Protocol, which Persefoni chief executive Kentaro Kawamori compares to the Generally Accepted Accounting Principles (GAAP) used by financial accountants.

“It gives us all the formulas: ‘this is how you calculate an air travel footprint versus a stationary combustion footprint’.” he said. “We take all that and normalise it . . . and then that gives us the basis to be able to create a SASB report and TCFD report, a GRI report and so and so forth.”

Persefoni is not the only company of its kind, but so far the market is wide open. Madelyn Antoncic, the former chief executive of SASB, made a similar move to Mr Mohin. She joined a company called Global AI in 2019, which uses big data and artificial intelligence to provide information on how companies are aligned with the UN’s Sustainable Development Goals. And big software companies such as Salesforce are rolling out their own carbon accounting platforms.

The opportunity appears to be huge for whoever gets it right. And as the old cliché goes, the best way to get rich in a gold rush is to sell picks and shovels. (Billy Nauman)

‘Could someone please call Brussels?’ A plea for biodiversity 

French president Emmanuel Macron and European Commission president Ursula von der Leyen at a video conference meeting during the One Planet Summit © AP

The “mute menace” stalking all of us working remotely struck again on Monday, as European Commission president Ursula von der Leyen launched into prepared remarks at a virtual conference with her microphone off. She was speaking to this year’s One Planet summit, which was established by French president Emmanuel Macron, the UN and World Bank to energise work on the Paris climate accords.

“Could someone please call Brussels?” Mr Macron pleaded as Ms von der Leyen talked on — unaware of the mic malfunction. It added a brief moment of levity to an otherwise dour topic for this year’s summit: declining biodiversity, or the menace humans pose to the world’s ecosystems.

The loss of biodiversity could drain nearly $10tn from the global economy by 2050. More than 85 per cent of wetlands that existed in 1700 were lost by 2000, and about one-third of the earth’s forests have been lost since the industrial revolution, HSBC said in a 2020 report.

In conjunction with Monday’s event, HSBC, in a joint venture with climate and investment company Pollination, Lombard Odier and Mirova pledged $10bn to biodiversity conservation, a move inspired by Prince Charles’s work on the topic. UK prime minister Boris Johnson has also freed up £3bn for marine and forest conservation.

For all the world leaders who participated on Monday, there was another menace lurking: Greta Thunberg. The environmental activist known for spoiling the fun of the international conference circuit trolled the summit on Twitter.

“Bla bla nature, Bla bla important, Bla bla ambitious,” she tweeted on Monday. 

It is a fair criticism, but one the EU is taking seriously. Last year, the EU launched a biodiversity strategy for 2030. The plan calls for a proposal for legally binding EU nature restoration targets in 2021, and on Monday the European Commission started a consultation on developing these binding restoration targets.

Maybe Mr Macron was on to something when he called to Brussels for help? (Patrick Temple-West)

Politically themed investments boosted after US Capitol riot

Since last week’s events, when a rightwing mob stormed the US Capitol, corporations have been falling over themselves to cut off political donations. Some have stopped giving to lawmakers who supported the president’s attempts to deny the outcome of the election. Some have stopped giving altogether.

How long they keep this up (and whether or not it has any effect) remains to be seen. But given that the companies in question include the largest US banks, it underscores the idea that business cannot be divorced from politics.

As we wrote this summer, an increasing number of investors are looking to drop companies that donate to politicians with whom they disagree.

In November, a company called Reflection Asset Management launched an ETF (with the ticker DEMZ) that only invests in companies that give “at least 75 per cent of their political contributions to Democratic candidates and political action committees”.

And over the past week data provider Floodlight, which works with investment managers to build customised portfolios tailored to people’s political leanings, has seen a surge in interest, said chief executive Nate Wyne.

“We’re really happy that more people are saying ‘this power is given to the people for a reason’ and we shouldn’t just keep doing this because we’ve always done it,” he said. (Billy Nauman)

Chart of the day

Line chart of Net greenhouse gas emissions  showing US emissions plunged in 2020

US greenhouse gas emissions rose less in 2020 than in any year since the second world war as the pandemic caused much of the US economy to grind to a halt. But they are expected to come roaring back when the economy recovers, providing a challenge to the incoming Biden administration.

Tips from Tamami

Nikkei’s Tamami Shimizuishi helps you stay up to date on stories you may have missed from the eastern hemisphere.

The movement to stop sourcing cotton from China’s Xinjiang region is gaining momentum, as clothing and textile companies face increasing pressure to take responsibility for their supply chains.

Retailer Marks and Spencer vowed to stop using cotton from the region last week, becoming one of the first official signatories of a call to action led by a coalition of human rights groups to stop abuses of Uyghur people. Labour groups, including Human Rights Watch, the AFL-CIO, and Worker Rights Consortium are supporting the campaign.

Fair Labor Association, a Washington DC-based non-profit, banned using cotton and textiles from the region at the end of last year. It was the first time the organisation, whose members include Nike, New Balance and Japan’s Fast Retailing, Uniqlo’s parent, had prohibited sourcing from a specific country or region in its 20-year history.

It’s no easy task to find an alternative source of cotton. The Xinjiang region accounts for 84 per cent of China’s cotton production and 20 per cent of the world’s. FLA, however, believes that its member companies can achieve the goal.

“There are a number of cotton-producing countries — in Asia, Africa, and the Americas — with the ability to increase supply over time, and possibly even in the short-term with the global forecast for cotton use down because of the Covid-19 pandemic,” said Sharon Waxman, president and chief executive of FLA.

Scott Nova, executive director at WRC, observed that the movement of companies disassociating from Xinjiang has been gaining traction in the past couple of months.

“This is a seismic shift from where most of these same corporations stood on the issue less than 12 months ago, when they were privately insisting that ending cotton sourcing from [the region] was either a logistical impossibility or would take many years to achieve,” said Mr Nova.

Further Reading

  • UK urged to introduce mandatory climate votes at AGMs (FT)

  • Germany seeks global corporate tax deal with Biden administration (FT)

  • Corporate America pulls political donations after Capitol assault (FT)

  • Investors start to pay attention to water risk (The Economist)

  • Kirin fails to dispel doubts on military-linked Myanmar partner (Nikkei)

  • Sustainability transformation: 6 tips you can steal from Ikea and Octopus (Sifted)

  • Shell case puts spotlight on energy groups’ role in climate change (FT)

  • Environment groups question UK’s carbon capture push (FT)

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