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Welcome to a special edition of Moral Money. With the virtual versions of Climate Week and the UN General Assembly kicking off this week, we will be here to keep you up to speed on anything important you may have missed. Today we have:

  • The Big Four accounting firms team up on ESG

  • How will Ruth Bader Ginsburg’s death affect US environmental regulation?

  • Net zero pledges pile up

  • Resetting sustainable finance

  • Big company finance chiefs chart new path for sustainability

The Big Four come together on ESG

Covid-19 has produced many firsts. Here is another one: as the UN General Assembly meeting gets under way, the heads of all the rival Big Four accounting firms will sit together on a virtual podium for the first time ever (tune in at 9:30am EDT), to unveil a framework that they have jointly created for environmental, social and governance standards.

The aim of the initiative, spearheaded by Brian Moynihan, chief executive of Bank of America, and the World Economic Forum is to create more clarity in the current murky alphabet soup of rival standards (such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Boards (SASB), Task Force on Climate-related Financial Disclosures (TCFD) — to name but a few.

Participants say that the announcement has been given a new urgency due to the economic pain and social upheaval unleashed by Covid-19. “[Society’s] struggles have only got worse with Covid-19 and the only way we solve those problems is to get the capital to the right places,” Bob Moritz, head of PwC said. “We need a framework to help investors get the information they need for this.”

Or as Carmine di Sibio, head of EY, said: “This is the first time we [the Big Four] have done something like this. This will take what the Business Roundtable put out last year and make it real.”

A cynic might argue that this effort is so “collaborative” that it risks moving to the lowest common denominator, producing weak, broad-based standards. Some of the environmental metrics, for example, seem potentially less onerous than those proposed by the European Commission.

However, Mr Moynihan insists this misses the point: the framework aims to enable companies to show investors (and themselves) how they are changing their behaviour; it is as much a measure of progress, as statement of perfection and, as such, aims to create a pool of companies that financial institutions feel comfortable dealing with. “We should lend to companies [which adopt this], even if they are an oil and gas company, and investors should invest.”

But the Big Four are scrambling to catch up to the standards they’ve asked others to meet. The metrics have been under discussion for a year but the accounting groups that drew them up have themselves hitherto only reported on a third of the 21 measures in their own accounts. They are racing to comply with the rest, since they hope that most of the 130 members of the International Business Council will adopt the framework for 2021 accounts. “The concept is comply or explain,” said Mr di Sibio, who argues this action will have a snowball effect.*

Of course this begs another question: what happens to SASB, GRI et al? The Big Four leaders are too tactful to comment. But the direction of travel is clear. “This doesn’t make GRI and SASB redundant but they need to be aligned — we want the reporting framework to be more global,” said Mr Moritz.

Or as Mr Moynihan said: “This is about simplification and consolidation.” If he means it — and can deliver — investors may breathe a sigh of relief. (Gillian Tett)

Ginsburg’s death may not doom US environmental regulations

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The biggest story in the US over the weekend was the death of liberal Supreme Court Justice Ruth Bader Ginsburg. President Donald Trump has promised to nominate a new justice with haste, and there is little the Democrats can do to stop him. By solidifying a conservative majority on the court, Trump’s nominee could swiftly undo decades of progressive reform on issues such as civil rights, healthcare and abortion.

This, of course, would be seen as bad news for environmentalists, as the court has already been moving towards substantially trimming federal regulations, said Daniel Esty, environmental law professor at Yale University and editor of one of Martin Wolf’s picks for the best economics books of 2019.

“Environmental cases have mostly split along partisan lines in recent years,” he said. “There would be great risk that you could end up with a Supreme Court that is even more slanted against what might be considered traditional environmental regulatory strategies.”

However, there have been signs that the ideological divide is breaking down and that Ginsburg’s death may not lead to the outright destruction of US environmental protections.

Ginsburg herself did not always come down on the side of the planet, as seen in a ruling earlier this year that cleared the way for a natural gas pipeline to be built underneath the Appalachian Trail. And in April 2020, Justices John Roberts and Brett Kavanaugh crossed party lines to join the court’s liberal cohort on a critical water pollution ruling, seen as a win for environmentalists. Mr Esty believes this augurs well for future environmental cases, even if the court adds another conservative.

“It could be that you have got a middle group of justices now committed to a more pragmatic legal interpretive strategy,” he said.

It should not take long to find out. According to Mr Esty, there are a number of cases rapidly approaching the Supreme Court that should provide a good barometer on how it will approach environmental protection. A dispute between the Sierra Club and the Fish and Wildlife Service over federal open records laws is one to watch. It is set to be heard by the Supreme Court in early November. (Billy Nauman)

Prince Charles kicks off Climate Week with call for ‘warlike’ stance against global warming

© REUTERS

Climate Week kicked off in New York (virtually) yesterday with a speech from the UK’s Prince Charles and an update from the UN’s “race to zero” campaign.

The good news is, even with the global pandemic, the number of local governments and businesses pledging to cut their emissions to net zero by the end of the century has doubled. Even companies in “hard to abate” sectors, such as concrete manufacturer LafargeHolcim, are making commitments to do so. And the International Chamber of Commerce has rolled out a plan to help small and medium-sized companies join in.

Walmart also announced yesterday that it intended to cut its emissions to zero by 2040 without using carbon offsets — which seems to be a particularly ambitious target given the scale of its operations.

These developments are certainly laudable and show that companies are reckoning with the severity of the climate crisis. However, with so many companies committing to cut emissions (we’ve counted at least 60 in the past year) one is left to wonder how many will hit their goals.

It also seems like the PR value of these announcements is diminishing as they become more common. On one hand, this could lead to more companies making promises they have no intention of keeping because they don’t want to be left behind. Conversely, it could mean that companies that aren’t serious about cutting emissions won’t bother saying they are doing so.

The UN Climate Change group running the “race to zero” insists it will hold companies to account for missing their targets, but with the deadlines decades away it may be too late to matter.

As Prince Charles pointed out in his speech, good intentions have done little to stop global warming so far. Instead he called for a Marshall Plan for the planet and said the world needs to take a “warlike footing” to combat climate change. If companies are going to save the world from the problems they played a large role in creating, it is imperative that they are not just spewing hot air. (Billy Nauman)

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Control-Alt-Delete: sustainable finance and the green reboot

Sustainable finance has already experienced explosive growth in 2020 as socially conscious investors proved willing to embrace social bonds alongside well-established green offerings.

Now, investors and underwriters are developing new ways to build out sustainable finance. Alzbeta Klein, head of climate business at the International Finance Corporation, called this a “control-alt-delete” moment to reboot global economies for a sustainable future. 

The IFC will be getting selective about the projects it funds, emphasising a “green tilt” when helping companies hit hard by the coronavirus downturn, Ms Klein said at a Climate Week panel on Monday. Further ahead, a longer term “green rebuild” will be emphasised, she said.

Bankers are looking to push the envelope further. At another Climate Week event, HSBC touted its plastic-waste reduction bond issued by Henkel in July. This was a $100m private-placement deal specially tailored for the German consumer goods company.

“Clients are going to be looking for more innovation,” Adam Kanzer, BNP Paribas’s head of stewardship for the Americas, told Moral Money. Expect near-term efforts to finance biodiversity projects, he said.

But with innovation, and a divergence from conventional green bonds, the spectre of greenwashing lurks. The more creative sustainable finance becomes the more opportunities there could be “for tremendous greenwashing,” Mr Kanzer said.

As always, the authenticity and culture of the company is set at the top. Many companies are locked into doing the same things they have done forever and are reluctant to take risks.

“We need more people like Paul Polman,” he said, referring to the former Unilever chief executive. (Patrick Temple-West)

Join the Moral Money team at the inaugural Global Moral Money Summit next week on September 30-October 1. Learn how businesses across the globe are looking internally at their supply chains and sustainability practices and vowing to build back better following a challenging 2020. Our superb line-up of speakers will share their experiences, opinions and thoughts on where they see opportunity in the future. Free tickets are available to senior executives from corporations. Register now

Chart of the day

Bar chart of 2015-2019 ($bn) showing The biggest creditors to the meat and dairy industries

Climate campaigners have spent years pushing for defunding and divestment from fossil fuel companies. Now, as their arguments gain traction, they are taking aim at the emissions-heavy meat and dairy industries. Please see our colleague Emiko Terazono’s beefy report here.

*This article has been amended since original publication to correct a typographical error in the number of IBC participants.

Smart reads

  • To coincide with Climate Week, a new digital clock was unveiled this weekend in Manhattan’s Union Square to show exactly how long the planet has until global warming becomes irreversible. Please read The Washington Post’s story here.

  • The chief financial officers of Ford, Unilever, Tesco and a number of other large companies outlined a plan to “inspire a new meaning for the role . . . as the architects of long-term sustainable value creation” at a UN Global Compact panel yesterday.

Further reading

  • HSBC fund chief on re-energising a business in the Covid era (FT)

  • Nikola founder Trevor Milton steps down after fraud allegations (FT)

  • Roar materials: Kenzo’s pledge to help double wild tiger numbers by 2022 (HTSI)

  • How do you plant a trillion trees? (FT)


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