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  • ESG Pillar 1: Environment

    ESG consists of x3 pillars, as outlined in the prior post ( In the following articles, we will take a deeper dive into each of those three pillars. The ‘E’ pillar of ESG refers to the physical environment. The physical environment is a shared, common resource comprised of land, water, air, biodiversity (flora, fauna, avifauna), and the processes that interconnect them. It is imperative that all industrial, commercial, public, and private activities that utilise or impact these shared resources are sustainable, fair, and equitable in nature, and are well managed. Sustainable implies actions/practices maintained over the long term that do not deplete net global natural resources or cause harm to the environment. Sustainable also infers the preservation of the environment for future generations. Fair refers to treating all groups impartially and without bias, while equitable is the recognition that some sectors may require more support than others- the latter two points will be returned to when considering the ‘S’, or social, in ESG (and please also visit my sister website dedicated to research in sustainable food systems and sociology/anthropology where I also discuss such matters in greater detail, for example, the Just Transition). Organisations and companies of all scales and in all regions must ensure that they measure and manage their impacts on the environment. Investing governed by ESG principles is a sustainable investment method that: prioritizes optimal environmental, social and governance outcomes/factors, helps to foster sustainable business practices, aids in the transition of current business practices to more sustainable methods, and is a framework to enable global businesses to attain their climate targets while also practicing social equity. ESG investing has suffered in that a united and clear definition of what it means took time to emerge. Such a lack of clarity invites significant risk in the implementation and assessment of ESG investment strategies/portfolios as well as in compliance with emerging ESG regulation. To tackle this, the ‘E’ pillar was initially focussed upon, and environmental concerns given primary emphasis (one might argue appropriately so), specifically climate change in the form of carbon emissions. Hence, the main goal of the environmental pillar of ESG has been to reduce carbon emissions (greenhouse gas emissions), which is a significant and primary cause of climate change. However, the definition of the ‘E’ pillar is increasingly recognised as being a broader topic related to natural resource management and environmental risk, particularly in relation to biodiversity loss which goes hand in hand with climate change. Hence impact measurement and management criteria can be developed for a sector/organisation/company within this pillar using a wide variety of metrics. Why is the 'E' important? Environmental impacts and the environmental performance of organisations are of key business concern for a wide array of reasons. Firstly, as alluded to in previous posts, not only do organisations have an impact on the environment, but the environment also has an impact and presents significant risk to businesses. Globalization changed global production practices, which has also led to increased risk exposure in the face of climate change. Any type of international trade will result in a global supply chain and all the inherent risks in the management of that supply chain. Resource change because of climate change threatens supply chains, for example water scarcity, water quality degradation, or agri-food issues such as crop failure and land loss. Such threats sit alongside changing consumer demands, global pandemics, and geopolitical upheaval - often instigated in part due to climate change and resource scarcity. Such phenomena threaten to upend global supply chains. Particularly affected are SMEs, who are more exposed to such risks and uncertainties. Though risk management plans account for fluctuations and for events that can test or stretch a company or organisation, we are now witnessing repeated extreme events, which go beyond usual supply chain risk assessment, and financially threaten not only organisations and businesses, but national and global economies. COVID-19 starkly exposed the fragility of global supply chains in the face of such extreme events, in particular increased demand volatility (e.g., PPE), and the dependency of global economies on single or limited sources (e.g., overreliance on production in certain regions of the world). Stakeholders are also increasingly concerned with environmental factors and performance, and progressively require greater communication with regards to environmental outputs. Arvidsson & Dumay (2021) outline how investors seek to include ESG performance in their investment processes. They highlight that investors/shareholders are driving demands for more information on ESG performance and want to know how companies are contributing to sustainable development. The demand is driven by the recognition that climate risk equates to investment risk. They cite the example of major investment funds like BlackRock, who are adjusting their investment strategies to prioritise sustainable development. This shift is necessary because in a low-carbon economy, certain assets become worthless or even liabilities, leading to stranded resources. Investors now realise the importance of understanding the connection between climate change and investment risk, and as a result, there is a growing demand for reliable climate change and ESG performance information that meets investment standards. Environmentally focused investing can bring about opportunities for organisations. Companies that adopt a forward-thinking approach can take advantage of emerging regulations, shifting demographics, and investment trends. By prioritising sustainability and adapting their business practices, these companies can maintain a competitive edge as well as positively contribute to the world around them. Simply put, according to S&P Global research, companies that include environmental goals in their growth strategies don't perform worse than other companies. In fact, they may even do better. The S&P 500 ESG Index, created in 2019, ranks companies based on their environmental, social, and governance (ESG) criteria and excludes underperforming ones. This index aligns with the risk and return profile of the S&P 500 and gives more exposure to companies that limit their greenhouse gas emissions, set reduction targets, and report on their ESG analysis. Importantly, the S&P 500 ESG Index doesn't significantly outperform or underperform the regular S&P 500 Index. Environmental Indicators When we talk about the climate, it can often feel like a very vague term. We know there is a problem, we know it’s big, but where do we start in terms of measuring it accounting for it, monitoring it? Some suggest focusing the "E" pillar of ESG on climate change mitigation alone. This aligns with decarbonization literature and helps companies and investors make clearer decisions. It also offers a measurable benchmark for investments in this area, similar to how other resource management issues have been addressed using such tests. However, various metrics are established to measure climate change and biodiversity loss (biodiversity loss being an element not to be ignored as it goes hand-in-hand with climate change). For example, in the assessment of companies' environmental impact, S&P Global incorporates four factors: greenhouse gas emissions, water use, waste and pollution, and land use and biodiversity. S&P Global Ratings' ESG Evaluation also considers potential social and governance risks to determine an entity's ability to operate successfully, including an evaluation of its preparedness to anticipate and adapt to long-term environmental disruptions. These factors ultimately contribute to determining the ESG score. Generally, metrics of environmental impact include: GHG emissions (Scope 1, 2, 3 & total) Carbon footprint GHG intensity Fossil fuel sector Non-renewable energy consumption and production Energy consumption intensity per high impact climate sector Biodiversity (and protected areas) Emissions to water / water footprint Hazardous waste ratio The environment can be broken into three broad categories: climate change, resource depletion (especially fresh water), and pollution (both air and water). Oftentimes these factors work together to compound their effects. For example, floods are becoming more common and affecting greater numbers of communities. Other environmental effects are more direct and observable, such as the proliferation of oil slicks in water or smog hanging in the air. For example, overpopulation is a critical issue with wide-ranging environmental and social consequences. It leads to pollution, food shortages, hunger, civil unrest, and inadequate medical care. Another example is water scarcity, which directly impacts both nature and humans. The scarcity of water (and in particular clean, fresh water) is likely to increase poverty levels, mass migration, regional pressures on natural resources, and deforestation. Investors consider biodiversity loss and climate change as major sustainability concerns, with deforestation being the most urgent aspect. Agriculture, responsible for 23% of global greenhouse gas emissions and 71% of deforestation, stands as the largest polluter worldwide. Forests not only provide food for 22% of the world's population but also absorb 40% of global carbon emissions. The close link between carbon emissions and climate change contributes to the rise in more frequent Category 4 and 5 storms, massive forest fires, and flash floods in urban areas. The environmental impact of plastic production, usage, and disposal is extensive. While plastic has been used for many years, its global production and consumption experienced a significant surge in the 1960s due to its lightweight nature, cost-effectiveness, and versatility. Plastic not only contributes substantially to greenhouse gas emissions during its life cycle but also during manufacturing and decomposition processes. Plastics primarily emit carbon dioxide (CO2), but they also release other gases like methane and ethylene. Methane, being 28 times more potent than CO2, is a significant greenhouse gas emitted by plastics. Moreover, methane takes a long time to break down in the environment, leading to significant global warming impacts even in small amounts released. Apart from greenhouse gas emissions, plastics pose a threat to wildlife and waterways as they degrade into small particles. These particles are consumed by animals and enter the food chain, posing risks to human health. The performance of plastics in landfills is another concern, as methane is collected under plastic liners and utilized for energy. To address these issues, considering design, repurposing, repairing, and recycling at each stage of the circular economy can be potential solutions. Incorporating these strategies into the environmental aspect of a company's ESG (Environmental, Social, and Governance) strategy can contribute to mitigating the impacts of plastic production and usage. Greenhouse Gas Emissions (GHGs) It is widely accepted that harmful greenhouse gas emissions originate primarily from the transportation and electric utility sectors. In the United States, the world's second-largest emitter overall, recent data indicates that more than half of carbon emissions can be attributed to the transportation sector (27%) and the electric utility industry (25%) alone. The oft-cited required response within these sectors is the shift towards electrification, as highlighted by Jones and Ginley (2021). Electrification programs directly tackle the majority of emissions and also contribute to reducing other emission sources, such as those from commercial and residential heating. Therefore, to accomplish the objectives of the "E" pillar (environmental sustainability), it is essential to prioritize electricity procurement, both in its direct and indirect forms, above or at least equal to any other programmatic goal. We will return to strategies to tackle carbon emissions in further posts. The sources of GHG emissions are well understood and measurable, according to the International Energy Agency (IEA). The mathematics of carbon reduction show that certain sectors, such as transportation and electric utilities, need significant emissions reductions, while other sectors may not require drastic changes to meet internationally recognized decarbonization goals. This has been discussed by experts like Gerrard and Dernbach (2018) and Vandenbergh and Gilligan (2020). The uncomfortable fact is that certain industries and geographies emit disproportionately greater amounts of harmful emissions than other industries and territories. When analysing an organization's carbon footprint, it involves measuring the total amount of greenhouse gases emitted by that organization, event, product, or individual. Greenhouse gases (GHGs) include carbon dioxide, methane, nitrous oxide, and related compounds. To make them comparable, they are converted to carbon dioxide equivalents, where one tonne of carbon dioxide has a global warming potential of one. The reported emissions are then categorized into three "Scopes." Scope 1 greenhouse gas emissions refer to emissions released directly into the atmosphere as a result of an organization's activities. They are often called direct emissions. Examples include emissions from manufacturing processes (e.g., cement production), burning diesel fuel in trucks, or fugitive emissions like methane from coal mines or coal-burning for electricity generation. Scope 2 greenhouse gas emissions are indirect emissions released into the atmosphere due to the consumption of energy commodities. For instance, if a power station burns coal to generate electricity, the greenhouse gas emissions resulting from the coal burning are attributed to the power station as scope 1 emissions. If that electricity is then transmitted to a car factory and used to power machinery and lighting, the emissions associated with generating the electricity are considered scope 2 emissions for the factory. Scope 3 greenhouse gas emissions encompass emissions beyond scope 2 and are generated in the broader economy. They occur as a consequence of a facility's activities but originate from sources not owned or controlled by the facility itself. Examples of scope 3 emissions include the extraction and production of purchased materials, transportation of purchased fuels, the use of sold products and services, and business-related air travel on commercial airlines. Regulation governing the E in ESG The global response from regulatory bodies to address environmental risks has been fragmented, with Europe taking a proactive stance by implementing environmental reporting standards and advocating for a transition to carbon-neutral energy. The European Union (EU) has introduced initiatives to encourage sustainable investment and has recently introduced the Corporate Sustainability Reporting Directive (CSRD), which mandates large companies to disclose a comprehensive range of environmental, social, and governance (ESG) metrics by 2025. In contrast, the United States has shown mixed responses, lacking a cohesive federal environmental policy. Emerging economies are grappling with the challenge of balancing economic development with the need to prepare for a cleaner future (BDO, 2023). Regarding individual disclosures, the following areas are of particular importance: Supply Chain Due Diligence: Organizations face mounting pressure to ensure that their supply chains operate without causing harm. Germany and Norway have already implemented regulations, and the EU's proposed Directive on Corporate Sustainability Due Diligence (CSDD) aims to address adverse human rights and environmental impacts associated with supply chains. Electric Vehicles: Policymakers are utilizing mandates and incentives to promote the adoption of electric vehicles. The U.S. offers federal incentives through the IRA, and state and local governments provide various incentive programs. California has implemented regulations requiring all new vehicles to be zero emissions by 2035. Greenwashing: Regulators are taking steps to combat greenwashing through legislation and rules focused on preventing misleading environmental claims. Singapore, Australia, the EU, Switzerland, the United Kingdom, and the United States have either introduced or proposed measures to mitigate greenwashing practices. Tax: Governments are employing tax incentives to encourage sustainable activities, providing organizations with opportunities to participate in these programs. The U.S. Inflation Reduction Act (IRA) extends tax credits for energy transition initiatives, while the EU has reached a provisional agreement on a carbon tax and proposes utilizing tax benefits to expedite the adoption of sustainable technologies. Assurance: Regulators are incorporating independent assurance requirements into disclosure rules to enhance the credibility of climate-related information. The EU's CSRD takes a gradual approach to implementing assurance requirements, while both New Zealand and the proposed rules by the U.S. Securities and Exchange Commission (SEC) also address the issue of assurance. Aviation: Governments are striving to reduce emissions from the aviation sector by promoting more efficient aircraft and the use of sustainable aviation fuel (SAF). The U.S. offers incentives and has launched initiatives to support SAF projects. The EU and other countries have proposed or implemented regulations to increase the use of SAF and reduce emissions (BDO, 2023). In summary, organizations must closely monitor regulatory developments, ensure alignment of their ESG strategies with new requirements, and consider seeking third-party assurance for a comprehensive set of ESG metrics. Transparency, responsible procurement practices, and strategic planning are crucial in meeting regulatory obligations and promoting sustainable business practices. Current and Future Needs within the field of ESG Data Empirical data To understand the environmental aspect of ESG, empirical research and data on the energy transition are needed. While the "E" in ESG can be quantified, it lacks theoretical development in certain important areas. It is crucial to establish standard metrics and performance units for organizations to align and measure their environmental performance. The necessary data exists, and there is no excuse not to utilize it, particularly through science-based targets (SBTi) that provide methods and guidance for setting environmentally sound targets. This data is essential to allocate capital effectively according to ESG guidelines. By incorporating this data and understanding actual environmental performance, rather than just focusing on reporting quality, we can develop a comprehensive theory of ESG, especially the environmental aspect. This will enable the establishment of standardized metrics and units, facilitating accurate benchmarking across industries. Benchmarking allows companies to evaluate their ESG performance against industry standards and best practices. The European Commission has introduced green benchmarks to help investors assess investment opportunities based on climate-related factors. For investors, benchmarking enables a comparison of different investment options and provides measurable targets for improved investment returns. Testing methods like backtesting, the INVEST framework, return on investment (ROI) calculations, and unit testing are commonly used to evaluate investment strategies and determine their success in generating higher returns. Sociological & Technical Trahan and Jantz (2023) explore the intersection of ESG investment and socio-technical pathways. With the emergence of new technologies, it is crucial to assess their sustainability within the larger system. This assessment involves examining both emissions and investment returns. The specific outcomes will vary depending on the product and approach being considered. Incorporating diverse perspectives is essential to gaining a comprehensive understanding of climate change theory and its impacts. Instead of focusing solely on secondary metrics, companies should prioritize the social and technological factors that contribute to emissions in the first place. This broader perspective on socio-technical pathways introduces a new management challenge. To account for the secondary effects of emissions resulting from changing socio-technical systems, guidelines are necessary. Changing socio-technical systems refer to the need for society to alter its interaction with technology in order to reduce greenhouse gas emissions. This includes changes in consumer behaviors and expectations, such as shifts in food consumption and energy usage (e.g., transitioning to electric cars). It encompasses a broader transformation in how we live and work. Secondary effects of emissions involve unintended changes in greenhouse gas emissions or carbon stocks that arise from a project or activity. These effects can have positive or negative impacts on the environment and human health. Examples include reduced visibility and health impacts from particulate emissions produced by the combustion of biofuels and fossil fuels, acid rain and health impacts from sulfur dioxide emissions, damage to plants and human health effects from ozone emissions, health impacts from carbon monoxide emissions, greenhouse gas emissions from fuel combustion leading to global warming and climate change, unintended changes in GHG emissions or removals associated with a GHG project, and the reduction of regulated pollutants through carbon dioxide capture from point sources. In conclusion, the "E" pillar of ESG, which focuses on the environment, plays a crucial role in sustainable business practices and investment strategies. With the recognition that climate risk equates to investment risk, companies that prioritize environmental goals and adapt their practices can not only maintain a competitive edge but also positively contribute to the world while not significantly affecting returns. In upcoming posts, I will delve into the 'S' and 'G' of ESG, and ESG regulatory and reporting mechanisms. References Arvidsson, S. and Dumay, J., 2022. Corporate ESG reporting quantity, quality and performance: Where to now for environmental policy and practice? Business Strategy and the Environment, 31(3), pp.1091-1110. BDO USA. (2023, February 23). Action Required: Sustainability and ESG-Related Regulations Are on the Rise Globally. Retrieved June 2, 2023, from Apostoleris, H., Sgouridis, S., Stefancich, M., & Chiesa, M. (2018). Evaluating the factors that led to low-priced solar electricity projects in the Middle East. Nature Energy, 3, 1109–1114. Arvidsson, S., & Dumay, J. (2022). Corporate ESG reporting quantity, quality and performance: Where to now for environmental policy and practice? Business Strategy and the Environment, 31(3), 1091–1110. Azar, J., Duro, M., Kadach, I., & Ormazabal, G. (2021). The Big Three and corporate carbon emissions around the world. Journal of Financial Economics, 142, 674–696. Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 48. Bhandari, K. R., Ranta, M., & Salo, J. (2022). The resource-based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm's embeddedness into ecology, society, and governance. Business Strategy and the Environment, 31, 1525–1537. Bradford, A. (2020). The Brussels effect—How the European Union rules the world. Oxford University Press. Caballero, R. J., & Jaffe, A. B. (1993). How high are the giants' shoulders: An empirical assessment of knowledge spillovers and creative destruction in a model of economic growth. National Bureau of Economic Research (U.S.), 8, 16–73. Carlsson Hauff, J., & Nilsson, J. (2022). Is ESG mutual fund quality in the eye of the beholder? An experimental study of investor responses to ESG fund strategies. Business Strategy and the Environment, 1–14. De la Serve, M. E., Revelin, D., & Triki, K. (2021). Green finance in the Asia-Pacific region: Mobilisation spearheaded by central banks and supervisory authorities. Banque De France Bulletin, 237, A.4. Dimson, E., Marsh, P., & Staunton, M. (2020). Divergent ESG ratings. The Journal of Portfolio Management, 47, 75–87. European Securities and Markets Authority. (2022). ESMA's response to the Commission's consultation on the [Benchmarks Regulation] BMR review, ESMA81-393-502. Trahan, R.T. and Jantz, B., 2023. What is ESG? Rethinking the “E” pillar. Business Strategy and the Environment.

  • Introduction to ESG: Environmental, Social, and Governance

    What is ESG? ESG stands for “Environmental, Social, and Governance” and is an essential framework for assessing organisational sustainability and the sustainability/ethical impact of an investment or business decision. ESG helps businesses address urgent issues such as climate change, biodiversity loss, resource scarcity, social inequality, and financial risks, while also promoting sustainable business practices. ESG: can be used to evaluate the impact of a company on the environment and on human health and society; can be used to set organisational climate/environment/ethical targets; can be used to consider the ethical implications of organisational practices; includes an embedded regulatory function. ESG principles are applied in business decision-making and investment but can also be applied more broadly across an organisation. It is most typically employed in the field of finance to assess non-financial metrics that may affect the risk profile of a company or investment. ESG principles are used to identify opportunities for business growth. Importantly, ESG is a tool that not only allows businesses to assess their impact on the environment, but also allows companies to assess and predict how the environment will impact their business activities, allowing for proactive action to mitigate risk. ESG is data-driven, and requires robust datasets and data collection methods, analysis, and research to be effective. Though ESG sits within the financial sector the data is non-financial in nature. Therefore, what is interesting about ESG is that the data will be in many different forms across its three verticals, and part of the challenge is understanding those data. ESG is complex and multi-faceted, and while the core principles of ESG remain the same, their implementation and significance can differ in interpretation and application depending on the sector in which you are in. The landscape is ever changing, dependent upon breakthroughs in environmental science, green technology, and sentiments among consumers and society. What is most important is that society, consumers and investors now demand more of business, and require organisations to meaningfully contribute to solving climate change and biodiversity loss. Hence, organisations are under greater pressure than ever before to evaluate and improve their environmental performance and social contribution. In addition, a large number of disclosure requirements are coming down the pipeline which will require businesses to disclose their sustainability performance across all ESG verticals. Hence, ESG frameworks are urgently required across all business/NGO/public sectors. I will here first consider each individual vertical in ESG: Environmental, Social, and Governance. Environmental The “E” in ESG refers to the environment, how companies impact the environment, and how the environment impacts companies. We are in the midst of a climate crisis, where both rapid climate change (in this context referring mainly to carbon emissions) and biodiversity loss are increasingly recognised as going hand-in-hand. Natural resources are rapidly changing and disappearing, natural capital shrinking, and we are at risk of losing valuable ecosystem services and functions such as water supply, carbon storage, and food supply. From an organisational perspective, environmental change can place urgent pressure on supply chains, leading to the scarcity and even disappearance of key resources. Water shortages, for example, can lead to the failure of water-intensive crops such as almonds, or shortages in the drinks industry with water being the core ingredient, for example, in beer. The concept of “Virtual Water”, which will be discussed in a later post, refers to the hidden water in commodities when traded from one place to another. Virtual water allows us to evaluate the environmental footprint of products, services, and commercial exchanges. It is a way of measuring indirect water use and can be used to assess water sustainability in supply chains. Water security is a key aspect of sustainable water management and is a key metric in ESG. Considering virtual water in ESG investing can help promote more sustainable water use, reduce water scarcity risks, and identify investment opportunities in companies that are working to improve their water management practices. International and national targets with regards to climate change and environmental impact have been established and more continue to be developed and enshrined in law. To achieve these environmental targets, companies and organisations need frameworks to firstly account for their environmental performance, to locate and identify areas in which to make improvements, and methods to monitor and audit their environmental performance into the future. ESG tools can be employed for such a purpose. Investors are increasingly interested in the environmental impacts of the companies they invest in. They demand more in terms of environmental sustainability which is increasingly recognised as not only a practical necessity, but as an intrinsic need. ESG frameworks can be used to communicate organisational sustainability and risk management efforts to stakeholders and investors. Vitally, holding global temperatures at 2°C above pre-industrial levels will require a dramatic shift in both public and private investments from fossil fuels to renewable alternatives. Hence, responsible finance initiatives in the form of ESG scores are an attractive tool to set and align organisational sustainability goals. From a practical perspective, the “E” in ESG considers factors such as a company's carbon emissions, resource usage, waste management, pollution control, and efforts to mitigate climate change. Companies that prioritise environmental sustainability may take actions such as implementing energy-efficient practices, adopting renewable energy sources, reducing greenhouse gas emissions, managing water resources responsibly, and addressing biodiversity conservation. Social The social, cultural and human health impacts arising from business behaviours are vital elements of sustainable development. The “S” in ESG is concerned with human health and human rights and recognises the need to meaningfully tackle issues such as exploitative labour, workplace and organisational diversity, gender equity, indigenous rights, and modern slavery. Global supply chains need to urgently address these issues, as well as issues such as employee wellbeing. The social element of ESG should, in my view, range from the global to the hyper-local, depending on the size of the organisation. Initiatives to improve global human health are essential, especially within a global company, but so too are smaller scale initiatives. Please see the following article on indigenous rights, the Just Transition, and risk exposure on this site's associated sister-website Social factors to consider in sustainable investing include a company's strengths and weaknesses in dealing with social trends, labour, and politics. Companies that prioritize social sustainability may implement policies and practices to foster employee well-being, support workforce diversity and inclusion, provide fair wages and benefits, ensure safe working conditions, and engage in responsible supply chain management. They may also contribute to community development through initiatives such as education and skills development programs, charitable donations, and volunteering efforts. Governance Environmental regulation is increasing across the globe among calls for greater transparency with regards to environmental and social performance in business. Within the ESG framework, governance refers to the systems, processes, and practices that guide the way a company is directed, controlled, and operated. It focuses on the structures and mechanisms that ensure accountability, transparency, and responsible decision-making within an organisation. Governance factors encompass a range of considerations related to the company's leadership, board of directors, executive compensation, shareholder rights, ethical conduct, risk management, and compliance with laws and regulations. It also examines the company's approach to corporate governance, including the independence and diversity of the board, the separation of executive and board roles, and the effectiveness of oversight functions. The EU has introduced several different ESG regulations in recent years, including the Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD), and the EU green taxonomy. The EU green taxonomy is a classification system that establishes a list of environmentally sustainable economic activities. It is designed to support the transformation of the EU economy to meet its European Green Deal objectives, including the 2050 climate-neutrality target. The EU taxonomy regulation and the Sustainable Finance Disclosure Regulation (SFDR) are implemented together to ensure equal competition and legal certainty for all companies operating within the EU. The US has been slower than many other developed nations in implementing ESG regulations, but there has been significant progress in recent years. The U.S. Securities and Exchange Commission is poised to roll out ESG disclosure regulations on climate risk and human capital management. Additional climate risk disclosures, such as those required by the Task Force on Climate-related Financial Disclosures (TCFD), are also becoming more common. The TCFD framework consists of voluntary recommendations that promote transparency leading to better climate risk management. The TNFD (Taskforce on Nature-related Financial Disclosures) is an international cross-sector initiative that aims to provide a framework for organisations to report and act on evolving nature-related risks and opportunities. The TNFD framework will capture things that the TCFD does not, such as plastics in the oceanic food chain and loss of soil fertility caused by land use change. The full framework for market adoption will be in September 2023. The TSFD is also now being developed, which will focus on social-related financial disclosures. ESG regulations vary by country, and staying informed of and compliant across regional differences is critical for companies that do business internationally. The repercussions of non-compliance can be staggering, including large fines, poor reputation, and loss of business opportunities. ESG regulations are not just limited to the financial industry, but also include anti-money laundering regulations and US anti-trafficking laws. This post aimed to provide a general overview of ESG and its context within business regulation. In upcoming posts I will delve more deeply into each of the three verticals, discussing the criteria for each, the practical implementation of ESG principles, ESG and its relationship to sustainability (and the Sustainable Development Goals), and I will continue on to discuss ESG metrics, dynamics, and reporting. I will also break down ESG by sector, such as food production, construction, property management, retail and more.

  • E. J. Devereux: Environmental & Biodiversity Expert & The Importance of Sustainable Development

    The future of our planet, and our place in it, depends on our ability to both predict and meaningfully adapt to the twin crises of biodiversity loss, and climate and resource change. The futures of organizations and businesses around the globe also depend on the idea of not only "how does our organization impact the environment", but how does the environment impact our organization? Now, and into the future in a changing global resource base? The concepts of Environmental, Social, Governance (ESG), Environmental Sustainability, and Sustainable Development are vital to understand, communicate and implement in all areas of business and in all organizations, whether big or small. Success and growth in all sectors depend on the availability of raw materials and associated resources, such as water, and sustainable and dependable supply chains. Sustainable development is important because it seeks to balance economic growth with environmental protection and social well-being, ensuring that present needs are met without compromising the ability of future generations to meet their own needs. Importantly, national and international governments increasingly require organisations to reach important environmental targets, such as achieveing net zero emissions, and businesses themselves recognize the need to address environmental challenges such as climate change and resource depletion. Setting and achieving environmental targets can not only help companies reduce their environmental impact but can also improve their bottom line by reducing costs, increasing efficiency, and attracting customers who value sustainability. Sustainable development applies to everyone: from single, small-scale farms, all the way up to pharmaceutical API manufacturers and global corporations. Importantly, the importance of change now needs to be communicated effectively- to the public and consumers, and also to investors and shareholders, whose investments and demands may well drive the way forward to a greener future. All people have a share in ensuring the future viability of our planet, especially in terms of, for example, food security and food equity, water quality, and sustainable consumption. But our planet is changing, and change is frightening. There is no denying the psycho-social side of climate change mitigation. Added into the bargain is the shortage of experts in the field- particularly in large organizations as well as research- and you have a recipe for disaster. My name is Emma J Devereux, and I am a passionate climate and environmental scientist, ecologist, sociologist, governance, and environmental sustainability specialist. I possess a combination of technical expertise, leadership skills, and a strong commitment to environmental conservation. I am exceptional in that my education, training, experience, travel, and intellectual pursuits mean that I am uniquely placed to understand, research, and envisage environmental sustainability concerns from a range of different vital, and global, viewpoints. Coming from a farming background, I have a deep understanding of natural heritage, natural capital, ecosystem services, and the impacts of climate change on the bottom line of a small business. Working as a Consultant Ecologist and Plant Specialist in Environmental Consultancy, I understand the place of environmental legislation in everyday planning and business contexts and have a working knowledge of the development and philosophy of the Environmental Impact Assessment framework in Europe and the USA/Canada with specific legal and procedural mechanisms for Ireland in particular. I work on a wide range of projects, including national infrastructure projects, large residential developments, intensive agriculture developments, quarrying and mining operations, individual and small-scale projects, API manufacturing complexes, commercial developments, and more. I have strong technical expertise in areas such as biodiversity conservation, wildlife management, and natural resource management, with a deep understanding of ecological principles, conservation biology, and environmental policy. I also possess a wealth of expertise in GIS mapping, data analysis, and predictive statistical modelling- essential to model and envisage future impacts of proposed environmental sustainability measures. As an Environmental Sustainability Specialist, I understand the key concepts in environmental sustainability and climate change required to be able to collect data, analyse, assess, risk manage and mitigate against the impacts of climate change for a range of different applications. I have an MSc. Environmental Sustainability from University College Dublin (UCD) where I studied a range of subjects related to environmental problems and solutions, sustainable development, climate, and the natural environment, such as environmental policy, sustainability, renewable energy, climate change, ecosystem management, environmental law, and environmental economics, sustainable energy systems; approaches to energy systems analyses and sustainability metrics, water quality assessment and management, etc. My Ph.D. from Leiden University (the Netherlands) and the Nutritional and Isotopic Ecology Lab at the University of Colorado Boulder (USA) looks at the impact of climate change on plant nutrition and resource change on grassland landscapes, and the knock-on effects on consumers. My particular academic specialism is paleoecology - the study of ecosystems and their interactions with the environment, understanding the long-term dynamics of ecosystems and the environmental factors that shape them, and the processes that will impact the environment into the future. Paleoecology draws on a range of scientific disciplines, including geology, biology, and climatology. Key areas of research in paleoecology include the impact of human activities on past, present, and future environments, and the role of ecological interactions in shaping biodiversity. I achieved an MSc. Environmental Archaeology from University College London (UCL) and worked with such prestigious institutions as the British Museum and the University of Cambridge. As an Environmental Archaeologist, I am expert in human-environment relationships, and the dependency of humans on their surroundings in a variety of ways, from commercial resources and subsistence to the more intangible ideas of Natural and Cultural Heritage. I have a deep understanding of natural capital value (use value and non-use value), the concept of ecosystem services, and the sociology of human-environment relationships. I can understand the different climate concerns of people across the world, such as Indigenous groups, farming and rural communities, urban dwellers, and those with different investments in the environment around them. I have published academic articles on topics such as Traditional Ecological Knowledge and Pro-Environmental Diversification on commercial farms. My academic background displays my commitment to issues of biodiversity, and passion for the environment, conservation, and sustainable development. However, I also uniquely possess a combination of technical experience, communication skills, analytical thinking, strong business acumen, and senior management and leadership experience, which distinguishes me from others in the field. I worked as a Data and Policy Analyst on the gas transmission team at Ofgem (UK) - the Office of Gas and Electricity Markets, a non-ministerial government department in the United Kingdom that regulates the electricity and gas markets. Part of my role was regulatory – establishing and monitoring KPIs using key environmental metrics, using data to inform decision-making and policy development within the organization, working with large amounts of data, using statistical and analytical methods to identify trends, patterns, and insights. I supported the development of policy and regulation based on the insights gained from data analysis. Within my specific remit was the “move to a low carbon future” within gas transmission. This involved responsibilities for developing policies and regulations to support the transition to a low-carbon gas system, working with stakeholders such as gas suppliers, industry associations, and government agencies to ensure that gas infrastructure and supply chains are compatible with decarbonization goals. My strong business background also ensures that I realise that organisations have a duty to reduce environmental impact whilst also having responsibilities to their shareholders, especially those publicly traded. Reducing carbon emissions, increasing transparency, engaging with stakeholders, developing sustainable products, and setting targets that are measurable and achievable are key ways a company can address shareholder concerns, and must be smartly developed by experts in their field. This builds a stronger, more sustainable business that delivers value to both shareholders and society as a whole. I have many years of senior-level project design, implementation, and management, public engagement, strategy and proposition, stakeholder management, local and national government, and research experience in organisations such as Allied Irish Banks, the University of Cambridge, Central London Local Authorities, and more. I am a highly adept communicator, with experience in public engagement across a range of sectors, teaching, facilitation, and presentation of analyses across various media. I understand the importance of effective service implementation and for example undertake freelance research for organizations such as the Centre for Effective Services, an organization that supports social impact organizations. Please see the Resume section of this website for an overview of my experience and education. This website will feature articles on sustainable development, biodiversity, natural resources, and environmental social governance (ESG). I aim to raise awareness and share knowledge on these topics, foster discussion, promote responsible investing, and advocate for change. Please do not hesitate to contact me directly for any specific queries related to these issues.

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