Australian Economy

This month in ESG: the hottest seven years ever, Tasmania goes carbon negative, and warnings of ‘total societal collapse’

Terence Jeyaretnam takes us through the top 10 ESG markers for May 2022, in his monthly column.

The dial shifted on climate, diversity and integrity this month – the E, S and G of the federal election. May was also busy with extreme weather records, a dire warning from the UN around total societal collapse, but also some good news with a “rights of nature” verdict out of India and net zero progress in California and Tasmania.

“ESG markers” – like biomarkers that tell us how healthy our body may be – show us the big movements in the field of ESG in Oceania, and globally. 

So, here are my top 10 for May. (Again, if I happen to miss some key markers in a particular month, just drop me some comments, and I will pick them up next month.)

Last seven years hottest on record

The first analysis of global temperature in 2021 shows it was 1.2 degrees Celsius above pre-industrial levels – ranking as the fifth hottest year on record and confirming a trend towards increasing greenhouse gas concentrations that are trapping more heat than ever before. This assessment now indicates that we are no longer able to say that we are 1.1 degrees Celsius above pre-industrial levels, but 1.2 degrees, heading rather quickly towards the 1.5 degree mark that we are hoping to stay under.

The global climate crisis continues to unfold, with extreme weather striking across the world. Europe suffered its hottest summer on record, and broke maximum temperature records in Sicily, while intense wildfires raged throughout Italy as well as Greece and Turkiye. Severe floods, made up-to-nine times more likely by this heating, also wrought havoc in Germany. 

Extreme heat also caused the heatwaves in the west of the US and Canada, with temperature records being broken by five degrees Celsius and reports that the event was made at least 150 times more likely by global heating.

Parts of eastern Australia may be uninsurable by 2030

A report by the Climate Council suggests that one in 25 homes in eastern Australia may not be insurable, due to extreme weather caused by climate change, by 2030.

The report considered 10 electorates in its analysis. “Uninsurable” is defined in the report as an area where the required type of insurance product was expected to be not available, or only available at such high cost that no one could afford it. As an example, the report suggested up to 27 per cent of properties in the electorate of Nicholls, in northern Victoria, and 20 per cent of properties in Richmond, New South Wales, could soon be uninsurable due to flood plain risk.

California briefly runs on 100 per cent renewables

While smaller grids, such as that in South Australia, have achieved it in the past, this is the first time an economy and grid as big as California has (albeit briefly) achieved 100 per cent renewable-power. 

According to the California Independent System Operator, the milestone was achieved within a 15-minute period between 2.45pm and 3pm on Saturday 30 April, California time. About 75 per cent of this came from solar power, while the rest constituted wind, geothermal, hydro and bio-gas. This presents California as being well on track to being carbon neutral by 2045.

Tasmania goes carbon negative

According to researchers from the Australian National University, Tasmania has become one of the first parts of the world to become not just carbon neutral, but carbon negative, by the reduction in logging. Notably, Tasmania already had a low emission profile, with much of the state’s electricity largely coming from hydro energy.

ISSB outlines actions required to deliver global baseline of sustainability disclosures

The IFRS Foundation’s International Sustainability Standards Board (ISSB) has outlined the necessary steps required to establish a comprehensive global baseline of sustainability disclosures. This baseline presents a unique opportunity to prevent any further fragmentation of current sustainability disclosure requirements. 

The ISSB aims to complete necessary institutional and technical-standard setting work to create the global baseline’s core elements by the end of 2022. 

Implementation of the global baseline will then require action by others, including public authorities and market participants, to contribute towards the development of the global baseline and to require or encourage its widespread use. The global baseline builds upon, incorporates and protects the heritage of the existing investor-focused sustainability disclosure standards, including those of the Task Force on Climate-related Financial Disclosures (TCFD), the Climate Disclosure Standards Board (CDSB), SASB Standards, Integrated Reporting and the World Economic Forum’s metrics.

Nature has legal status on par with humans, Indian court rules

The Madras High Court has recently ruled that “Mother Nature” has the same legal status as a human being, which includes “all corresponding rights, duties and liabilities of a living person”. It also says that the natural environment is part of the human right to life, and that humans have an environmental duty to future generations. 

This case is the latest in a series of “rights of nature” rulings that give ecosystems, animals and the natural world rights similar to those of humans, corporations and trusts. Countries including Ecuador, Bolivia, Panama and New Zealand have enacted variations of rights of nature laws, as have over 30 communities and local governments within the United States. 

Australia’s climate election shows the country wants to lead on climate change

Australia’s federal election saw Australians elect the opposition Labor Party to power, with incoming Prime Minister Anthony Albanese vowing to “end the climate wars” and turn Australia into a “renewable energy superpower.” 

Under Albanese, Australia now plans a 43 per cent emissions reduction this decade, and is reportedly seeking to host a United Nations climate conference in 2024. 

Polling in the lead-up showed that eight out of 10 Australians wanted greater climate action from the government, and 70 per cent of respondents said they believe climate change was already impacting the country. “Environment” was the most-mentioned issue on social media during the campaign, ahead of the economy and corruption. The incoming parliament has a super majority of climate support with not only Labor, but a wave of Greens and independent Teals being elected on a climate agenda (as well as gender and integrity). 

Australia’s gender election brings female vote, parliamentary diversity and greater gender balance

In 2021, a groundswell of anger over the mistreatment of women in politics saw thousands of women converge on Parliament House. In 2018, Julia Banks, a former Liberal MP, quit the party over “cultural and gender bias, bullying and intimidation” from her own ranks, as well as the opposition. In 2019, some prominent Liberal female members of parliament opted not to seek re-election, citing sexist bullying and misogyny.

A 2021 report compiled by the Australian Human Rights Commission found that one in three employees in Australia’s federal parliament had been sexually harassed. Over half of staffers had experienced at least one incident of bullying, sexual harassment, or either actual or attempted sexual assault. Last year, Australia slipped to 50th place out of 156 countries in the World Economic Forum’s Global Gender Gap Index. This was its worst ranking ever, down from 44th in 2020.

Labor, the Greens and independents picked up on voter disenchantment with the government, and worked to address this issue in election campaigning. However, they didn’t stop at gender diversity, but widened their approach to include cultural diversity, and First Nations parliamentarians. 

Now, women form 38 per cent overall of our federal parliament – but breaking it down between the two houses reveals a discrepancy. While women make up only 31 per cent of the 151-member House of Representatives, they’re the majority in the 76-member Senate at 53 per cent, which puts Australia ahead of Canada and the US in terms of female representation in the upper house. Labor is largely responsible for the improved representation of women in the lower house, with the party nearing parity at 43 per cent. The lag is apparent on the conservative side, however, with the Liberals at 21 per cent and the Nationals having just two female MPs in the lower house. Compared to New Zealand, the UK, the US and Canada – Australia is now second only to New Zealand (48 per cent) in terms of overall female representation in federal parliament.

Japan plans to issue $157B in green transition bonds

Japanese Prime Minister Fumio Kishida has laid out a plan to issue an estimated 20 trillion yen ($157 billion) worth of “green transition” bonds to help finance investment to achieve a carbon-neutral society. The government will also create a 10-year road map to promote green investment, that would include financial aid and infrastructure building. 

Details of the green transition bonds, including the specific amount to be issued, will be discussed at a panel to be set up later this year. 

UN warns of total societal collapse

The United Nations published its 2022 Global Assessment Report on Disaster Risk Reduction (GAR 2022) this month, including its grim verdict –  that the world was experiencing an accelerating trend of natural disasters, and economic crises.

The paper, “Pandemics, Climate Extremes, Tipping Points and the Global Catastrophic Risk – How these impact global targets”, offers an in-depth scenario analysis of global collapse risks, based on how human activities are transgressing planetary boundaries. It finds that the continuation of “business as usual” and a failure to invoke drastic policy changes means that human civilisation is moving inexorably toward collapse. 

It identifies four potential pathways ahead. Yet only one of them, “Stable Earth”, involves the achievement of global targets under the UN’s sustainable development goals and Sendai Framework. All the others are heading toward collapse. 

As the report acknowledges, there is still much that can be done. But the time for action is not after 2030.

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