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The ESG Review: Why ESG is in better health than you might imagine

A reality checker article in the Financial Times this week accomplished what such attempts to establish the full truth in a major media outlet can do.

It probed the fundamental points that have been raised by ESG nay-sayers over the past year, and examined the plain facts.

Headlined ESG’s..OK, the tepid billing led to a look at the actual slowdown in launches of new ESG investment funds, relabelling of previously-badged ESG funds as something else, fund closures and net outflows. It concluded that the broad picture is that while concerns of greenwashing, political tensions and the ongoing need for clearer standards has no doubt seen some softening, overall ESG is in relatively good health, from an investment perspective at least.

It’s a situation perhaps best summed up by an FT article from last week, which outlined that ESG has become an easy target for attacks and net zero policy changes in some large western markets have only heightened that. It projected that the ESG ‘industry’ is making moves to better defend itself against that in the ”hope to avoid getting tangled up in the climate culture wars”.

If the ESG investment agenda has not suffered the body blow that some media articles may have led readers to believe, then the drive to enforce greater transparency on businesses in reporting progress towards goals certainly shows no signs of a let-up. This week, the State of California passed a new law compelling the largest companies headquartered there to report their carbon emissions, an obligation that’s already due to come into force for EU companies.

The implementation of the law will be subject to an aggressive timeframe, and apply to firms with revenue of $1 billion-plus. Given that California is home to many of the world’s largest companies in sectors such as technology, energy and financial services, expect that development to have reverberations well beyond the state, with the stipulation to report exact emissions making it the first legislation of its kind.

Meanwhile, with the UK political focus having been elsewhere this week, the Government quietly published its 2024 carbon allowance auction calendar, which will introduce tight emissions limits for industries as part of the UK Emissions Trading Scheme.

“Through the scheme’s auctions process, companies in industries including manufacturing, power and aviation are required to buy allowances for every unit of carbon they emit. With fewer available to buy, these sectors will need to take further steps to cut their emissions,” it said.

The spotlight may be falling on the froth as the drive to decarbonise and achieve ESG goals becomes ever-more politicised, but beneath the surface, swan-like regulators and finances appear to be aiming to stay the course. 

The ESG News Review is written by Steve Earl, a Partner at PR agency BOLDT.

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