OPINION: An energy crisis, a green trade war and the end of cheap money will test the commitment of ESG investors in 2023.
If 2022 was ESG’s year of reckoning when reality caught up to the hype, then 2023 is when a slowing economy and the end of cheap money will challenge ESG investors globally and in Australia. Four issues stand out.
All of which pose major problems for ESG advocates: how to reconcile the energy reality with what has been said for the past five years.ironically over the Biden administration’s Inflation Reduction Act and the incentives it provides for a range of clean energy technologies. After demanding transparency from companies that actually emit, the financial sector is less keen when facing similar demands.
Third, new emission reporting standards based on those developed by the International Sustainability Standards Board and the Taskforce on Climate-Related Financial Disclosures, are being proposed in Europe, North America and Australia. These will place an onus on financial institutions to account for emissions.
The increase in regulator focus on greenwashing last year has shown that it’s the financial sector which is in the frame. Claiming sustainability credentials for BAU investments will no longer cut it.Along with a heightened political focus on ESG by Republican-controlled states in the US and the potential for class action lawsuits against companies and directors that have either failed to meet stated targets or fallen short on fiduciary duties, aspects of ESG will become more problematic.
Despite provision of assistance under the government’s proposed package, the fundamental issues – international cost competitiveness, inability to reduce emissions with commercially available solutions etc – will still challenge a number of emitting companies.
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