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With the ESG landscape evolving at a rapid pace, MLT Aikins is pleased to offer a curated list of timely and relevant ESG articles to help you stay current. Learn more about our ESG services.

CSA Targets “Overly Promotional” ESG Disclosure

On November 3, 2022, the Canadian Securities Administrators (CSA) issued a report cautioning companies to avoid publishing exaggerated and potentially incomplete claims regarding their business operations, sustainability of a product or otherwise conveying a false impression – also known as “greenwashing.” As a result of an investigation into the alleged greenwashing of a Canadian company, the CSA advises companies to avoid making ESG disclosures without any evidence to support their sustainability claims or they may face potential consequences. Continue reading.

Stakeholders want a say in ESG matters, but capitalism lives on

White House Announces New Environmental Impact Disclosure Requirements

On November 10, the White House Council announced that major federal suppliers are now required to disclose their environmental impacts through the CDP global disclosure system. This will include disclosure of GHG emissions and climate-related financial risk while also requesting companies take tangible action by setting science-based GHG reduction targets. Read more from CDP.

SEC Climate Rules Delayed due to Bureaucratic and Legal Woes

Having missed its self-imposed October deadline, the Securities and Exchange Commission (SEC) is behind schedule for finalizing new climate disclosure requirements. The changes will be the result of thousands of public comments and factors from the June Supreme Court ruling in West Virginia v. Environmental Protection Agency. In that case, the Court ruled that agencies need clear permission from Congress to create regulations that have major economic or political effects.

Despite corporate pushback, the proposed changes will likely include some sort of financial statement disclosure about climate impact. Read more from Bloomberg.

ISSB Confirms Requirements for Scope 3 Emissions and Scenario Analysis

According to an October 21 statement by the International Sustainability Standards Board (ISSB) of the IFRS Foundation, the ISSB will include Scope 3 Emissions as part of required company disclosures under its new standards. Scope 3 Emissions are those originating in a company’s value chain and beyond its direct control. Regulators in major jurisdictions like Europe, the U.K. and the U.S. have introduced or are preparing mandatory standards heavily influenced by the ISSB standards. Read more from ESG Today.

In addition, at the supplementary board meeting held on November 1, the ISSB unanimously confirmed that companies will be required to use climate-related scenario analysis to inform resilience analysis. The ISSB agreed to provide application support to preparers including materials developed by the Task Force for Climate-Related Financial Disclosures (TCFD) to provide guidance to preparers on how to undertake scenario analysis. Learn more from IFRS about application supports.

The ISSB has also announced a new Partnership Framework with more than 20 partner organizations. This announcement is key to the implementation of climate-related disclosure standards for 2023 as discussed at COP27. It is designed to support preparers, investors and other capital market stakeholders as they prepare to use IFRS Sustainability Disclosure Standards. Read more from IFRS.

Corporate Emissions Oversight Body Facing Criticism from Climate Scientists

The Science Based Targets Initiative (SBTi) continues to receive criticism from the science community as outlined in a recent letter to SBTi’s chair Lila Karbassi. The letter calls the current approach critically flawed and provides several recommendations to ensure the integrity of the initiative going forward. SBTi does not verify the accuracy of the underlying emissions knowledge reported by corporations nor does it require the information to be verified by third parties. Read more from Financial Times.

Conversely, there now exists an alternative to SBTi known as the United Nations Research Institute for Social Development (UNRISD) Sustainable Development Performance Indicators (SDPI) Manual (collectively, the “Manual”). The Manual provides five universal criteria for science-based target methods for GHG emissions. Read more.

BCG Survey Reveals Slow Progress for Emissions Measurement

A recent survey from BCG on carbon emissions shows progress is slow for comprehensive measuring of companies' greenhouse gas emissions. The better a company measures its GHG emissions, the more effectively it can reduce them, yet increases in comprehensive measuring have been minor.

This is the case across industries and regions, with an increase of 1% from only 9% in 2021 to 10% in 2022 of companies measuring their GHG emissions comprehensively. Interestingly, only 12% of organizations surveyed consider Scope 3 their top priority. Read more from BCG.

Increased Interest in Third-Party ESG Assurance

Critical stakeholders are challenging corporations when it comes to producing reliable, transparent ESG information. The result has been a rise in use of external third parties for ESG assurance due to the nature of ESG disclosure requirements. The self-selected requirements on what information is disclosed leads to a lack of transparency, which increases the importance of an independent audit function internally. Third-party assurance enhances the reliability of ESG information and builds confidence among stakeholders. Read more from Thomson Reuters.

Lloyd’s Market Commitment to Net Zero Will Trickle Through the Supply Chain

Ontario-based managing general agent (MGA) Excess Underwriting is looking to follow Lloyd’s commitment to a more sustainable future. Lloyd, the world’s oldest insurance marketplace, has committed to transition its operational emissions to net zero by 2025. As part of Lloyd’s supply chain, MGA has been encouraged to reduce its carbon intensive activities and is looking to increase its support for climate solutions. Read more from Canadian Lawyer.

Stakeholders want a say in ESG matters, but capitalism lives on

A recent letter to CEOs written by Larry Fink on behalf of BlackRock’s clients provides insights into the power of capitalism.

Fink writes that the foundation of stakeholder capitalism relies on a company having a clear sense of purpose and consistent values that recognize the importance of engaging with and delivering for their key stakeholders. He writes that “putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success.” Fink expands on the influence of new sources of capital which is fueling market disruption. He urges companies to evolve and grow so they too can generate attractive returns for decades to come.

Fink touches on the importance of the transition to the net zero world and its relation to capitalism. He states companies should focus on sustainability – not because they are environmentalist but because they are capitalists and fiduciaries to clients. Fink explains that companies should empower clients with a choice to vote on ESG matters. Read the full the letter.

PwC’s 2022 Review and Survey Provide Mixed Messages About ESG

PwC recently published its global annual review for 2022 and its annual survey of directors, which provided a grim look at the new era of leadership.

The Review details how ESG is now one of the most common topics of conversation in corporate governance today. PwC urges companies to have their ESG houses in order prior to going public as investors want to invest in businesses that recognize and respond to the risks and opportunities ESG practices present. Read the Review.

The Survey, on the other hand, provides that only 40% of CEOs have factored climate change into their strategic risk management, 55% see no link between ESG and the bottom line, and a mere 11% think sustainability expertise is important. The Survey shows that the Review's encouragement of ESG practices may just be lip service. Read the Survey.

Tulipshare takes on Tesla and Proctor & Gamble

Tulipshare, a retail activist shareholder platform, has called on Telsa to tie its executive pay structure (specifically Elon Musk's salary) to ESG factors. A shareholder resolution is expected to be filed on the matter at Tesla’s annual meeting next year.

The S&P Dow Jones ESG Indices last spring kicked Tesla out due to the company facing reputational and legal risks which was followed by the CEO of Tesla tweeting in May that “ESG is a scam.” Read more from Reuters.

In addition, Tulipshare is launching a campaign to expand its influence over Proctor & Gamble. Its goal is to install an independent board member with experience in achieving sustainability goals to add value and balance to the board (and company) and ensure deforestation concerns are being addressed. Learn more from Tulipshare.

VW Could Face Legal Action on Climate from Institutional Investors

VW’s stance on environmental issues has been a sensitive topic since the Dieselgate scandal in 2015. It now faces potential legal action by a coalition of institutional investors who accuse VW of refusing to answer questions about its lobbying activities related to climate change. These investors attempted to include climate lobbying on VW’s 2022 shareholder meeting agenda, but were unsuccessful. Read more from the Financial Times.

Gen Z Willing to Quit Working for Irresponsible Companies

A recent insight from GlobalScan shows that Gen Z employees are the most likely to quit working for irresponsible companies, followed by Millennials, Gen X and Baby Boomers, respectively. See the insight at GlobalScan.