By Ira Srivastava
1. How to integrate sustainability and geopolitical issues. Boards must face multiple crises at once in this day and age. Here are the key steps for board members to take to address these issues:
- Include geopolitical risks in risk assessments. In the past, risk assessments have been limited to regulation that would affect a company. The scope must be expanded to include trade issues, geopolitical instability, and more. It should also consider impacts to and from suppliers around the world, not just the organization itself.
- Prioritize sustainable investing. Crises are increasingly interlinked, and environmental issues can threaten the overall stability of an organization.
- Plan for insurance market challenges. Extreme weather events are impacting insurance markets around the world, with many insurance companies pulling out of wildfire and flood-prone regions. Keeping these considerations in mind when creating long-term strategies is key.
2. Renewable energy overtakes fossil fuels in Europe. For the first time in history, fossil fuels were responsible for less electricity generation than wind and solar in the European Union through the first half of this year. Electricity demand grew for the first time in two years, but coal and gas usage fell by 25% and 14% respectively. Meanwhile, wind and solar power supplied 30% of the region’s electricity while 27% came from fossil fuels. This is a strong indicator that the EU’s energy transition is showing signs of success, with it simply being a matter of time before fossil fuels are phased out. Germany, Italy, Spain, Belgium and France were the five member states who were responsible for the majority of fossil fuel consumption reductions.
3. Can Japan save ESG investing? While ESG investing is taking a hit around the world with most funds seeing net outflows, the same cannot be said in Japan. According to sustainability strategist Yasunobu Katsuki, “The pace has not slowed down”. While global ESG bonds have fallen since 2021, Japanese sustainability bond volumes doubled in the same time frame. Part of this is due to the pledge the Japanese government made in 2020 to reach net zero emissions by mid-century, giving Japanese companies a target and deadline to work towards. Japan is also the first country in the world to offer transition bonds to help fund a range of net-zero projects and technology. Amid anti-ESG trends in the United States and a rightwards swing of the European Union — long seen as the world’s sustainability leader — there is an opportunity for Japan to emerge as a strong voice in sustainability and climate change mitigation. The lack of backlash is also suspected to be due to the fact that “Japan has not been doing anything radical that would spark opposition to sustainability” as opposed to the U.S. and EU.
4. The SEC’s climate disclosure rules in court. The US Securities and Exchange Commission released its long awaited climate disclosure rules in March of this year, with experts predicting immediate legal challenges. The SEC has begun a defense of these rules by stating that the climate disclosures it has mandated are “information directly relevant to the value of investments”, affirming their jurisdiction to set these rules. Nine suits were filed against the rules within ten days of their publication arguing that the requirements were too difficult and cost-prohibitive for organizations to comply with.
5. Spain boosts renewable energy capacity. Spain has greenlit nearly 300 renewable energy projects worth over US$18 billion in solar, wind, and hydroelectric power generation. Via investing in these projects Spain seeks to achieve its 2030 target of reaching 81% of energy demand met by renewable energy, while it is currently at 50%. Spain is a global leader in the renewable energy transition, especially in solar power. These projects add up to about 28 gigawatts of renewable energy capacity.ions.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.