Terence Jeyaretnam runs through all the markers in environmental, social, and governance news for the first month of the year. 

The month of January covers the Chubb review of the carbon credit scheme in Australia, more extreme weather events, and predictions for further catastrophes in 2023 and standards announcements and climate stress tests. 

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!  

Here are my Top 10 for January 2023, in no particular order.

Single-use plastic cutlery and plates to be banned in England

Single-use items such as plastic cutlery, plates and trays are to be banned in England. Research suggest that every year England uses about 1.1 billion single-use plates and 4.25 billion pieces of cutlery, only 10 per cent of which are recycled after being used. Furthermore, plastic items relating to takeaway food and drink, including food containers and cutlery, make up the largest share of litter in the world’s oceans, according to research. Similar bans have already been made in Scotland and Wales, while the UK government has already banned single-use plastic straws, stirrers and cotton buds in England since 2020.

Chubb review of Australia’s carbon credit scheme released

Prof Ian Chubb, who headed the review of Australia’s carbon credit scheme has backed a UN expert group recommendation that companies should prioritise absolute emissions cuts consistent with the goal of limiting global heating to 1.5C, and offsets should be used only “above and beyond” that. The government subsequently released a paper that proposed changes that would require most big emitting facilities to reduce pollution by 4.9 per cent a year, but allowed unlimited use of credits to meet targets. The Chubb review backed the integrity of the Australian carbon credit system, and did not accept allegations that the scheme has mostly not delivered real cuts in emissions. Notwithstanding, the review recommended significant changes, including the creation of a new independent integrity committee and that the government not accept new “avoided deforestation” projects. In response, the Australian Government has noted that most proposed changes, which includes an initial $600 million in funding to help trade-exposed industries adopt cleaner technology, can be made through regulation and do not require legislation. The exception is a new mechanism that would create a new type of “safeguard credits”. Companies that emit less than their government-imposed emissions baseline would receive safeguard credits and could sell them to businesses that miss their targets, creating a further incentive to cut pollution.

Western Australia commits to legislating net zero by 2050 and introducing five-year interim targets

WA’s target of reaching net zero emissions by 2050 will be formally enshrined in law — along with a commitment to slash public sector emissions by 80 per cent by the end of the decade. The legislation will be introduced to Parliament this year, with the Bill also introducing a statutory requirement for the setting of five-yearly interim emissions targets for the State, which would apply to the entire economy. Ministerial reporting to Parliament will also be a provision.

This move makes Western Australia the third State to legislate net zero emissions by 2050, following Victoria and Tasmania.

Artificial intelligence (AI) used to find lost bird species in Queensland

Since its Gondwana rainforest home was ravaged in the black summer bushfires of 2019/20, the eastern bristlebird had not been seen nor heard in south-east Queensland, when at the time only 40 individual birds were expected to comprise the total population. To confirm extinction, QUT researchers teamed up with BirdLife Australia and Healthy Land and Water to place acoustic monitors in the bristlebird’s northern range last year. The results were heartening, confirming the existence of the elusive bird feared lost to south-east Queensland. The potential of this kind of monitoring, called passive acoustic monitoring combined with AI offers new hope for biodiversity conservation.

Kimberley’s record-breaking floods and more extreme weather events to start 2023

With much of last year marked by extreme weather, the start of 2023 has unfortunately continued this trend.  Wild weather events were reported across much of the country, with rain lashing northern Queensland, floods in the Kimberley region of Western Australia, and bushfire conditions fuelling a fast-moving fire south of Perth.

In Western Australia, the north was inundated after extreme weather and ex-tropical Cyclone Ellie dumped record amounts of water across the region. The Kimberley contended with record-breaking floods. As an indication of the nature of climate change, a bushfire south of Perth was contained in the Shire of Donnybrook-Balingup at the same time.

Meanwhile, in South Australia, firefighters managed to contain a bushfire in the Adelaide Hills, just east of the state capital. 

Finally, to close the month, at least four people have died after New Zealand’s largest city experienced its wettest day on record. Auckland received 75 per cent of its usual summer rainfall in just 15 hours. A local state of emergency was declared as authorities managed evacuations and widespread flooding. While climate scientists have cautioned against attributing individual weather events to climate change, research by the National Institute of Water and Atmospheric Research (NIWA), the country’s climate science body has found the warming planet is leading to more extreme weather in New Zealand.

Global Sustainability and Climate Reporting Standards to be Released in June ’23, IFRS, but some relief on scope 3 reporting

The IFRS Foundation’s International Sustainability Standards Board (ISSB) will be releasing the finalised versions for the first global standards for sustainability and climate-related reporting in June of this year, according to IFRS, which has also been working closely with IOSCO, the leading standards setter for securities regulators, and expects IOSCO’s endorsement soon. In terms of next steps for the ISSB, following the release of the initial standards this year, the board will consult on a series of issues, including reporting on biodiversity, human capital and human rights, as well on the connectivity of financial reporting with sustainability reporting.

On scope 3, Companies reporting under the ISSB standards will be given an additional year to report on scope 3 emissions, according to an announcement by the ISSB following its December meeting. As part of the series of guidance and reliefs set out at its December meeting, the ISSB agreed to a temporary exemption of a minimum of 1 year from the implementation of the climate standard. The ISSB also indicated that the standard will allow companies to include information not aligned with its reporting cycle if the information is collected from value chain companies with different reporting cycles. Additionally, the ISSB noted that it agreed to refine proposed requirements for financed emissions, which typically represent the bulk of financial institutions’ Scope 3 emissions, to support financial sector preparers with the measurement and disclosure of portfolio emissions.

UNEP and S&P launch methodology to assess nature-related risks

S&P Global Sustainable1 and the UN Environment Programme (UNEP) have launched Nature Risk Profile, a methodology aimed at enabling companies and investors to assess and analyse companies’ nature-related risks, including impacts and dependencies on biodiversity. This comes on the back of significant nature-related announcements at COP15, and the impending launch of the Taskforce for Nature-related Financial Disclosures (TNFD).

Developed by experts from across the conservation, business, and finance communities, the new methodology outlines metrics and data enabling the identification and quantification of companies’ nature-related exposure, covering areas including risks related to companies’ impacts and dependencies on biodiversity, as well as potential risks arising from proximity to biodiverse areas. The methodology’s risk metrics are calculated by combining company-level information and best-practice nature-related data.

US Federal Reserve to review climate risk faced by banks

The US Federal Reserve Board released details and instructions for its inaugural climate scenario analysis exercise for the six largest U.S. banks, designed to assess the banks’ climate-related risk management practices and their resilience to a range of climate outcomes. Results from the exercise are to be submitted by the banks by the end of July. The banks participating in the climate scenario exercise include Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo. This comes on the back of stress tests conducted by EU, UK and Australian regulators, although the Fed has noted that their assessment will not have capital implications.

EU regulator stress test reveals pension funds to have significant climate risk exposure

European Insurance and Occupational Pensions Authority (EIOPA), the EU’s insurance and pension-focused financial regulator has found that European pension institutions have material exposure to climate risks. The stress test scenario used a steep increase in carbon prices, leading to an increase in fossil fuel prices, raising energy costs, impacting the general economic outlook, and pressuring equity markets, particularly in carbon intensive sectors. The scenario generated around a 13 per cent drop in assets, corresponding to €255 billion in losses, primarily in equity and bond investments. 

The assessment found that only 14 per cent of institutions use environmental stress tests in their own risk management, while those that do carry out these tests tended to perform better in the exercise than their peers.

2023 predicted to be even hotter!

2023 is forecast to be a hotter year than 2022, and likely to be one of the hottest on record according to the UK’s Met Office weather service, sighting two key reasons:

• An unusual three-year-long weather pattern that typically has a cooling effect on our planet should finally come to an end
• Global average temperatures are expected to rise as greenhouse gas emissions continue to climb.

This follows the past eight years being on track to be the eight hottest on the books as reported by World Meteorological Organization (WMO). 2023 is also expected to mark ten consecutive years with global average temperatures at least 1 degree Celsius higher than the average during the preindustrial period. Earth’s average temperature in 2023 is forecast to be between 1.08 and 1.32 degrees Celsius higher than it was before about 1900, when humans started burning fossil fuels at scale. As reported in prior ESG Markers columns, 2022 saw a third of Pakistan flooded, record-breaking heatwaves in China, Europe, North and South America, and a long-lasting drought in the Horn of Africa. I do not look forward to covering more climate carnage, but this seems inevitable.