Davos Attempts to Rebuild Trust

Global elites and world leaders met in Davos for the World Economic Forum's (WEF) annual event. The wintery conditions belied the largely snowless Alps and a worrying downward trend in snowfall across Europe. 

“Rebuilding trust” is the theme of this year’s event just when trust in global institutions is at an all-time low, according to the controversial “trust barometer” from PR company Edelman.

One way the WEF hopes to rebuild trust is to focus more attention on climate change. Climate was first mentioned at Davos in 2014, and ten years later, it is a centerpiece of the event. “A Long-Term Strategy for Climate, Nature and Energy” is one of the primary four themes, and the survey of WEF’s 1,500 members revealed that climate-related extreme weather events were the most significant long-term risk. 

Unsurprisingly, ESG has become passé - WEF executive chairman Klaus Schwab stated that political hostility is zapping “human energy that could otherwise be channeled into shaping a more optimistic future.” 

UN Secretary-General António Guterres put climate at the center of his speech, saying, "Let me be very clear again: the phase-out of fossil fuels is essential and inevitable.” The International Monetary Fund leader, Kristalina Georgieva , followed that by urging countries to move away from fossil fuel subsidies, saying that reducing subsidies and putting a global price of carbon at $85 per ton by 2030 could contribute trillions of dollars to climate action. 

Each year, the gathering of global elites in the Swiss Alps draws criticism, and this year was no different. Perhaps the most biting was from NYT reporter David Gelles who claimed that climate change has been pushed to the back burner by AI and the US election. Quoting Andrés Gluski , chief executive of AES:  “I think there’s a little bit of climate catastrophe fatigue… people are like, ‘yeah, yeah, the world is going to end. But I’m still going to vacation on the Greek islands or the Bahamas.'”

DEI on the Firing Line

First, they came for ESG…now, Diversity, Equity, and Inclusion (DEI) is on the firing line. The brewing backlash boiled over into a public forum last week when two white, male, billionaires debated the merits of DEI programs: Hedge fund manager Bill Ackman claimed DEI is “racist” (he even went as far as to claim that MLK would be against it), and Mark Cuban , said DEI is just “good business.” 

The 2023 U.S. Supreme Court ruling striking down affirmative action was supposedly limited to college admissions but has emboldened those seeking to challenge private-sector DEI initiatives. DEI mentions in investor calls plummeted in Q4 of 2023, however much like the ESG backlash, companies are still implementing DEI programs.  A recent survey of CEOs found that 57% are expanding their DEI commitments, and only 1% have significantly reduced them.

Climate Disinformation on the Rise

A new study found a rise in a new type of climate misinformation. Rather than claiming climate change is a hoax, the “new denial” claims wind and solar energy do not work and that climate scientists are corrupt.

The report comes ahead of a landmark defamation court case of climate scientist Michael Mann , brought back in 2012, which goes to trial this week. Mann claims that the online attacks on his climate research amounted to defamation. A jury will decide the case by early February.

Australia Mandates Climate Reporting

Australia proposed mandatory climate reporting for large and medium-sized publicly traded companies. When finalized, the rule will require annual reports on climate risks, including Scope 1, 2, and 3 emissions, starting from July 2024. 

The phased-in approach will begin with larger companies and large asset managers in 2024, medium companies in 2025, and smaller companies in 2026. Scope 3 (value chain emissions) will also be phased in, with companies getting an additional year to begin reporting. 

EU Bans Misleading Green Claims

As of 2026, claims of ‘carbon neutral’ that rely on carbon offsets will be banned in the EU.  A vote in the EU Parliament outlawed vague labeling terms like “environmentally friendly,” “biodegradable,” and “natural” without solid evidence.

In 2026, only sustainability labels using approved certification schemes will be allowed in the EU market. Green MEP Anna Cavazzini said, “This new legislation puts an end to misleading advertising for supposedly environmentally friendly products and thus enables consumers to make sustainable choices.”

France Criminalizes CSRD Non-compliance

EU member states have until July 6, 2024, to integrate the Corporate Sustainability Reporting Directive (CSRD) into their national laws. Between now and then, expect a lot of action in each member state as they set penalties for non-compliance.  

France, as the first to implement the CSRD into national law, has set a high precedent, with fines maxing out at €75,000 and the additional threat of five years imprisonment for some infringements. This criminal threat is likely to catch the eye of company leaders and the 26 other member states when setting their penalties. 

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Other Notable News:

• The New Hampshire GOP is trying to turn ESG investing into a felony. The bill could put individuals who “knowingly” use ESG criteria in state investment decisions in prison for up to 20 years. 🤯
• The world’s most sustainable firms continue to outperform the wider economy. The 20th annual Corporate Knights 100 Most Sustainable Companies list revealed that sustainable companies still have better revenue numbers than less sustainable peers. 
• 320 companies and financial institutions announced they will start using the Taskforce on Nature-related Financial Disclosures (TNFD). The group, which included financial institutions like Bank of America and NBIM, will begin making TNFD-aligned disclosures this year for FY23. 
• Renewables to the rescue for Texas: After the winter storm of 2021, which resulted in the deaths of over 200 Texans, this year’s winter weather did not see the same level of blackouts or energy issues due to help from wind and solar. 
• Tripling of renewables by 2030 within reach, The International Energy Agency (IEA) reported that an increase of 50% in global renewable capacity in 2023 was driven mainly by China doubling its solar capacity and increasing wind capacity by 66%.  
• COP29 Azerbaijan is already making headlines for the wrong reasons. Next year's hosts came under fire for comprising their 28-member organizing committee with only men.
• The Greenland ice sheet is melting at a rate of 30 million tonnes per hour. The new study revealed that climate change-driven ice sheet melting is 20% faster than previously thought.
• Companies are upskilling their workforce to fill the sustainability skills gap. A new survey found that 67% of CEOs either are currently or have upskilled or reskilled their staff with sustainability skills. 
• Looking for a new role in ESG or climate. Check out these new job listings. 

Notable Podcasts: 

• In this week’s episode of the BBC’s The Climate Question, the hosts dove deep into tidal power, its potential, and why it has yet to be deployed at any large scale. Tidal power technology has been around for more than 50 years. The tides are predictable, and the energy potential is huge, so why has it not been tapped into yet?
• In this week’s Bloomberg’s Zero: The Climate Race, climate journalist Akshat Rathi goes through the history of climate change at Davos, from no mention in 2014 to over a quarter of meetings being climate-related today. It includes an interview with Arctic scientist Gail Uncontrollable Wildfires Whiteman , who has camped out at the event every year since 2017 to deliver a message on climate risk to participants.