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Greetings from New York, where I find myself experiencing a sense of déjà vu. Over the past year, I have witnessed with dismay a slew of anti-woke and anti-green messages emanating from the American far-right as part of a colorful campaign against the Democrats. This week, however, it seems that Britain has taken a page out of the American playbook. Grant Shapps, the UK’s minister in charge of energy security and the net-zero pledge, has turned the decision to grant more oil and gas licenses into a political football. In a tweet, he stated, “The public have turned against Keir Starmer’s dangerous plan to surrender our energy security to Just Stop Oil. New polling shows Britain backs new UK oil & gas. That’s because the choice is simple: Growth or mass unemployment, keeping the lights on or turning your heating off, security or vulnerability, funding our NHS or taking funds away, following the data or surrendering to the mob.”
It remains to be seen whether this move will actually boost the Tory party’s chances in the next election; polls indicate they are still lagging significantly behind Labour. However, what is clear is that this policy shift has prompted vehement protest. Keep reading for an impactful intervention from Australian billionaire Andrew Forrest and the latest efforts to combat greenwashing in company accounts, as well as a notable corporate drive to find a new way of discussing sustainability without relying on the politicized acronym “ESG.” We would love to hear your thoughts on the best framing, one that will resonate on both sides of the Atlantic. The race is on. — Gillian Tett
Mining magnate threatens to withdraw from UK after Sunak’s climate pivot
Rishi Sunak’s recent embrace of oil and gas development in the UK has not only horrified many NGOs and activists but has also drawn fierce criticism from an unexpected source—Australian CEO and billionaire Andrew Forrest. Within hours of the announcement, Forrest, who heads the Australian industrial and mining conglomerate Fortescue, which is heavily involved in hydrogen, warned on Bloomberg TV that he would withdraw from Britain if the government did not reverse its decision. “We have several hundred million pounds of investment [in Britain],” he explained. Forrest also highlighted that he owns WAE Technologies, the battery group affiliated with the Williams Formula 1 team, and that WAE plans to open an advanced battery plant in Oxfordshire soon. This move was previously hailed by UK leaders as a significant step toward bolstering the electric vehicle industry and reducing dependence on China, especially as another battery company, Britishvolt, collapsed earlier this year.
Forrest stated, “We have other facilities planned for Britain, and we are planning to bring new technology to Britain. However, we see no reason to invest in a country that does not take climate change seriously.” While it remains unclear how Forrest will determine the seriousness of a country’s commitment to climate change, his comments are worth noting for several reasons. Firstly, they illustrate how this summer’s extreme heat is focusing attention on the issue. Forrest asserts that the UK government’s move is contradictory in light of mounting evidence of climate change, arguing that “we are currently experiencing the hottest months in history” and that “if we are unlucky, global warming could reach 1.5 degrees next year.” Secondly, Forrest hopes his intervention will prompt other business leaders to speak out. He believes that corporate executives must demonstrate their ability to lead during this critical time. Finally, Forrest contends that the UK government’s decision strengthens the perception that the US is a more welcoming destination for green technology. Despite facing its own right-wing backlash, the US’s Inflation Reduction Act has made a persuasive case for green investment, according to Forrest. “The Biden administration has created an economic engine that compels you to invest in the US if you manage other people’s wealth,” he explains. “I would like to invest in Britain, but the country needs policies that shift away from fossil fuels towards clean energy.” It is worth noting that the future of Biden’s IRA is uncertain in the event that Donald Trump wins the 2024 presidential election. Additionally, given that concerns about climate change are bipartisan in the UK, it remains to be seen how sustainable the UK government’s policy shift will be. Nevertheless, the winds of policy change across the Atlantic are clearly shifting, isolating the UK further from continental Europe and the current American administration. All eyes will be on whether other CEOs will follow Forrest’s lead. (Gillian Tett)
A new initiative to combat greenwashing
As companies face increasing pressure from both investors and regulators to expand the scope and scale of their sustainability reporting, the need for high-quality external assurance of these disclosures becomes increasingly urgent. However, there are concerns about the rigor and consistency of this assurance, with some fearing that it could be a form of “greenwashing.” Therefore, it is worth mentioning the announcement made by the International Auditing and Assurance Standards Board today, as they unveil proposed standards for ensuring the quality of sustainability disclosures.
Tom Seidenstein, chair of the IAASB, emphasized the importance of establishing relevant assurance standards in light of the global trend towards mandatory sustainability reporting. The proposed standards, named ISSA 5000, will be open to public comment for the next 120 days, and the IAASB aims to have them confirmed and operational next year.
The IAASB’s audit and assurance guidelines serve as the foundation for regulatory standards worldwide. Previously, the board released a set of standards called ISAE 3000, which established broad standards for non-financial reporting assurance in general. However, Seidenstein noted that member companies have expressed their need for more extensive and specific guidance on assuring sustainability reports. He added that the new IAASB guidelines could be used to ensure the accuracy of disclosures made under major corporate sustainability reporting standards, such as the International Sustainability Standards Board, the Global Reporting Initiative, and the EU’s European Sustainability Reporting Standards.
While these corporate reporting standards differ significantly, particularly in their definitions of “materiality,” Seidenstein stated that the new IAASB guidelines would ensure that reporting adheres faithfully to whichever framework is utilized. He added, “Having more external assurance instills confidence that the reporting statements are free from errors and enables decision-making regarding capital allocations and other matters relevant to society.” (Simon Mundy)
Why SHH Should Not Replace ESG
Larry Fink is not the only one. A month after the BlackRock CEO declared that he no longer uses the term ESG due to its politicization, a new report reveals that other business leaders are also moving away from the acronym for environmental, social, and governance investing. In response to the growing backlash against ESG, 48% of US companies surveyed by the Conference Board stated that they have changed their terminology to use words like “sustainability” instead. This is more than four times the number of companies altering the substance of their ESG programs. Rather than retreating, ESG advocates are rebranding.
This cautious approach reflects a wider debate within the investment industry. Critics argue that ESG has been watered down to the point of irrelevance, with companies engaging in token gestures to create the appearance of compliance. Additionally, there is concern that political polarization and the risk of “greenwashing” have diminished the credibility of ESG metrics. However, some experts argue that replacing ESG with other terms may not solve the underlying challenges facing sustainability investing. They assert that it is crucial for investors and corporations to focus on substance over semantics and to carefully assess a company’s commitment to genuine environmental and social initiatives. Ultimately, the success of sustainable investing hinges on transparent and accountable practices rather than mere terminology.
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