Climate change is now the most prominent issue in the global ESG conversation, and SA has the unique feature of being an emerging market with developed market levels of carbon emissions. It is the world’s 32biggest carbon emitter. It also scores poorly on several governance indicators such as corruption perceptions indices, and components of the World Bank’s Worldwide Governance Indicators, though it also scores well on others such as freedom of the press.
This national picture reflects at the level of companies. Many have weak emissions profiles and score low on sustainability given their reliance on coal-based power and the economy’s bias towards extractive industry. But, again, companies also need to finance the transition of their activities, requiring significant additional capital investment.
Continued investment in companies that worsen social conflict or that damage the natural environment will eventually destroy the base from which all profits are made. The costs of escalating social inequalities in some parts of the world and of the climate change crisis are already being felt by businesses and investors.
However, this is complicated in practice. How do we measure ESG outputs, additionality, transition and change, in clear, consistent ways that are not prohibitively resource-intensive? Most ESG tools are backward-looking in that they rate companies on historic data. ESG additionality, however, is forward looking: it requires assessing the impact that an investment will make on future ESG performance. This requires estimates and forecasts that have not been part of most ESG strategies in the past.
To implement this economy destroying rubbish here where it is least affordable.
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