Purpose on Payday

By Andrew Adie

June has revealed the divisions that run through the world’s political and economic structures and the inequalities of wealth that form a tapestry that can’t be ignored within the wider ESG and purpose mission.

The G7 Summit in Cornwall brought some strong positives in that it reunited the leaders of the world’s largest democratic economies and showed renewed purpose for defending free trade, climate targets and standing up for democratic ideals.

It was also light on actual detail when it came to the environment. Aside from reiterating a commitment to ‘build back better for the world’ and agreeing the principle of meeting Paris Accord 1.5˚C global warming aspirations, and hitting net zero by 2050. The Summit also agreed to accelerate the wind-down of coal fired power (ending support for unabated coal fired power generation) and committed to support the targets of the 30x30 initiative (to conserve and protect at least 30% of the world’s land and 30% of the world’s ocean by 2030).

The G7 Summit also reiterated its commitment to providing $100 million a year to poorer nations to help them cope with the impact of climate change yet Oxfam and others were quick to point out that the target has never been delivered. The battle lines for COP26 are likely to be framed by this issue and, on the environment, the impression left was that the heavy lifting had been kicked down the road to COP26 to resolve.

The Summit was also a focal point for protests from a range of NGOs who believe that the world’s richest nations need to do more to tackle climate change. Another theme that will frame COP26.

In another example of the growing unease around inequality, a report from Credit Suisse revealed that more than five million people have become millionaires during Covid at the same time as many continue to suffer hardship from business interruption, lost jobs and disrupted education. The mission to level-up and ‘build back better for the world’ has not got any easier or less pressing.

June has also seen significant activity from activist investors buying stakes in UK companies which are largely seen as being undervalued in the current climate. As in many cases, ESG metrics are being used as levels to force change through the business but whether the beneficiaries are wider social stakeholders remains a moot point.

The majority of the shareholder action appears to be driven towards boosting returns for investors on a short-term horizon.

Yet at the same time analysis by Oxfam based on Swiss Re Institute data has suggested that the G7 economies could shrink by 8.5% each year by 2050 (double the impact of the Covid Pandemic) due to the impact of climate change. The environmental stakeholder can’t be ignored.

The Climate Change Committee also published a report stating the UK is ‘woefully unprepared’ for the impact of climate change, despite being a world leader on decarbonizing its economy and adopting renewable energy. The report highlights the huge disruption that extreme weather and a heating planet could have on the economy and society and calls for more investment and action.

July will pick up this theme, with London Climate Action Week providing a platform for the ongoing pressure, and analysis, of how our efforts to decarbonise the economy and protect the environment are progressing.