2023 has been a busy year for ESG (and me).
The year started strong for the anti-ESG pushback with successful if temporary, boycotts against Bud Light and Target. Twitter was still widely used to organize these efforts, and politicians were ramping up their rhetoric for the summer’s Congressional ESG hearings.
By the end of the year, we had a loss and damage fund announced at a controversial COP, the anti-ESG hearings were a massive bust, and some companies and financial services firms backed away from the ESG entirely.
The big theme for The ESG Advocate this year was the The Great Disclosening, which appeared in several articles. As the SEC has pushed its rule out to April 2024, I suspect this theme will continue to serve as a foil to ESG action throughout the coming year.
I spent much of the year writing my new book, ESG Mindset, which will be out in April. Between keeping up with my job during the day and writing this Substack, short takes on ESGNews.com, and my book on the off hours and weekends, it has been one long year of sustainability and ESG.
So, with all that, here are the top things I took away from 2023 in the Environmental, Social, and Governance categories.
Environmental: We are not ready
Globally, 2023 was the hottest year in the past 125,000 years. While El Nino plays a role, it isn’t the only contributor. Locally, for the first time I can remember, here on the East Coast of the US, we had to deal with wildfire smoke from hundreds of miles away in Canada for several days. Overall, the planet is in crisis.
If you didn’t know, I sit on the commercial side of sustainability. I believe the world will undergo the biggest systems shock we’ve ever seen over the next 20 years with new business, energy, and financial models emerging. Technology is standing by to help, yet two things are missing: courage and empathy.
Courage here means seeing that change is necessary and then acting. In 2022, the US signed the Inflation Reduction Act. This year, the Department of Energy has estimated that the investment might reduce 1B tons of carbon emissions and set the US on the path to 80% renewables by 2030. Portugal had a huge ESG win by running on diversified renewables for six days. Recently, it was announced that China is rapidly scaling the deployment of renewables.
These are laudable and tangible transitional efforts, but the energy and financial services sectors are still not transitioning as quickly as possible. We need serious systemic change, yet I can’t make sense of the economics of solar for my home or find any EV charging stations in my rural town. I also need to take a plane to get just about anywhere.
Regarding empathy, this one is tough. Last year, I was optimistic about loss and damage coming out of COP27, with a committee announced to investigate the matter. This year, my hopes quickly grew and were dashed as COP28 established a loss and damage fund, but the amounts committed were paltry. $700M was initially committed, but we are in a world of repeated billion-dollar disasters annually.
As a reminder, another loss and damage fund was established at COP15 in 2009, which remained underfunded. There is no indication here that this new fund will remain consistently funded year over year or be in the form of grants, not loans. In a disaster, no country wants to hear that they can have a loan with interest.
We are rolling the dice here, allowing superpowers to transition towards sustainability while ignoring the Global South, which will be at the center of this new extractive push for rare earth minerals to support it. I can’t imagine this gamble is going to pay off.
Social: The anti-ESG pushback revealed!
While the anti-ESG pushback from conservative states has centered on Environmental issues, the real pushback came in the form of several disappointing movements in the US in 2023.
Bud Light and Target’s boycotts were related to social justice issues, with the former being a misalignment to stakeholders and the latter being an anti-Pride month pushback. But by summer, the US Supreme Court rolled back affirmative action for college admissions, opening the floodgates for emerging DEI litigation.
In October, a US Appeals Court blocked The Fearless Fund from considering application grants from Black women. As a reminder, Black founders typically receive 2% of overall funding (and it dropped in 2022). It will be interesting to see how these systemic injustices ever get resolved and what the continued consequences of inaction will be for the broader corporate ecosystem if these issues cannot even be attempted to be resolved.
Governance: Another reminder of its power
This past year, my article about Silicon Valley Bank at the intersection of Governance was by far the most popular. If there was another big theme for 2023, it was the unrecognized power of Governance in almost every big corporate issue this year.
Yet, despite globalization's role, intangible growth, connected crises, and the influence of AI and technology, companies are backing away from ESG, a brewing Governance risk. Last week, I wrote about the danger of backing away from ESG action in favor of reporting and disclosures.
As we enter a potential corporate and market disruption period, Governance will consistently emerge as the theme to watch. To paraphrase my friend Dr. Andrea Bonime-Blanc, “The time of inactive board participation is over.” I hope to see investors and asset managers taking a more active role in 2024, leveraging corporate risk and good Governance as levers to help companies navigate the change. Still, the universe has no force like inertia, so that hope remains small.
However, it might not be that bleak. One Social and Governance topic I didn’t cover too much indicates a coming shift. 2023 was undoubtedly the year of the organized labor movement. This year, UAW, Hollywood writers, UPS, and Starbucks saw strike after strike with interesting tactics and arguments. I don’t expect this momentum to slow as CEO pay continues to be a talking point and market caps continue to grow.
One last thing: Look to the writers
It has been another strange year for book bans in the US, which I find to be a parallel theme to the anti-ESG pushback. Even though ESG leads with material intersections of the business and markets, the empathy learned from books can help shape a diverse perspective across ESG topics. Remember, I called out empathy in the Environment section above, and reading opens up new possibilities and potential.
I believe fiction writers often can give us a glimpse into what’s coming, at least in the near term, so I am NOT a fan of book bans. Who knows if writers influence the future directly, like Star Trek, or take cues from society? I bought several books this year, but three stood out for dealing with climate change and social justice issues at their center.
Appleseed by Matt Bell - I admit that I knew this one was about climate change going in, as the cover pretty much gives it away. I wasn’t ready for a story that spanned three primary timelines over several hundred years across fantasy and science fiction themes. I struggled with this, but Bell believably showcases our changing relationship with the planet in each period, threading a complete narrative. The near-term timeline is just plausible enough to be a bit jarring.
A House Between the Earth and the Moon by Rebecca Scherm - This science fiction story features a world on the verge of collapse from climate change. One where a satellite waits for the world’s wealthiest people to escape. This one features a phenomenal subplot about the psychological power of generative AI in the hands of social media-obsessed teens that could have been the entire narrative’s focus, and I wish it had been explored further.
Perilous Times by Thomas D. Lee - I remember being fascinated in the store, reading the book’s jacket, and hearing a roundtable knight who continually comes back to life when England is in peril. I did not expect the peril to be climate change in the near future. I enjoyed this modern Arthurian legend, which included a bit of everything, including gender and racial issues, geopolitical conflicts, corporate greed, and, of course, dragons. This one was the most fun one on my list.
Well, I think that’s it for me for this year. I appreciate you all sticking with me as I dropped off writing here to write my book from March to September, then went to editing through the fall, and now sit in proofreading through mid-January. Eventually, I’ll get back on a schedule.
Here’s to 2024, the year I launch my first book!