This month, the International Panel on Climate Change,1 a body of more than 14,000 scientists from across the globe, sent a wake-up call to the world with its new report calling on the international community to immediately reduce carbon emissions in order to slow the planet from warming and sea levels from rising.
Climate change is not patient. It will not wait for human attitudes and politics to catch up. And if our sole strategy to address climate change is to reduce global emissions, it will be too late to save millions of lives.
While we're waiting for the public sentiment to catch up to the climate reality, we have to ensure the most exposed infrastructure – vulnerable homes and community assets – are safeguarded from climate risks. Accomplishing that will require financial investment, good governance and behavioral change.
The report’s findings should compel governments across the globe to immediately develop and deploy the “carrots and sticks” that will ensure communities and investors protect homes and livelihoods.
Carrots come in the form of financial incentives, such as tax rebates, as well as free technical assistance from governments and nonprofits to help communities adjust to the changing climate.
Sticks come in the form of enforcement actions, such as an order to stop an activity, penalties and regulatory compliance to ensure that communities take the necessary steps to alter the course of climate change. The framework that can harness this dual approach is the rising prominence of Environmental, Social and Governance (ESG) in the marketplace.
ESG criteria are a set of standards for a company, corporation or organization that socially-conscious investors use to screen, and in turn drive, potential investments. They come on the heels of two decades of groundwork around corporate social responsibility as well as the creation of the United Nations’ Sustainable Development Goals (SDGs).2
Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how that company manages equitable relationships with staff, vendors, clients and customers in the communities within which it operates.
Governance deals with a company’s proactive leadership, parity of pay, internal controls and shareholder rights.
ESG is a powerful tool to motivate the global private and public sectors to reverse our path and protect us presently and in the future. ESG encourages companies, governments and communities to put forward strong executive commitments that will incorporate the values of ESG into all lines of business.
ESG, in its current and evolving form, will enable projects and programs that change behaviors and make the financial investment necessary to protect communities from the immediate impacts of climate change.
Perhaps out of an instinct for survival, the increased interest from investors and governments in ESG is encouraging and a sign that there is a course to follow if we want to reverse the trajectory we are on, as spelled out by the IPCC. But even more, ESG demonstrates that the global community can reduce the risks to front line communities suffering most from climate change’s impacts.
Using ESG as a Framework for Change
Using ESG as a framework for change, potential government and investment strategies could look like this:
Climate disclosure policies
To understand how recipients of public and private funding are managing climate risk, climate disclosure policies should be implemented by governments and investors in order to prove that they are both reducing emissions and contributing to the net-carbon neutral policies that support the regeneration of the environment.3
As climate disclosure becomes an activity regulated by financial agencies and investors, entities will need to embed ESG compliance within their larger regulatory compliance systems.
Enforceable carbon pricing
Governments and the marketplace should create instruments that will penalize high carbon emitters and reward actors who show meaningfully reduced carbon emissions and comply with ESG benchmarks. Proposed carbon pricing mechanisms can generate revenue for governments to re-invest in initiatives such as land stewardship and support for the natural environment, resilient housing, renewable energy, energy efficient infrastructure and more research.4
In California, the reinvestment of funds from the state’s Cap and Trade program has successfully reduced pollution and emissions while creating affordable housing opportunities for low income households.
Enforcement of fair share policies
Governments should propose fair share policies that prevent public and private sector organizations from forgoing their contributions to offset carbon emissions, thus placing a burden on lower-income communities and communities of color.
Participatory budgeting
Participatory budgeting should be implemented for deployment of investments to ensure that the investments made in communities to adapt to changing conditions and mitigate risk are approved and vetted by the very same community residents. This ensures social, cultural and environmental viability and also the possibility of community stewardship of an intervention.
Given the need for flexible and adaptive strategies, there will need to be a combination of virtual oversight through technology, and most importantly, oversight through human eyes.
International Climate Moonshot Communication Campaign
A campaign led by a consortium of non-traditional influencers from range of backgrounds – government, entertainment, financial sector, faith networks – should be created to solicit ideas for strategic interventions at the community level, in order to communicate a global “moonshot” of how great the need is to turn back carbon emissions and how significantly we need to invest in adaptive infrastructure and housing.
The objective would be to motivate communities, governments and households to contribute to the campaign goals, and the campaign outcomes would be tied to financial and programmatic incentives that can encourage the participation in, and the execution of, solutions.
Creating location-specific strategies
Location specific plans should be implemented to support ESG alignment and emissions reduction, such as specifically tailored environmental adaptation strategies. An example of one of these adaptation strategies is artificially creating wetlands along a coast to help reduce flooding.
Adaptation strategies can be paired with mitigation strategies, an example of which is the construction of a flood wall on the perimeter of a community to protect from flooding. These strategies would be informed by local contractors and teams and specifically built in harmony with local geography and climate.
The global community must heed the warning of the IPCC and redouble our efforts to reduce global emissions, while identifying the solutions that best protect communities that are most at risk.
ESG guidance should be incorporated into every aspect of development and capital projects, from deal sourcing and vision through design, construction and asset management.
The ESG framework will not only attract investors and help them make key decisions, but it will also aid underwriters and agencies by ensuring developments are resilient, financially sustainable and regenerative for staff, residents and communities.;
As we continue our fight against climate change, ESG provides a blueprint for mitigating risks to our most vulnerable sections of society.