Should ESG be the savior of the planet? | Taiwan News

0

The Taiwanese government has shown strong support for fundamental environmental, social and governance (ESG) investment strategies for the development of sustainable finance through the Green Finance 3.0 Action Plan and the 2050 Pathway Net-Zero.


Just a few months ago, the Taiwan Stock Exchange (TWSE) introduced a new ESG reporting mandate for companies listed on both the TWSE and the Taipei Stock Exchange (TPEx). Companies are required to publicly disclose relevant information regarding their ESG practices and development status on an annual basis.


It is expected that over the long term, the disclosure mandate – in combination with the sustainability roadmap launched by the Financial Supervisory Commission in March 2022 to reduce greenhouse gas emissions – will strengthen investor confidence and attract additional domestic and foreign investment.


So, to be blunt, the disclosure requirements in Taiwan do not require an annual ESG “thesis” and it is clear that the disclosure mandate will evolve over time.


In a previous opinion piece, I noted some of the issues facing ESG on the global stage. These include a limited data pool, lack of a single regulatory framework, disparate terminology and definitions, and even the suggestion of “greenwashing” public reporting.


These issues not only create “noise”, but one could argue that the ESG itself is in the midst of a whirlwind of controversy. The basis for this article is a July 23 edition of The Economist, a publication that I have long admired, but I have real issues with this particular edition and its focus on ESG.


We’ll start with the cover, a “pair of scissors” cutting through the acronym ESG accompanied by the words “Three letters that won’t save the planet.”


S.O.S.


Now, I’ve been writing about ESG for a while now and, although I’m not employed as a sustainability manager at a listed company, nor am I compensated for my vision positive and optimistic about ESG, I have never heard or read about ESG as a savior or panacea for the many woes of the world. Sure, a dramatic title and cover grabs attention and sells copies, but subscribing to ESG’s mystical power to save the planet seems like a stretch even to my imagination.


So, let’s skip the dramatic coverage and move on to one of the articles. Let me clarify that I am not a scientist and I left science to my older brother for a long time and was comfortable in my English, History and Humanities space.


I am a former lawyer and a quick glance at the end of this article will tell you more about my background. I come to the ESG from a different angle than the editors of the articles in the edition in question. I’m very respectful of scientists and grateful to learn from them – I’m just not one of them.


In the “Leaders” section, he describes ESG as failing to make capitalism work better and instead alleges that it has “turned into a shortcut of hype and controversy.” We also note the first reference to “greenwashing”.


Greenwashing is a misrepresentation of a product, service or investment, making something appear more sustainable than it actually is. The article gives the names of some major global financial institutions that are under investigation for such practices.


The article goes on to describe ESG as “an ungodly mess that needs to be ruthlessly rationalized.” naming, sanctioning and sanctioning these activities and institutions.


If you want cruelty, eradicate the fraud and corruption that surrounds greenwashing. Second, ESG is in many ways still in development, finding its way into every country. ESG’s “ruthless rationalization” smacks of the extreme, and is there another agenda?


break it down


Just because ESG isn’t yet clearly presented in a globally adopted 100-point questionnaire doesn’t mean it has no purpose or that investors don’t want to see such measures in place. in the companies in which they invest their money.


The author of the article first discusses the “S” in ESG and notes that one of its problems is that “individual companies will make different decisions about their social behavior”. If we talk about ESG applicable to all listed institutions, it is ridiculous to suggest, at this stage of its evolution, absolute uniformity within all listed institutions. There will be discrepancies, and the commonalities and discrepancies will need to be “ironed out” over time.


‘G’ or ‘the art of management’ is described as too subtle to be captured by ticking boxes. UK listed companies are shocked by comments that these companies have “an elaborate code of governance – and dismal performance”.


Well again, get your house in order. Enforce governance and accountability provided by law. Relegating ESG to the “nasty corner” because of poor governance just doesn’t make sense to me. If ESG forces us to improve governance, we will have achieved more than expected.


“E” then comes for his review. “E” is apparently far too “inclusive” a term as it includes “biodiversity, water scarcity, etc.” .”


In my humble opinion, this is too limited and short-sighted.


House cleaning


Yes, carbon emissions are a major conundrum facing the world, but the global population is not only concerned about carbon emissions. Even if you don’t buy the climate change arguments, I’m ready to believe that you care about other environmental issues, such as drinking water, plastic waste, etc.


Again, restricting “E” to carbon emissions feels like a back door approach to shutting down ESG simply because it seeks to solve a plethora of problems.


I remember a factual story about an attempt to remove the lowly sparrow from a country on the grounds that it consumed agricultural crops. The sparrow was eliminated (at least for a time) but its absence then illustrated its importance in controlling the population of insects, which did much more damage to agricultural crops than the sparrow. A balanced view is the best view in my opinion.


The article in question then ends with the statement that “it is government action, combined with clear and consistent disclosure that can save the planet, not an abbreviation that risks representing an exaggerated and superficial puff” .


This is consistent with other comments, in the same edition of The Economist, which argue that ESG sounds like a “godly mantra” and not “a force for change”. Again, I would never have subscribed to ESG as the savior of the planet.


Change the abbreviation if you must. Hasn’t it already gone beyond, to some extent, CSR or corporate social responsibility? And I don’t dispute the need for continued government action and greater clarity and disclosure – all of this can be achieved in the long term.


As I noted at the start, the ESG world continues to come under intense scrutiny. However, I continue to assert that, regardless of the international noise, Taiwan, at least, sees positive ESG benefits.


If changes are needed in the ESG approach globally, then propose the changes and have them debated vigorously, and a better model duly adopted. In the meantime, I am confident that Taiwan will carefully assess and implement the changes it deems necessary, provided there is a benefit to Taiwan.


Paul Shelton has 30 years of experience in the banking industry, working as Head of Legal and Compliance and MLRO for Asia-Pacific branches of major international financial institutions in Japan, Singapore, Australia and Hong Kong. He also has experience working with financial regulators in the Asia-Pacific region and provides advisory services to Taiwanese financial and non-financial sector associations in all aspects of compliance, anti-money laundering and anti-money laundering. money/sanctions and governance. He resides in Taipei.

Share.

About Author

Comments are closed.