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Tim Mohin: 2023 in Review and 2024’s Emerging Trends

Tim Mohin: 2023 in Review and 2024’s Emerging Trends

2023 in Review and 2024’s Emerging Trends
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And we are back!  Here’s hoping you had a  joyous and restful holiday break.

To kick off the year, we reflect on some of the biggest ESG and Climate News stories from 2023 and forecast the trends for 2024.

2023’s Top 5 ESG and Climate Stories

Hottest Year Ever

Photo Credit: Jadyn Kist/ CNBC

The image for this edition is the “warming stripes” – where each stripe indicates the annual global average temperature. The creator of this image, Ed Hawkins, said, “Another dark red stripe gets added, though I think I need a new color.”

2023 was the hottest year since records began and possibly the warmest in the last 125,000 years. By some accounts, 2023’s global average temperatures breached the 1.5°C goal set in the Paris Accord.

With the increased heat came wildfires in Canada that blanketed North America in an orange-hued toxic smog. Climate-change-fueled weather anomalies in 2023 added up to the most $billion+ disasters the US has ever seen (25 as of December 8th), putting the real-life costs of a warming planet into perspective.

COP28 Recognizes Fossil Fuel Transition

COP 28 Christopher Pike/flickr

Marking a global turning point, COP28 produced a final agreement to transition away from fossil fuels. COP28 also resulted in agreements to reduce methane, fund loss and damage from climate change developing countries, triple renewable energy generation, and a host of other positive deals. However, as with every COP meeting, some were disappointed with what they saw as a lack of progress.

A Flurry of New Regulations and Standards

A host of new regulations and standards in 2023 marked a turning point for global climate and ESG reporting. Here is a rundown of some of the main releases:

The Year of Interoperability

With so many new regulations and standards being released, you would be forgiven for thinking this would make reporting more confusing. Last summer, we dubbed 2023 the “year of interoperability” as nearly all the global reporting standards setters collaborated to make their approaches “interoperable.” Whether these efforts relieved the confusion and reporting burden is yet to be seen.

The ISSB helped clarify the alphabet soup when they took over the Task Force on Climate-Related Financial Disclosure (TCFD) responsibilities in late 2023.  In addition, the CDP questionnaire – used by ~23,000 companies, will now align with the ISSB climate standard.

The ESG Backlash

Source: Facebook/Office of the Governor

2023 was a year where a Republican backlash painted ESG as pushing a “woke agenda.” The backlash saw 18 states led by Florida’s Ron De Santis prohibit state funds from going to ESG-focused investments. The knock-on effect of this was that some companies distanced themselves from using the term, and investments coming into ESG-labeled funds saw a precipitous drop. Despite firms using the ESG term less, it did not stop them from embarking on sustainability initiatives, although more quietly.

Five Things to Expect in 2024

The Year of Implementation

2024 will be the year of implementation. The requirements and deadlines are known, and companies are now in various stages of preparation for compliance. While implementation takes center stage, here are a few policies worth watching:

ESG Backlash Intensifies

REUTERS/David ‘Dee’ Delgado

With 2024 being an election year for over two billion people in 40 countries, ESG has become a hot-button topic for leadership hopefuls to varying degrees around the world. In the US, Republican presidential candidates are amplifying the ESG backlash.

State-level anti-ESG lawsuits are becoming more sophisticated. Late in 2023, Tennessee sued the world’s largest investment firm, BlackRock, for apparently misleading customers by pushing ESG principles across their portfolio. The 73-page lawsuit alleges  BlackRock overstated the financial performance of ESG factors.

There are suggestions that the ESG backlash will even spread to the EU and hamper its sustainability progress.

The Elephant in the Room

Kevin Lamarque/Reuters

The current Republican frontrunner, Donald Trump, promised to gut President Biden’s climate agenda, including the IRA and would reinvest in fossil fuels. US auto companies warned that cutting the IRA could destroy the US EV market.

While immaterial in US politics, a recent Yale study found that 71% of voters, regardless of party allegiance, support the IRA when informed what it is. Not surprisingly, most voters are not aware of the IRA, which is why Biden is putting it at the center of his election campaign. As Bill McKibben said, “Biden still has to win that second term, (or all climate action) will evaporate when Trump (or for that matter Nikki Haley) take over in a year.”

Climate Risks and Greenwashing Scrutiny

Paul Morris/Bloomberg/Getty Images

2024 is set to be just as hot or hotter than 2023. With another El Niño year ahead and 2023 producing the most emissions ever, we can expect a sad litany of climate disasters similar to 2023.

The drumbeat of legal action against companies overstating their ESG credentials will continue in 2024. While the financial service sector led the 70% jump in greenwashing incidents in 2023, these issues can affect any company in any sector.

RELATED ARTICLE: Tim Mohin – COP28: Beginning of the End of the Fossil Fuel Era?

Looking Beyond Climate

Climate will continue to dominate the agenda in 2024, but light will be shed on other issues, such as biodiversity, social matters, and the circular economy. With the release of the TNFD and attempts to give nature and animals legal rights, many believe that 2024 will be the year biodiversity enters the political mainstream. Social issues will get a boost from new regulations. The EU’s new due diligence directive (CSDDD) and the German Supply Chain Due Diligence Act (which will expand in 2024) force companies to identify and mitigate human rights abuses in their supply chains. Other new EU policies, such as the Batteries Rule and the Deforestation Regulation, will reshape how companies design products, source commodities, and produce materials.

This Smart Read article is contributed by Tim Mohin, Global Sustainability Leader, BCG. Every week ESG News delivers smart commentary from ESG practitioners and experts to unpack issues of the week. Submit your ESG Smart Read to [email protected]


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