Chapter 2 Flashcards
SDG + when it was launched
Sustainable Development Goals. United Nations’ Sustainable Development Goals (SDGs), launched in 2015 as part of the UN’s 2030 Agenda for Sustainable Development.
MDG
Millenium Development Goals
def sustainability
Humankind meeting its economic needs without overburdening the natural environment or future generations
sustainable development
country-level ECONOMIC development in a way not overexploiting natural resources and not overburdening society
ESG
ESG is a subcategory of sustainability - set of standards, measuring the environmental, social and governance perfornamce of firms, often by financial counterparties
Private sector
Businesses, companies, privately owned organizations
Materiality
Significance to company’s finances and business operations
3 types of Sustainability
- Environmental - natural res. are consumed at a rate less than replenished
- Social - min standard of basic necessities and human rights and sufficient resources
- Economic - economic systems spread prosperity globally
How do corporations practice S?
Through their S policies, S practices, and adhering to ESG norms
What are the environmental criteria of ESG?
Measure relation to climate change / nature (e.g. CO2 emissions, water usage, deforestation impact)
Social criteria of ESG
How company treats its employees, relates to suppliers, communities
Governance criteria of ESG
Company’s
- leadership
- board composition
- executive compensation
- risk management
- other internal procedures
UNFCCC
United Nations Framework Convention on Climate Change
IPCC
Intergovernmental Panel on Climate Change
When were SDGs created? Deadline?
2015, deadline - 2030
When were MDGs created + deadline?
2000, deadline - 2015
How many SDGs and targets within them?
17 SDGs -> 169 targets
Multilateral organizations
International organizations formed by multiple countries to work on global issues, such as the United Nations (UN), World Bank, International Monetary Fund (IMF), and World Health Organization (WHO).
Nature-based solutions
Actions to protect, manage, restore ecosystems, that also address societal and human challenges
WWF
World Wildlife Fund
5 characteristics of a viable Nature-based solution
- Addresses climate change and increases ecosystem functionality
- Science-based
- Synergistic
- Designed and implemented with local stakeholders and local people
- Measurable and traceable
def ecosystem services
Benefits ecosystems provide to humans. Both measurable (like timber production) and less tangible (like spiritual values)
4 types of ecosystem services
- Supporting (e.g. species habitat) -> enable all other services to exist
- Provisioning (timber) - generate marketable resources for society
- Regulating (e.g. regulation of natural processes, e.g. mangrove forests helping with hurricanes)
- Cultural (e.g. recreational service)
What are the policy options to protect ecosystem services (3)?
- Limit use of provisioning ecosys serv (e.g. water, timber)
- Protection of habitats
- Apply market mechanisms to ecosystem services (e.g. water market, trading water rights via broker)
Natural capital def
stock of abiotic and biotic world’s
natural assets (e.g. forest - natural capital -> timber is an ecosystem service, deriving from this natural capital)
Natural Capital Protocol
Framework allowing ofganizations assessing their impact & dependencies on natural capital
World Resources Institute Ecosystem Services Review
Framework allowing orgs to assess impact & dependencies on ecosystem services
Triple bottom line
Assessment of corp sustainability with equal weights on financial perf, social impact and environmental impact
CSR
Corporate Social Responsibility - concept that corp has broader obligations to society
divesting def
exclusion from investments
Materiality def
Relative significance of an issue to an organization’s finances and business operations
Two main types of greenwashing
Decoupling - when org claim sust expectations to stakeholder, but don’t fulfill them
Attention deflection - orgs hide unsustainable practices with incomplete disclosure / misleading statements
Other non-main types of greenwashing (6)
Greencrowding - obscuring sustainability record among many companies in the sector
Greenlighting - spotlight small green features, distracting from large non-green
Greenshifting - shifting env blame to the consumer
Greenlabeling - misleading claims on sust
Greenrinsing - changing ESG targets before they are achieved
Greenhushing - hicing, under-reporting sustainability credentials
Greenwishing def + example
Well-intended efforts to address env challenges, that don’t make any significant difference and are actually superficial (e.g. buying e-car, but it’s charged from the coal-fired power station)
LCA def
Life Cycle Assessment - “cradle-to-grave” assessment of a product’s environmental impact
Two types of reporting frameworks for sus information
- GRI - Global reporting initiative - report all sus impact, regardless whether material for investors or not
- SASB - Sustainability Accounting Standards Board - specifically report sus issues financially material to investors
IFRS S1 what does it disclose
Requirements for Disclosure of Sustainability-related Financial information
What is IFRS S2 standard about
Climate-specific disclosures for investors (climate related risks)
Institutional investor
An institutional investor is a company or organization that invests money on behalf of other people.
(e.g. banks, pension funds, insurance companies)
6 principles of PRI (Pr. of Responsible Investing)
incorporate ESG into investment analysis and decision-making
incorporate ESG issues into our ownership policies / practices
seek disclosure on ESG issues by investees
promote acceptance and implementation of the Principles within the investment industry.
work together to enhance our effectiveness in implementing the Principles.
report on our activities and progress towards implementing the Principles
def climate risk & its 2 subtypes
financial risk linked to climate change. 1st sub - physical risk (physicall weather impact of climate change) and transition risk (R from economic transformation to achieve a net-zero carbon economy)
Write-off
reduction of an asset’s value on the company’s financial records
Stranded asset
Stranded assets are assets that have suffered from unanticipated or premature write-offs (devaluations) (e.g. due to physical or transition risks). Most commonly stranded asset is the one with high transition risk
What is the goal year for net zero emissions?
2050
UNFCCC
United Nations Framework Convention on Climate Change
FSB
Financial Stability Board
TCFD
Task force on Climate related Financial Disclosures
fiscal year
a 12-month accounting period that a business uses for financial and tax reporting purposes
Physical subtype of climate risk
Caused by physical climate & weather impacts from CC
Hazard, 2 types of hazard + examples
Event with potential to cause harm & enhance risk. Chronic & acute. Accute - weather related, increase with CC (floods, hurricanes, heatwaves, wildfires etc.)
Chronic - long term trends (rising temperatures, sea levels, changing precipitation patterns)
Examples of transition risks
E.g. high carbon tax imposed by gov for transition - this is a R for the company
Vulnerability
Degree to which assets / firmss can suffer loss bc of CC impacts
Where are stranded assets due to physical risks concentrated? And transition?
Stranded assets due to trans. R. - in energy and industrial sector
Str. ass. due to phys. R. - in coastal areas, e.g.
How much has the atmosphere temperature risen since the pre-industrial time? And what is the strategy?
Since pre-industrial times (typically defined as the period from 1850 to 1900), the global average temperature has risen by about 1.2°C (2.2°F) as of 2023.
Under Paris low-emissions scenario, temperature rise has to stability around 1.5-2C
Paris Agreement - what are the target temperatures there?
“Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.”
What is the Deadline of Paris Agreement?
No fix deadline, but reachine net zero around 2050
Supply chain risk
Indirect R. R arising from disruptions from suppliers
3 types of indirect risks
Supply chain risk
Legal liability risk
Systemic risk
Legal liability risk + example
Indirect R - fin consequences afte being held legally responsible
(e.g. sued for inadequate prep for physical risks)
