ESG in 2019 – the environment

The environment is one aspect of ESG (environmental, social and governance) that continues to be strongly driven by political and regulatory agendas.

2019 will be no exception – especially in relation to climate change, packaging and recycling developments.

An ESG approach that is politically-informed – mapping and anticipating such developments at supranational, national and sub-national levels, is therefore, critical to enabling  investors develop their own strategies and manage risk.

December saw the Government launch its much-anticipated Resources and Waste Strategy. This  includes detailed policy plans for producer responsibility for packaging and recycling.   The Strategy complements their 25 Year Environment Plan, which is their long term blueprint for eliminating avoidable plastic waste

The Department for Environment, Food and Rural Affairs will publish a consultation in early 2019 on how its new extended producer responsibility (EPR) framework for packaging will function, although the strategy is clear that producers will ‘bear the full net cost of managing their products at the end of their life’. The Government is also aiming to stimulate demand for recycled plastic by introducing a tax on plastic packaging with less than 30% recycled plastic.

Environment Secretary Michael Gove said at the launch: ‘together we can move away from being a ‘throw-away’ society to one that looks at waste as a valuable resource’, adding that the measures will help to ‘cement our place as a world leader in resource efficiency, leaving our environment in a better state than we inherited it’.

At supra-national level, following negotiations at UN climate talks in Poland in early December, a deal was reached and signed up to by almost 200 countries to put into action the principles in the 2015 Paris Agreement. Negotiations regarding the implementation of the Agreement focused on providing firm guidelines for countries on how to transparently report their greenhouse gas emissions and efforts to reduce them.

However, decisions were postponed until 2019 on pledging more ambitious action on regulating the market for international carbon emissions trading and on fighting global warming.

The deal received a somewhat lukewarm reception from some environmental groups, arguing  that more ambitious targets should have been set. President Macron’s dropping of the diesel tax increases from the 2019 budget, in response to widespread protests, highlights the political capital required to  putting carbon policies into effect, particularly with regards to cost of living implications for voters.

As 2018 has demonstrated, the environment is not a technocratic field isolated from political or public concerns. Investors and businesses operating in sectors with high environmental policy exposure (due to energy costs or fiscal incentives) need to consider the political, policy, regulatory and ESG dimensions carefully.

For more information on how GK helps companies and investors manage environmental and other ESG issues , please take a look at our ESG services page.

 

See more articles by Megan Baxter