Global Elections 2024: A Potential Turning Point for the ESG Landscape
Sam Sweeney, Sustainability Executive at FuturePlus
Overview
This year, approximately half of the world’s population will be heading to the polling stations in an unprecedented convergence of elections around the globe. In a time of geopolitical and economic upheaval, the results of these elections will have material influence on international stakeholders, investors, political actors, and the ESG landscape. This blog provides an insight into what this emerging state of affairs might look like, exploring some of the key initiatives, trends and obstacles that are present in the ESG space today.
The Issue at Hand
At the end of 2023, many heralded COP28’s agreement regarding the “just, orderly and equitable” transition away from fossil fuels as being a landmark piece of climate diplomacy.1 However, as is the case with all other COP outcomes, it is worth noting this was not a legally binding resolution and instead acts as a galvanising call to arms for countries around the world. McKinsey Sustainability make the observation that it will be the “mechanisms for implementing this commitment” that will be most important; it is up to the governing bodies of nations around the world to put in place practical timelines and policies to allow us to achieve these goals.2 As a result, it may be this disparity, between broad international consensus and effective governmental policy, that the immediate future of ESG is predominantly associated with. For whilst ESG is becoming an integral part of business and political policy, there are still a myriad of challenges that are currently preventing its complete assimilation.
Areas of Concern
The polarisation of ESG-related opinions, particularly in the US and in manufacturing-dependent economies, is one of the reasons why it is so difficult to agree on legally binding agreements at international summits. An increasing number of political parties can be seen to attack the ESG and climate policies of opposition administrations, labelling them as “pseudoscientific” and “woke”, in an attempt to regain or maintain power. Consider Donald Trump’s pledge to repeal many of the progressive bills of President Biden’s term in office - promising to reverse clean energy funding and increase oil and gas production.3 This threat of reneging on previous commitments represents one of the most pressing concerns for Climate and ESG: how positive momentum can be eroded as important topics are politicised and placed on the ballot. This would jeopardise the future of ESG for short-term political gain. Former President of the European Commission, Jean-Claude Juncker succinctly summed up this sentiment when he said “everyone knows what it is that must be done, the difficulty is getting elected again after we have done it”.
Viewing these issues through a business lens is also particularly important. “Greenwashing” is another way in which the topic of ESG can be misrepresented and detrimentally impacted. As legislation continues to be passed which requires a robust and evidenced approach to ESG, more and more companies have been found to be either deficient, or downright fraudulent, in their ESG activities. The fallout from many of these high profile cases can serve to tarnish the public’s view of the impressive ESG-related progress being made by both public and private actors: potentially resulting in an electorate that is misinformed and less sympathetic towards ESG policy.
Areas for Optimism
The points above shed light on why a year of international political overhaul could partially nullify recent advancements. However, there still remains a strong case that ESG will continue to gain support and momentum. The willingness of multiple states (the UK, Australia, Hong Kong, Canada, Nigeria, Malaysia and New Zealand) to adopt the ISSB’s newly published global sustainability disclosure guidelines, is a great indicator of the continued support for ESG across all continents.4 Furthermore, 2024 has also seen the passing of the Corporate Sustainability Due Diligence Directive through the European Parliament. This directive will build upon the EU Corporate Sustainability Directive (2023) and ensure that the ESG regulatory landscape continues to be strengthened by independent international bodies, seeking to guarantee a minimum ethical standard of behaviour regardless of administration changes.5
There is also increasing support for ESG when the business-case is brought to light. CEO’s around the world are becoming more aware of the role and benefits that ESG will have in the future of business strategy, with 71% of people believing that the influence of ESG in corporate performance will continue to grow.6 A report from Deloitte goes further to state that companies which have incorporated Diversity, Equity and Inclusivity policies into their business strategy are not only more likely to see increased job satisfaction and happiness in the workforce, but also increased profitability too.7 This idea is given great support by the success and growing investor preference for ESG funds internationally. All of these points seem to suggest that as an international community, we are moving towards a more ESG-inclusive approach to both business and politics. In order to continue this trend of increased ESG consideration, it is of paramount importance that governments and companies use their platforms to educate and engage people as much as possible. Businesses must also be made aware that it is in their best interests to make genuine sustainability commitments, from both ethical and profitability standpoints, and avoid the temptation of “greenwashing”. For without the commitment of resources to the exploration and assimilation of ESG into our everyday lives, we will fail to uphold the vital promises made during international summits.
Closing remarks
In the words of former Secretary-General of the UN, Ban Ki-Moon: “Climate change is the single greatest threat to a sustainable future but, at the same time, addressing the climate challenge presents a golden opportunity to promote prosperity, security and a brighter future for all.”
Even if the work of previous administrations is tempered by the introduction of less-sympathetic governments, we are closer to a global approach to business and diplomacy that holds ESG as one of its key tenets. In order to stay this course and ensure that the next worldwide confluence of elections does not cast the future of ESG into such relative uncertainty, it is essential that we continue to educate the electorate, our leaders and businesses around the world. This way, we can create a cohesive international ecosystem which fosters and values an ESG landscape and provides us with the opportunity to make the most of this “golden opportunity”.
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