ESG Agreements and Regulations Overview

ESG Agreements and Regulations

• ESG stands for Environmental, Social, and Governance
• International, regional, and local agreements and regulations related to ESG are a key topic in the introduction to ESG.

Recap of Previous Sessions

• Key topics from previous sessions included understanding earth systems, climate change and pollution, social aspects of ESG, and the role of governance in sustainability.
• Previous work covered significant periods like the 1950s-80s, 1990s, 2000s, and 2010s, with respective developments in the discourse of ESG.

History of ESG

• 1950s-80s: Economists began discussions on business ethics and social responsibility.
• 1960s: Social movements brought social issues into corporate considerations.
• 1971: The first socially responsible investment fund was created.
• 1990s: The UN Environment Program (UNEP) and COP conferences emerged, with emphasis on sustainable economies and lowering GHG emissions.

2000s

• 2004: The UN coined the term ESG in its "Who Cares Wins" report.
• The report along with "Principles for Responsible Investment (PRI)" were launched.
• Corporate scandals brought about the need for accountability and transparency.

2010s

• 2011: The Sustainable Accounting Standards Board (SASB) was founded.
• 2015: The Taskforce on Climate-Related Financial Disclosures (TCFD) came into existence.
• 2016: The Global Reporting Initiative (GRI) standards became important reporting frameworks for ESG.

Present

• ESG is now mainstream in business strategy.
• Investing and reporting are important topics, moving beyond just environmental sustainability.
• Expectations of companies and their commitments have increased.

The United Nations Global Compact (UNGC)

• A voluntary initiative launched by the UN in 2000.
• Encourages businesses and organizations to adopt sustainable and socially responsible policies.
• Based on ten principles covering human rights, labor, environment, and anti-corruption.

UN Principles for Responsible Investment (PRI)

• A global initiative encouraging investors to consider ESG factors in decision-making processes and ownership practices.
• Launched in 2006, in partnership with the UNEP Finance Initiative and UN Global Compact.
• PRI emphasizes the importance of ESG considerations in investment practices.
• Objectives include promoting sustainable investment, aligning investment with societal goals, and disclosing ESG issues.

Signatories

• PRI signatories include pension funds, sovereign wealth funds, insurance companies, asset managers, and investment consultants.

Reporting and Transparency

• PRI requires signatories to report annually on their progress towards implementing the principles.
• Reporting frameworks include indicators and metrics for ESG factors, active ownership, and collaboration practices.
• The PRI contributes to the mainstreaming of responsible investment and awareness of ESG factor importance in decision-making.

The Paris Agreement

• A landmark international treaty adopted in 2015 under the UN Framework Convention on Climate Change.
• Aims to limit global warming to well below 2 degrees Celsius above pre-industrial levels and pursue efforts to limit the increase to 1.5 degrees Celsius.
• The Paris Agreement has significant implications for investment decisions and capital allocation because investors increasingly consider climate-related risks and opportunities.

Paris Agreement Outcomes

• The Paris Agreement sets a goal to limit global warming.
• Countries submit Nationally Determined Contributions (NDCs).
• Regular global stock takes assess collective progress.
• Principles of transparency and accountability enable reporting and progress towards goals.
• It emphasizes financial and technological support for developing countries for mitigation and adaptation of climate change.
• It acknowledges the importance of adaptation to climate impacts on vulnerable populations.
• Loss and damage due to climate change is addressed, helping vulnerable countries facing unavoidable losses.

COP28

• The COP28 UN Climate Change Conference in Dubai was the largest of its kind.
• More than 150 Heads of State and Government from various national delegations, alongside many others, attended the conference.

ESG in GCC (UAE)

• The UAE is establishing itself as a global hub for sustainable finance.
• Projects such as Masdar City focus on renewable energy.
• The UAE has implemented ESG reporting requirements.
• The country is working towards the UN Sustainable Development Goals (SDGs).

ESG in Bahrain

• Bahrain's Economic Vision 2030 emphasizes sustainability and economic diversification.
• ESG reporting guidelines have been introduced for listed companies.
• Bahrain focuses on renewable energy, social welfare, and sustainable development.

Importance of ESG Reporting

• Regulators aim to enhance the availability and reliability of ESG information for listed companies.
• Transparent reporting for ESG factors aligns companies with local, regional, and international regulations.
• This enables anticipating future regulations.

The Supreme Council for Environment

• The Supreme Council for Environment regulates the environmental legislative system.
• The council works to protect the environment.
• It strengthens national efforts to protect the environment, natural resources, and sustainable development.

The Supreme Council for Women

• A national advisory institution monitoring Bahraini women's advancement.
• It drafts policies covering women's roles in public life.

Central Bank of Bahrain (CBB)

• The CBB plays a crucial role in regulating and supervising financial activities.
• It works towards the stability and development of the country's economy.

Bahrain Bourse's ESG Reporting Guide

• The Bahrain Bourse has established an ESG reporting guide.

Self-Study

• Students should research international agreements and regulations related to ESG.

Montreal Protocol

• An international treaty aimed at protecting the ozone layer.
• The treaty works to phase out the use of substances that deplete the ozone layer.

United Nations Framework Convention on Climate Change (UNFCCC)

• A treaty established to address climate change and its impacts.
• It sets the stage for international cooperation.
• Supports global efforts to combat climate change and adverse effects.

Kyoto Protocol

• A treaty that targets greenhouse gas emissions reduction.
• Ensures emission reduction targets for industrialized countries.

Stockholm Convention

• A treaty for protecting human health from persistent organic pollutants (POPs).
• Aims at protecting the environment through reducing production, usage and release of POPs.