ESG and Sustainability Quiz

SEE211: Energy, Climate Change and Sustainability

• Course offered at Indian Institute of Technology Kanpur
• Instructors: Arunavo Mukerjee and Sachchida Nand Tripathi
• Lectures 4-6 cover the topic
• Lectures focus on ESG (Environmental, Social, and Governance)

Lecture 4: Introduction to ESG

• Introduction to ESG - overview of sustainability
• The E in ESG - how environmental changes force investors to rethink
• The S in ESG - why the S in ESG is the key to improvement
• The G in ESG - governance is a powerful force for balance
• Appendix

The Beginnings of Sustainability

• Founding of the "Club of Rome" network in 1968
• "The problématique": Environment, Inequality, Poverty, Criminality, Ill-health, Urban blight
• Interconnected challenges cannot be solved individually
• Reframing economics, rethinking finance, emerging new civilization
• Holistic long-term thinking for a better future

History of Sustainability

• UN introduces the term "ESG" in 2004 paper "Who cares wins"
• Aichi Biodiversity goals extended until 2050
• Introduction of six principles for responsible investing (PRI)
• Task force on climate-related financial disclosures (TCFD) is founded
• UN agrees on 17 sustainable development goals (SDGs)
• European Commission policies discussing financial risks of climate change
• Investor alliance for human rights is founded
• Task force on nature-related financial disclosures (TNFD) is founded
• Earth Summit in Rio de Janeiro devising plans to protect the environment

From "Who cares wins" To Sustainability

• UN's "Who cares wins" paper in 2004 marked the start
• PRI (Principles for Responsible Investment) principles for the financial sector
• SDG (Sustainable Development Goals) principles for society in general

"Who Cares Wins" - What Does That Mean?

• E - Environmental: Biodiversity, Climate change, Greenhouse gas emission, Pollution, Water management, Land degradation, Circular economy
• S - Social: Consumer protection, Data security, Working conditions, Diversity and integration, Compensation and services, Human rights (child labour), Education
• G - Governance: Risk management, Corporate ethics, Incentive structure, Accounting and taxes, CEO characteristics, Compensation/salary, Board diversity/independence
• Caring means taking environmental, social, and governance factors into decision-making

UN's Sustainable Development Goals

• ESG is a holistic concept, encompassing Economy, Society, and Biosphere (Environment)

Volume of ESG Investments

• Global investments in ESG are $30.7 trillion (data from 2020)
• Major participants include Europe, North America, and Asia

Conclusion

• ESG is continually evolving and becoming more relevant
• Global conferences and initiatives are critical to its development

E stands for Environment

• A healthy natural environment is crucial for human life
• Biodiversity, greenhouse gas emissions, water management, and land degradation are essential factors for a sustainable world

Top 5 Global Risks Over Time

• Environmental risks are steadily increasing in importance

The Global Temperature is Rising

• Global temperatures have increased since 1880
• Climate change leads to more extreme weather events and higher costs

Economic Consequences

• Extreme weather causes major disruptions in global supply chains, leading to significant costs for businesses

Biodiversity

• Biodiversity is the variability among living organisms in terrestrial, marine, and other aquatic ecosystems
• It forms the basis of essential ecosystem services vital for human well-being

Biodiversity - A Fundamental Prerequisite

• Human well-being is intricately linked to a functioning natural environment
• Natural capital, biodiversity, and society are complex systems with spillover effects and significant importance to environmental factors

But - Our Ecosystems are in Danger

• Loss of biodiversity, wetlands, forests, and soil layer
• Overuse of fish stocks, coral reefs
• Ocean acidification, pollution
• Greenhouse gases causing climate change

5 Large Extinctions - 1 More to Go?

• Extinctions have occurred throughout Earth's history

The Importance of Our Blue Economy

• The ocean's significance as an economy.

Global Risks Stemming from Oceans

• Sea-level rise, acidification, food insecurity, human health, biodiversity declines, and resource depletion

Consequences of Rising Sea Levels

• Rising sea levels displace populations and creates refugees

Can Technology Be An Answer?

• Technology can enhance energy efficiency and reduce environmental preservation costs.
• ESG investments can catalyze energy efficiency.

Conclusion

• Environmental protection is not just a cost, but a fundamental factor for human life and economic growth

S stands for Society and Promotes SDGs

• Societal factors are crucial for the economy and wellbeing of society
• Key factors include working conditions, human rights, education, consumer protection, and data security

S-The Ugly Duckling of Investing?

• Social sustainability is a term not often considered in investment management

Failures of the Social Dimension

• Child labor, manufacturer concerns, supply chains, social dimension issues

Time to Rethink the Social Pillar

• Social factors have notable impact on supply chains
• Addressing the social pillar is vital for holistic company assessment

Conclusion

• The social pillar is increasingly recognized as essential for corporate productivity and investment returns

G stands for Governance and Promotes SDGs

• Governance refers to the system of rules, policies, and processes that direct and control an organization

"Good Governance" Matters

• Board diversity can improve performance in complex environments
• Ownership structures influence strategic decisions
• Increased board member independence improves objectivity
• Remuneration can be linked to non-financial criteria
• Better monitoring correlates with higher performance

G-From Control to Guidance

• Governance evolved from an earlier focus on control over guidance
• The shift emphasized the responsibility of companies towards environmental issues

No ESG Without the G

• Modern governance balances environmental, social, and financial aspects of corporations

The Importance of the G During a Pandemic

• Good governance is crucial for handling societal impacts of pandemics
• Adaptation to the pandemic world requires resilient social and environmental systems

Conclusion

• Effective governance balances financial and social/environmental issues to sustain investments

Examples of ESG Challenges

• Case studies on ESG challenges faced by companies
• Child labor, safety standards, and environmental concerns

Schneider Sustainability Policy

• 2022 full year results for Schneider impacting different areas

Not a Child's Play

• Sustainability concerns regarding the mica used in the production of car paints
• Child labor, safety standards, environmental issues

Bombay Tea Party

• Two tea company suppliers are evaluated for ESG risks

Brick by Brick

• ESG risks in the selection of suppliers for construction materials in a housing project

Overall Conclusion

• ESG requires a systematic and conscious approach to change existing practices

Lecture 5: Deep Dive into E

• Recap of sustainability, climate change, and ESG definitions
• Atmospheric CO2 is increasing
• Greenhouse Gas Effects

GHG Emission: Warming

• Trends in GHG emissions and global average temperatures

What is the Concern?

• Consequences of rising sea levels
• Reduction in polar ice, melting of glaciers, loss of biodiversity, and extreme weather events

Consequences

• Loss of biodiversity, extreme weather events, acidity of rains and oceans, and pollution of resources
• Food and water supply issues, health consequences

Coral Bleaching, Drought, Species Loss, Rise in Sea Level

• Impacts of climate change on various systems

What Must Be Done?

• Reducing carbon emissions to limit warming to 1.5°C
• Global warming trends and estimates of future warming
• Urgent need for emission reduction

Green House Gas Effect

• Explanation of the greenhouse effect

What happens when we burn fuel

• Release of nitrous oxide, pollutants, and particles

Making a Sense of Numbers

• Calculation of carbon emissions from coal consumption data
• Explaining the carbon output or electrical energy or petrol usage

Global Warming Potential

• Factors determining why some Greenhouse gases are more potent

Emission intensity of common fuels

• Comparison of emission intensity across different fuel sources

Carbon (Emissions) Quantification, Accounting & Net Zero Framework

• Quantification and accounting of carbon emissions
• Discussion on a Net Zero framework

What is Carbon Footprint?

• Explanation of carbon footprint in the context of business operations

Carbon footprint classification

• Scope 1, Scope 2, and Scope 3

Carbon emissions

• Explanation of carbon emissions from power plants in India
• Carbon dioxide equivalent (CO2e) emissions explained

Emissions at different scales

• Global and country-level carbon emissions

Per person annual emissions

• Comparison of per-person carbon emissions across different countries

A few numbers (CO2e)

• Various household and product-specific carbon emissions

Numbers

• Numerous examples of carbon emissions per product or activity

List of Projects

• Project summaries covering energy efficiency, water efficiency, and renewable energy opportunities in Chennai

Lecture 6: Carbon Footprint Printing of Cities

• Deep dive into carbon footprinting of cities: Approach and Key Findings for City Diagnostics - Chennai, Overview of CURB (Climate action by the World Bank).

Approach: Methodology

• CURB program purpose is to guide cities for low-carbon strategies
• CURB tool can be evaluated for efficacy by various criteria

CURB: Climate Action for Urban Sustainability

• CURB is a tool to help evaluate and implement climate action plans

Sector-specific analysis

CURB tool analyzes city-specific factors and emissions sources based on sectors

Private Sector Buildings, Municipal Buildings & Public Lighting, Actions, Electricity Generation, Solid Waste Management, Waste Water Management, Transportation,

• CURB tool identifies actions for each sector concerning energy efficiency, water efficiency, waste management, and transportation

General Carbon Emission Policy & Regulatory Targets

• Regulatory targets for carbon reduction and emission

Passenger Mode Shift, Vehicle Fuel Switch, Low Carbon Urban Design

• Transportation sector actions and targets for reduction in emissions

Estimated Emissions 2015 without mitigation

• Evaluation of emissions in 2015 without mitigation plans in place

Residential Energy Use by end use, Commercial Energy Use by end use, and Municipal Buildings & Public Lighting Policy & Regulatory Targets

• Emission intensity of various categories of energy use and relevant regulatory targets

Emissions Comparison: Chennai vs Bengaluru

• Comparison of emission profiles between Chennai and Bengaluru

Emissions Reduction Targets – Chennai City

• Goals to reduce emissions over time

Actions suggested by CURB

• Actions proposed to reduce emissions

Actions used for modeling: Chennai

• Modeling actions for emissions reduction based on various sectors

BAU vs Target Emission Reduction Performance of Selected Actions

• Graph representing historical and desired future emissions reduction levels

List of Projects

• Projects relating to energy, water and, renewable energy efficiencies, as identified in Chennai