ESG Agreements & Regulations Overview PDF

International, regional, and local agreements and regulations related to ESG. EE6000 Introduction to ESG Prepared by: Mahmood Hammad Recap from previous sessions Understand Climate ing earth change and UNSDG systems pollution The role of...

International, regional, and local agreements and regulations related to ESG. EE6000 Introduction to ESG Prepared by: Mahmood Hammad Recap from previous sessions Understand Climate ing earth change and UNSDG systems pollution The role of Social governance aspects of in ESG sustainabili ty The United Nations Global Compact (UNGC) The United Nations Global Compact (UNGC) is a voluntary initiative launched by the United Nations in 2000 to encourage businesses and organizations worldwide to adopt sustainable and socially responsible policies and practices. The UNGC is based on ten principles derived from international agreements, covering human rights, labor, environment, and anti-corruption. The United The mission of the UNGC is to mobilize businesses and stakeholders to embrace and implement ten principles in the Nations areas of human rights, labor, environment, and anti- Global corruption. These principles are derived from the Universal Declaration of Human Rights, the International Labour Compact Organization's Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and (UNGC) Development, and the United Nations Convention Against Corruption.  The UN Principles for Responsible Investment (PRI) The UN Principles for Responsible Investment (PRI) is a global initiative that encourages investors to incorporate environmental, social, and governance (ESG) factors into their decision-making processes and ownership practices. The PRI was launched in 2006 by then-UN Secretary- General Kofi Annan in partnership with the UNEP Finance Initiative and the UN Global Compact. It was created in response to growing recognition of the importance of ESG considerations in investment practices.  The UN Principles for Responsible Investment (PRI) Objectives: The PRI aims to promote sustainable investment practices among institutional investors, asset managers, and other financial market participants. It seeks to align investment strategies with broader societal goals, including environmental protection, social equity, and good governance. Principles: Incorporate ESG factors into investment analysis and decision-making processes. Be active owners and incorporate ESG issues into ownership policies and practices. Seek appropriate disclosure on ESG issues by investee entities. Promote acceptance and implementation of the PRI within the investment industry. Signatorie s: Signatories to the PRI include institutional investors such as pension funds, sovereign wealth funds, insurance companies, asset managers, and investment consultants.  Reporting and Transparency: The PRI requires signatories to report on their activities and The UN progress towards implementing the principles through an annual reporting framework. Principles The reporting framework includes indicators and metrics to for assess signatories' performance in areas such as ESG integration, active ownership, and collaboration. Responsib Impact: le The PRI has contributed to mainstreaming responsible investment Investmen practices and raising awareness about the importance of ESG factors in investment decision-making. t (PRI) By encouraging investors to consider ESG risks and opportunities, the PRI aims to contribute to more sustainable and resilient financial markets and economies.  The Paris Agreement The Paris Agreement is a landmark international treaty adopted in December 2015 under the United Nations Framework Convention on Climate Change (UNFCCC). It represents a collective global effort to address climate change by limiting global warming to well below 2 degrees Celsius above pre- industrial levels, with the aim of pursuing efforts to limit the temperature increase to 1.5 degrees Celsius.  The Paris Agreement 1. Environmental Aspect: The Paris Agreement aims to limit global warming to well below 2 degrees Celsius above pre-industrial levels, with efforts to limit the temperature increase to 1.5 degrees Celsius. It emphasizes reducing greenhouse gas emissions and transitioning to a low- carbon economy, aligning with the environmental sustainability aspect of ESG. 2. Social Aspect: Climate change disproportionately affects vulnerable populations, exacerbating issues such as poverty, food insecurity, and displacement. The Paris Agreement acknowledges the importance of addressing social equity and promoting climate resilience, aligning with the social dimension of ESG, which emphasizes factors such as labor practices, community engagement, and human rights. The Paris Agreement 3. Governance Aspect: Effective governance is crucial for implementing the commitments outlined in the Paris Agreement, requiring coordination among governments, businesses, civil society, and other stakeholders. This governance structure complements the governance aspect of ESG, ensuring transparency, accountability, and ethical leadership in decision-making processes. 4. Investment Implications: The Paris Agreement's goals have significant implications for investment decisions and capital allocation, as investors increasingly consider climate-related risks and opportunities. ESG investing integrates environmental, social, and governance factors into investment analysis and decision-making, allowing investors to support companies that demonstrate a commitment to sustainability and responsible business practices in line with the goals of the Paris Agreement. The Paris Agreement (main outcomes) 1.Temperature Goal: The agreement sets a goal to limit global warming to well below 2 degrees Celsius above pre-industrial levels, aiming for 1.5 degrees Celsius to prevent the most severe impacts of climate change. 2.Nationally Determined Contributions (NDCs): Each participating country commits to submitting a nationally determined contribution (NDC) outlining its climate action plan, including emission reduction targets and adaptation measures. 3.Global Stock take: A mechanism is established for regular global stock takes every five years to assess collective progress toward the temperature goals and enhance ambition over time. 4.Transparency and Accountability: The agreement includes provisions for transparency and accountability, requiring countries to regularly report on their emissions and progress toward their NDCs. The Paris Agreement (main outcomes) 5. Financial and Technological Support: Developed countries pledge financial and technological support to assist developing countries in both mitigating and adapting to climate change. 6. Adaptation: The importance of adaptation to climate change impacts, particularly for vulnerable countries and communities, is emphasized, with a focus on enhancing adaptive capacity and resilience. 7. Loss and Damage: The agreement acknowledges the concept of loss and damage associated with climate change impacts, providing a framework for addressing these issues and supporting vulnerable countries facing unavoidable losses.  COP28 The COP28 UN Climate Change Conference in Dubai, the United Arab Emirates, was the biggest of its kind. 85,000 participants, including more than 150 Heads of State and Government, were among the representatives of national delegations, civil society, business, Indigenous Peoples, youth, philanthropy, and international organizations in attendance at the Conference from 30 November to 13 December 2023. What happened at COP28 Link: https://www.youtube.com/watch?v=XBxJ7lzplr8 ESG in GCC (UAE) Sustainable Finance: The UAE has been working to position itself as a global hub for sustainable finance. Dubai's International Financial Centre (DIFC) has launched the Dubai Sustainable Finance Strategy, aiming to establish the city as a center for green finance and sustainable investment in the Middle East and North Africa (MENA) region. Renewable Energy and Clean Technologies: The UAE has made significant investments in renewable energy and clean technologies. The country is home to Masdar City, a planned sustainable urban development project located in Abu Dhabi, which focuses on renewable energy, clean technologies, and sustainable living. ESG in GCC (UAE) ESG Reporting and Disclosure: The UAE Securities and Commodities Authority (SCA) has introduced ESG disclosure requirements for listed companies on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM). These requirements aim to improve transparency and accountability in corporate reporting, encouraging companies to disclose information on environmental, social, and governance factors. Sustainable Development Goals (SDGs): The UAE has aligned its national development plans with the United Nations Sustainable Development Goals (SDGs). The country has made commitments to achieve the SDGs by 2030, focusing on areas such as renewable energy, climate action, sustainable cities, and innovation. ESG in GCC (UAE) Green Building and Sustainable Infrastructure: The UAE has been at the forefront of green building and sustainable infrastructure development. Projects such as the Masdar Institute of Science and Technology, the Sheikh Zayed Grand Mosque, and the Dubai Metro Green Line exemplify the country's commitment to sustainable development and environmental stewardship. Corporate Governance and Ethical Business Practices: The UAE has implemented corporate governance regulations and guidelines to promote transparency, accountability, and ethical conduct in the corporate sector. These regulations aim to enhance Mohammed bin Rashid Al investor confidence and foster long-term sustainable growth. Maktoum Solar Park - a leading project that promotes  1. Economic Vision 2030: Bahrain's Economic Vision 2030 outlines the country's long-term development goals, ESG in emphasizing sustainability and diversification of the economy. The Vision includes objectives related to environmental sustainability, social development, and good Bahrain governance, reflecting ESG principles. 2. ESG Reporting Guidelines: The Bahrain Bourse, the country's stock exchange, has introduced ESG reporting guidelines for listed companies. These guidelines encourage companies to disclose information on environmental, social, and governance factors alongside financial performance, promoting transparency and accountability.  3. Sustainable Development Goals (SDGs): Bahrain has aligned its national development plans with the United Nations Sustainable Development Goals (SDGs). The country has made commitments to achieve the SDGs by 2030, ESG in focusing on areas such as renewable energy, environmental conservation, social welfare, and Bahrai economic growth. n 4. Environmental Conservation: Bahrain has implemented initiatives to address environmental challenges, such as water scarcity and waste management. The country has invested in water conservation projects, wastewater treatment facilities, and initiatives to promote renewable energy and energy efficiency.  ESG in Bahrain 5. Social Development: Bahrain has made efforts to promote social development and improve the quality of life for its citizens. Initiatives include investments in education, healthcare, housing, and social welfare programs to enhance human capital development and social well-being. 6. Corporate Governance and Transparency: Bahrain has implemented corporate governance regulations and guidelines to promote transparency, accountability, and ethical conduct in the corporate sector. These regulations aim to enhance investor confidence and foster a culture of good governance and responsible business practices. Importance of ESG Reporting The aim of regulators is to enhance the availability and reliability of listed companies’ information in relation to ESG factors. Companies that report on key ESG information not only can align with current local, regional and international regulations, but can also anticipate future regulations that may impact the company’s operations. The Kingdom of Bahrain has laid down key regulations that cover Environmental, Social, and Governance issues. The Supreme Council for Environment  The environmental legislative system in the Kingdom of Bahrain, regulated by the Supreme Council for Environment.  The Kingdom aims to strengthen its efforts to protect the environment and natural resources through deploying the necessary legislative structures.  The Kingdom also ratified several regional and international agreements, conventions and protocols related to protecting the environment and achieving sustainable development, including the Paris Agreement within the United Nations Framework Convention on Climate Change (UNFCCC). The Supreme Council for Women The Supreme Council for Women is the national advisory institution to all official organizations, which monitors the advancement of Bahraini women on the national and international level. It proposes, drafts, and follows up the implementation of public policies, national plans and strategies related to women in public life in partnership with the relevant national and international stakeholders while ensuring work-life balance, family stability and enhancing the quality of life of the Bahraini community. Central Bank of Bahrain (CBB) The CBB plays a crucial role in regulating and supervising financial activities in Bahrain, contributing to the overall stability and development of the country's economy. It collaborates with other regulatory authorities and international organizations to ensure compliance with international standards and best practices in the financial sector. Bahrain Bourse's ESG Reporting Guide Link to the Bahrain Bourse ESG Reporting Guide: https://bahrainbourse.com/resources/files/Sustainability/ESG_11%2 0June%202020.pdf  Self-Study: Students are asked to research about international agreements and regulations related to ESG. The following slides will include examples (important events). Montreal Protocol The Montreal Protocol is a significant international environmental treaty aimed at protecting the ozone layer. It was agreed upon on September 16, 1987, in Montreal, Canada. The primary objective of the Montreal Protocol is to phase out the production and use of Ozone Depleting Substances (ODS), such as Chlorofluorocarbons (CFCs), halons, and other similar chemicals. Montreal Protocol 1. Phased Reduction of ODS: The protocol establishes schedules for the gradual reduction and eventual elimination of ODS production and consumption by signatory countries. 2. Substance Control and Bans: It sets out specific control measures, including bans on the production and use of certain ODS chemicals. 3. Technology Transfer and Financial Assistance: The protocol includes provisions for technology transfer and financial assistance to help developing countries transition away from ODS use. 4. Scientific Assessment and Review: Regular scientific assessments are conducted to evaluate the state of the ozone layer and the effectiveness of the protocol's measures. Based on these assessments, adjustments to the protocol's control measures may be made. 5. Amendments and Adjustments: The protocol has been amended several times to strengthen its provisions and address emerging issues related to ozone depletion and climate change.  The United Nations Framework Convention on Climate Change (UNFCCC) is an international treaty established in 1992 as a response to UNFCCC concerns about climate change and its potential impacts on the planet. The UNFCCC serves as a framework for global cooperation to combat climate change and its adverse effects. UNFCCC 1. Global Framework: The UNFCCC establishes a comprehensive framework for international cooperation on climate change, providing principles, goals, and institutional arrangements. It sets the stage for negotiations and agreements, including the Kyoto Protocol and the Paris Agreement. 2. Enhanced Ambition Mechanism: The UNFCCC facilitates a process of reviewing and updating countries' climate commitments to increase ambition over time. 3. Adaptation and Resilience: The UNFCCC supports adaptation and resilience-building efforts to help countries cope with climate change impacts, including through projects and capacity-building. 4. Global Climate Finance: The UNFCCC mobilizes financial resources to support climate action in developing countries, including contributions to the Green Climate Fund. 5. Technology Transfer and Capacity Building: The UNFCCC promotes technology transfer, capacity- building, and innovation to support climate actions, particularly in developing countries. Kyoto Protocol The Kyoto Protocol was adopted on December 11, 1997, in Kyoto, Japan, and it targets the reduction of greenhouse gas emissions, particularly carbon dioxide (CO2) and other pollutants that contribute to global warming and climate change. 1. Greenhouse Gas Emission Reduction Targets: The protocol sets binding targets for industrialized countries (known as Annex I countries) to reduce their emissions of greenhouse gases by specific amounts compared to their levels in the base year (usually 1990). These targets vary among countries based on their historical emissions and capabilities. Kyoto Protocol 2. Flexible Mechanisms: The Kyoto Protocol introduced three flexible mechanisms to help countries meet their emission reduction targets more cost-effectively: Emissions Trading: Allows countries to buy and sell emissions credits. Clean Development Mechanism (CDM): Enables developed countries to invest in emission reduction projects in developing countries and receive credits for the emissions reductions achieved. Joint Implementation (JI): Similar to the CDM but involves projects between Annex I countries. 3. Compliance Mechanisms: The protocol includes provisions for monitoring, reporting, and verifying countries' progress toward meeting their emission reduction targets. It also establishes consequences for non-compliance. Kyoto Protocol 4. Adaptation and Support for Developing Countries: Recognizing that developing countries may face significant challenges in addressing climate change, the Kyoto Protocol includes provisions for supporting adaptation efforts and providing financial and technological assistance to these countries. 5. Commitment Periods: The Kyoto Protocol operates in commitment periods, with the first period running from 2008 to 2012 and subsequent periods subject to negotiation. Stockholm treaty The Stockholm Convention on Persistent Organic Pollutants (POPs) is a global treaty aimed at protecting human health and the environment from highly toxic chemicals that persist in the environment, bioaccumulate in living organisms, and can travel long distances through air and water currents. It was adopted on May 22, 2001, and entered into force on May 17, 2004. Stockholm treaty 1. Identification of POPs: The Convention initially identified 12 POPs for action, including pesticides like DDT and chlordane, industrial chemicals like polychlorinated biphenyls (PCBs), and unintentional by- products of industrial processes like dioxins and furans. 2. Control Measures: Parties to the Convention are required to take measures to eliminate or reduce the production, use, and release of POPs. This includes implementing bans or restrictions on the production and use of listed chemicals, promoting the use of safer alternatives, and adopting best practices for managing and disposing of POPs-containing wastes. 3. Global Monitoring and Reporting: Parties are required to develop national implementation plans and report on their efforts to reduce or eliminate POPs. The Convention establishes a global monitoring system to track the levels of POPs in the environment and human populations over time. 4. Capacity Building and Technical Assistance: The Convention provides support for capacity-building and technical assistance to help developing countries and countries with economies in transition implement the Convention effectively. This includes assistance with developing inventories of POPs, strengthening regulatory frameworks, and building the capacity of laboratories to monitor and analyze POPs. 5. Non-Compliance Mechanisms: The Convention includes provisions for addressing non-compliance by parties, including mechanisms for reviewing and addressing instances of non-compliance and providing support and assistance to help parties meet their obligations under the Convention.