The re-election of an individual who has railed against the “woke” environmental, social and governance (ESG) movement to the world’s most powerful political office could make it harder for chief sustainability officers (CSOs) in Asia to argue the case for climate action in the boardroom at a time of ESG target backsliding.
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Climate-denying, facts-averse reality TV personality Donald Trump, who swept to victory in the United States presidential elections on 5 November, is likely to waste no time dismantling the Biden administration’s climate policies and observers fear he may abandon rules that require companies to report their environmental and social impact, weakening corporate climate accountability.
Eco-Business approached CSOs in Singapore and Hong Kong to get a sense of how another Trump presidency might influence their mandate in reducing the environmental and social impact of their companies. Most declined to share attributed quotes.
Dealing with science denial
Dr Darian McBain, the former chief sustainability officer of Singapore’s central bank and seafood giant Thai Union said that CSOs in Asia will need to think harder about how to engage with stakeholders on ESG issues, at a time when Trump threatens to bring climate denial to the global stage yet again.
Trump has in recent years claimed that climate change is a “hoax”. He described the Biden administration’s Inflation Reduction Act (IRA) to support clean energy projects as a “green new scam” and may remove US involvement in the United Nations framework on responding to warnings from climate scientists.
“As a scientist, I believe in following scientific evidence, but as CSOs, we need to think about how to better engage, form support and activate people for sustainable outcomes when facts alone don’t work,” she said.
One CSO who leads the Asia Pacific sustainability function at a global bank told Eco-Business that American influence over corporate climate policy elsewhere is already limited, given the country’s position as the world’s largest petro-state – which has “not seen a radical shift under the Biden administration”.
“It’s hypocrisy. The US cannot preach climate action to the world, when it has gone from a net importer to a net exporter of oil and gas. It’s hard to evangelise restraint when your [fossil fuels] taps are on,” he said.
“People [in the US] can see it [climate change]. It’s not like it’s theoretical explanation. There are real climate events unfolding in the US,” the CSO said, referencing wildfires and tropical storms and uninsurable homes in California and Florida that are “bringing climate change home to America”.
The US has been a net exporter of oil and gas since late 2021. The country’s 2023 energy outlook states that this status will likely remain through 2050.
In his latest election campaign, Trump ran on a key promise for more oil extraction – accompanied by a “drill, baby, drill” slogan that had raised widespread concerns about how a Trump administration would lower America’s climate credentials. A pre-election analysis by Carbon Brief estimated that a Trump victory could lead to an additional 4 billion tonnes of US emissions by 2030, causing global climate damages worth more than US$900 billion, compared with Joe Biden’s plans.
ESG is different – not dead – in Asia
McBain said that the concept of ESG “was already ailing, but may now be pronounced dead from the US perspective.”
However, Asian CSOs will still need to manage business risks such as extreme weather events, loss of biodiversity and an inability to hire staff, “although not, perhaps, as one amorphous group of [ESG] issues,” she said.
Most Asian CSOs whom Eco-Business spoke to agreed that ESG is understood differently in Asia – as shorthand for sustainability and the energy transition – without the baggage of America’s culture war on diversity, equity, and inclusion (DEI).
One observed that few firms weakened their sustainability commitments during Trump’s last term from 2017 to 2021. “[CSOs in Asia] already realise that the E, S and G (in the ESG agenda) are uneasy bedfellows.”
The backlash against ESG does not mean Asian corporates will abandon their sustainability commitments, although progress may slow, the CSO said.
Recent backsliding in climate commitments by the likes of footwear maker Crocs (which reset its net zero target from 2030 to 2040), computing giant Microsoft (which missed its carbon reduction target due to its pursuit of artifical intelligence) and fizzy drinks firm Coca-Cola (which missed virgin plastic reduction goals) has more to do with companies “realising that it is harder to meet their targets than they anticipated”, following the “giddy days” of the Glasgow COP in 2021 than it has to do with the political environment, he said. COP26 provided the stage for a flurry of corporate climate action pledges.
Governments pose less influence over corporate sustainability commitments than investors, the CSO added. “Corporations need a social license to operate” and investor pressure to improve sustainability performance will continue to influence company ESG policy and targets in Asia.”
Malaysia-based academic Dr Pieter E. Stek observed in an opinion piece for Eco-Business that while momentum for sustainable practices has gained momentum in the European Union, China, and among many US corporations, without influential US government involvement, ESG efforts may tank.
However, analysis by Reuters finds that US companies have been stepping up their ESG pursuits in recent years, despite the cultural pushback against the agenda. Similarly, Asian corporates have shown a rapid increase in sustainability reporting rigour amid growing ESG regulation, and are unlikely to ease off the disclosure pedal.
Asia is among the world’s fastest growing regions for disclosure frameworks including CDP, Taskforce for Climate Related Disclosure (TCFD), and the Science Based Targets initiative (SBTi).
COP-out?
McBain argued that Asian business may be “forced to choose their target market” as the EU limits access by foreign markets from heavy sustainability due diligence regulations, reporting and carbon-related tariffs – for instance with the Carbon Border Adjustment Mechanism (CBAM), which taxes carbon-intensive goods imported into the EU – while the US goes down the path of higher blanket import tariffs for countries from Asia but lower sustainability trade barriers and tariffs.
She added that pulling the US out of the Paris Agreement – as Trump has said he will, again – may not be the crimp on climate action that some fear it might be.
“Trump has said that he will withdraw from the Paris Agreement. This is very bad news for global climate action. However, with this change there is potential that the COP process will become less of a circus of presenteeism than it has over recent years, and become more focused on serious negotiation for countries that are parties to the convention,” she told Eco-Business.
Another bank CSO who declined to be named said that a Trump presidency will “hasten America’s decline and China’s rise”, which could shift the centre of gravity for global climate action from West to East. If IRA is unwound, the rest of the world that is transitioning will buy simply from China,” he said.
