A 'greener' year ahead?

The year 2022 may well emerge as a ground-breaking year for climate change. Between November and December of 2022, two major agreements emerged from the UNFCCC framework. The first was the agreement on Loss and Damage that emerged from the COP27 at Sharm-el-Sheikh in Egypt.

The Loss and Damage agreement for the first time acknowledged the historic responsibility of the global north towards the global south in terms of causing climate change and paying for it. This has been a long-standing demand of climate-vulnerable countries and was first mooted by Vanuatu, an island nation, in 1991 but has been controversial in the global north as many fear that any contribution to a fund like this could be interpreted as liability for climate events, and the loss and damage caused by such events.

As Harjeet Singh, head of global political strategy at Climate Action Network International, tweeted, "With the creation of a new Loss And Damage Fund, COP27 has sent a warning shot to polluters that they can no longer go scot-free with their climate destruction. From now on, they will have to pay up for the damages they cause and are accountable to the people who are facing supercharged storms, devastating floods and rising seas."

Or as Rachel Kyte, dean of Fletcher School of Law and Diplomacy, Tufts University said, "We caused the problem, we need to help fix it."

Then, this week, came another historical agreement with the potential to limit and reverse long-term damage to global biodiversity. The UN Convention on Biodiversity (CBD)'s Conference of Parties 15 held in Montreal agreed to protect 30 per cent of the world's oceans and lands by 2030 and provide critical financing to save biodiversity in the developing world, in what is being called the Kunming-Montreal Agreement on Biodiversity. Currently, only 17 per cent of terrestrial and 10 per cent of marine areas are protected.

The framework's signature pledge is the agreement to ensure that 30 per cent of the world's land, water, coasts and marine areas fall under some form of conservation by 2030. At least 30 per cent of the world's degraded ecosystems are being restored by the end of the decade. The agreement also includes a commitment to raise USD 200 billion per year from all public, private, and philanthropic sources, as well as USD 30 billion in annual aid to flow from richer countries to developing ones by 2030. Amongst other pledges, countries are also being asked to reduce subsidies for unsustainable industries, such as unsustainable agriculture, industrial fishing and oil and gas, and redirect them to more sustainable practices. Dr Sunita Purushottam, Head of Sustainability at Mahindra Lifespace posted on LinkedIn, "A historic Paris-like moment for nature as over 190 countries agree on a framework for halting biodiversity loss."

Viewed together, these two agreements mean that developing countries that face the brunt of climate change can now look forward to some help in halting the loss of biodiversity in their countries as well as some compensation for loss and damage caused by extreme climate events in the future. While these agreements are still on paper and funding and payment mechanisms are yet to be decided, it is certainly a leg-up in the developing nations' ability to combat the effects of climate change.

Domestically, this is the year when the Securities and Exchange Board of India's mandate on ESG reporting for the top 1000 listed entities kicks in. From FY 2023 onwards, the Business Responsibility and Sustainability Report (BRSR) reporting becomes mandatory. This will give investors a single-point reference to the ESG initiatives of the top 1,000 listed firms in India and help in curbing greenwashing as the reporting process matures. As Mukund Rajan, chairman of E-cube investments put it, "BRSR will offer Indian companies the best way to communicate their ESG initiatives" to both investors and other stakeholders.

Earlier this week, the Securities and Exchange Board of India (SEBI) amended regulations for the issue and listing of non-convertible debentures to facilitate sustainable finance while 'safeguarding against greenwashing'. It expanded the definition of sustainable finance to include products based on pollution prevention and control and eco-efficient products which are now eligible to come under the green bonds umbrella. It also introduced new products blue bonds and yellow bonds, respectively, for water use and conservation products and solar energy products. These would be sub-categories under the green bonds umbrella. In addition, SEBI will also specify basic dos and don'ts relating to green debt securities, to address issuers against greenwashing.

Seen together, the global movement pushing for cleaner business practices is being mirrored at home through SEBI's move to clean up corporate India's act.

The writer is a former journalist and currently heads the ESG practice at Kaizzen. Views expressed are personal