Chatham House recently ran a student pitch competition addressing the question of how to rapidly solve climate change and the associated security threats. This competition provided the opportunity to speak at a think tank and to apply what I have learnt in the 'Environmental Security: an interdisciplinary approach' module in a practical context.
The common reaction and understanding of solving climate change tend to be pessimistic, as seen with discussions surrounding COP28. However, the environmental security course at King’s engages with broader concepts such as how public and private sector actors have the ability to make the shifts needed to encourage climate action. Part of this is recognising what will incentivise key players to adopt the sustainable practices needed to avert the effects of climate change.
The UK government was the focus of my proposal, as it has legally committed itself to reaching net zero by 2050. The National Security Doctrine is also focused on the UK government becoming a global leader in sustainability, displaying a space for climate progress to emerge. Climate change action is about innovation proving itself and then expanding to have the necessary effect.
My proposal centres upon the UK government taking unilateral action through the creation of an ESG accreditation system. ESG’s stand for environmental, social, and governance and are a way in which businesses can report what their impact on each domain is. I proposed that the UK government set up a regulatory body that would scrutinise and review reports provided by businesses regarding their ESG impact and targets.
This accreditation body would then provide an A- E rating based on these reports. For businesses to be incentivised the government would offer tax breaks, quicker sign-offs and less red tape for those that had been granted a certain accreditation rating and proven themselves to be responsible.
This proposal stems from discussions with individuals in both the public and private sectors. It was clear that ESG considerations are gaining importance and represent the future of sustainable finance, driven by increased shareholder activism, which involves investors taking action to influence a company's decisions and practices.
Within the UK, there is already a legal obligation for businesses with more than 500 employees or £500 million in revenue, to adopt ESGs. However, there are concerns from businesses over the legitimacy of ESG mainly due to claims of greenwashing. Some businesses have been able to claim good performance from ESG but still haven’t made positive steps towards sustainability and climate action.
My question and basis of research was why and how this bad practice was able to occur. ESG’s as a concept have many benefits and therefore the potential to make an impact. There is a well-established connection between businesses that comply with ESGs and the level of investment they receive. According to 2/3rds of investors take into consideration a business’s ESG credentials before an investment. These benefits are available to all businesses regardless of size. Small businesses are being encouraged to adopt ESGs now on account of these benefits and their future importance, displaying the strength of ESGs.
An accreditation system could reinstate trust and legitimacy through being government-led and this was identified as the core issue with ESG’s. The UK government and financial sector can create an environment in which businesses will trust the ESG system being enforced. Greenwashing fears would also be addressed through reports being reviewed annually to ensure that businesses continued to increase their sustainable practices, to avoid complacency.
Throughout the process of researching my proposal and identifying which areas were constricting ESG uptake, it became clear that there are impediments to climate investment that need addressing. Businesses are large contributors to emissions and are therefore key players in addressing climate change. But unless the right system is in place and there is an awareness that businesses can benefit from increased climate engagement and investment, this may not emerge. Therefore, for climate investment to reach the level required to make meaningful change, there needs to be a mobilisation of businesses.
Presenting at Chatham House, finding a research area and expanding this specialism was a really rewarding process. To develop my knowledge of ESGs I spoke to industry professionals alongside reading around the subject. My key takeaway from this process is the importance of engaging with different sectors and the different approaches they have. This provides a well-rounded understanding of a topic and the ability to encourage discussions that are necessary to begin making changes and motivate others to do the same.
The competition was also joined by MA students Noel Ang and Eleanor Shaw from the Department of War Studies, with Dr Richard Millburn serving as one of the organisers.
Layla's photo credits: Chatham House.