February 21, 2023

Welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead. 

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World Bank Chief David Malpass is out. So, who’s next? An ideal candidate wouldn't deny the overwhelming evidence of climate change. Perhaps the Bank will get its first woman leader, and plenty of qualified names are swirling: Ngozi Okonjo-Iweala, director-general of the World Trade Organisation; Mafalda Duarte, Head of the Climate Investment Funds; Samantha Power, the current head of USAID, among others. Another strong candidate is Raj Shah, president of the Rockefeller Foundation. Though, without deeper reform of the institution, a new leader may just be window dressing. 

It's a good time to read up on the Bridgetown Agenda for reform of the global financial architecture, which is gaining traction and high-profile support. Although even small reforms to increase how much the bank can lend, risk being rejected by some countries. 

American homes in flood zones are overvalued by as much as $237 billion. A correction to accurately account for risks exacerbated by climate change would disproportionately slash the value of homes owned by low-income residents in GOP-controlled states, a study published in Nature Climate Change warns. The new XDI Gross Domestic Climate Risk also shows that Florida, California, and Texas are among the most climate-vulnerable states.

Some good news: Arizona’s new attorney general announced the state would no longer participate in politically motivated anti-ESG investigations, saying “it is not the place of government to tell corporations and their investors that they cannot invest in sustainable technologies and practices or improve their governance processes.” Several other states are starting to wake up to the consequences such as exorbitant taxpayer costs associated with anti-ESG initiatives and legislation. Opposition from influential local banks, is helping sink legislation in deep-red states such as Mississippi, North Dakota, and Montana.

Poor governance and lax environmental standards are real issues at big companies, something insufficient and unsophisticated ESG metrics are obscuring. Norfolk Southern’s train derailment caused a major environmental disaster in East Palestine, Ohio, while the company has touted (and received accolades) for its ESG credentials in the past. Indian industrial conglomerate Adani is another example of lax ESG rules gone awry. Sustainalytics finally downgraded several Adani-related businesses in the aftermath of a Hindenburg Research report and a catastrophic aborted share issue. Shell, meanwhile, is now the subject of a complaint filed with the SEC for greenwashing and misleading investors. These problems strengthen the case for better ESG standards and more disclosure of material risks.

• This fire response from Barbados PM Mia Mottley on debt and climate
• The Global Citizen April event features PM Mottley, Ursula von der Leyen, President of the European Commission, Ugandan activist Vanessa Nakate, and others.  
• 5 Key Insights from the American Public to Help Companies and Investors Lead Through Increasing Attacks on ESG and ‘Woke’ Companies | Just Capital

• Feb 23: As You Sow and Corporate Knights release the 10th update of the Carbon Clean 200 report. Register here for the webinar. 
• Mar 22-24: Join Ceres Global and industry leaders from high-emitting sectors to examine the greater corporate ambition and accountability that is needed to drive sectoral action and transition to a more stable, just, and climate-resilient economy. Register here.

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– Tan Copsey, Katharine Poole, Steve Hargreaves, Jayson O'Neill & Shravya Jain-Conti