ESG Honestly: Cost-of-living crisis overshadows ESG
Posted 20 September 2023
As the UK cost-of-living crisis continues to dominate both headlines and debates in Parliament, ESG considerations appear to have rapidly fallen down the government’s agenda.
Environment Minister Zac Goldsmith’s resignation letter sparked concerns that the current crisis around domestic budgets has overshadowed the need to transition to a net-zero economy.
Goldsmith said he had accepted the position of minister due to his love and concern for the natural environment, which he added is degrading at an alarming rate.
He also aimed to advance the progress of policies aimed at protecting the natural world and secure the UK’s position as an international environmental leader.
However, Goldsmith was “horrified” by the government’s abandonment of commitments to address a wide range of domestic environmental issues, citing the recent withdrawal of a pledge to spend £11.6 billion of aid on climate and environment.
He claimed the government’s recent lack of action to combat climate change has caused the UK to step off the world stage and abandon its leadership role on climate and nature issues.
Goldsmith also criticised Prime Minister Rishi Sunak for being “simply uninterested” in addressing environmental issues, which was demonstrated by his decision to attend the party of a media baron instead of the Paris climate financing pact summit.
He concluded it is evident ESG and sustainability policies are no longer a priority due to the prime minister’s disinterest and government’s “apathy” towards the environment.
The government’s current priority
Sunak outlined his top five priorities for 2023 in a speech made at the beginning of the year. The majority of the prime minister’s five pledges centred around improving the country’s economic conditions to create a more secure and prosperous future; policies to address climate change and meet net-zero targets failed to make the list.
Sunak stated the government will prioritise halving inflation this year to ease the cost-of-living crisis and provide people with greater financial security.
The government has also pledged to grow the economy to create better-paid jobs across the county and ensure national debt falls to secure the future of public services.
It appears that Sunak believes the UK public’s focus has shifted away from ESG amid the cost-of-living crisis.
The UK public’s top three priorities in July 2022, according to SEC Newgate’s most recent ESG Monitor report, were: addressing the rising cost of living; securing quality, affordable energy and fuel supplies; and ensuring secure and affordable food supplies. The cost-of-living crisis has only deepened since, even if the availability of energy and food has improved.
Interest in ESG also fell in the year to July 2022. The SEC Newgate found the average public interest rating for ESG was 5.5 out of 10, which was significantly lower than the 6.1 of the year before and the 2022 global average of 6.5.
The importance of ESG
Despite the pressing need to ease the cost-of-living crisis, it must not overshadow the importance of ESG and the government must maintain a sense of urgency to address climate change.
Climate change no longer only poses a future threat; people around the planet are already experiencing the impact of global warming in their day-to-day lives.
The record-breaking heatwave spreading across Europe and Northern America demonstrates global warming’s impact of more frequent extreme weather events.
Soaring European temperatures – projected to reach between 40°C and 45°C – have spread across countries such as France, Spain, Poland and Greece, leading to wildfires and heat-related deaths.
Greece was also forced to carry out the biggest evacuation ever, moving 19,000 people from villages and resorts in Rhodes as wildfires continued to spread across the island’s south-eastern coast.
Even though natural weather patterns play a part in extreme weather, mainstream climate scientists have claim these heatwaves would be nearly impossible without climate change.
Meteorologists have also warned extreme heatwaves will become a regular occurrence in future years unless the transition to net zero is accelerated and is ESG is prioritised by governments around the world.
The increased frequency of extreme weather events is also creating material impacts as more instances of storms, floods and droughts are affecting crop yields and people’s ability to work.
For example, Argentina’s financial crisis has been exacerbated by a drought. The IMF estimates that it will reduce the country’s agricultural exports by $20 billion this year.
According to risk research by the Swiss Re Institute, if temperature increases stay on their current trajectory the global economy may be 10% smaller in 2050 than it could have been in a no-climate change world.
The increased frequency of extreme weather events and financial risks associated with climate change demonstrate the impact of failing to meet the Paris Agreement’s net-zero targets and further highlights the importance of prioritising ESG.