The Case for CBAM
In 2003, a devastating heat wave in Europe killed an estimated 70,000 Europeans, many of them elderly people living alone. This, and a series of other extreme weather events, have persuaded many countries to take climate change seriously. The European Union enacted the carbon border adjustment mechanism (CBAM). It came into effect as of October 1, 2023, and is designed to account for the carbon cost of producing imported goods, with the ultimate aim of reducing greenhouse gas emissions. “I’m a huge fan of CBAM,” Catherine Wolfram, professor of economics at MIT Sloan, said, joking that the name sounded like something […]
Green Supply Chain
How sustainable is a consumer good, like a car? Looking back at the intermediate goods produced during the stages of getting to that final good, such as the motor to put into the car, how sustainably were those intermediates produced? Windmills are considered more environmentally friendly than gas power plants. But windmills require steel, which is a highly emission-intensive product. Hence, we also need to switch to environmentally friendly steel. This is but one example of “greening” the supply chain—how the green transition requires switching from fossil fuels to cleaner energy sources not just at the end, but all along […]
World Energy Outlook
On October 24, 2023, the International Energy Agency (IEA) released its annual report, World Energy Outlook (WEO), to an international audience. The agency states that the energy world “remains fragile but has effective ways to improve energy security and tackle emissions.” Agency analysts looked at how close the countries of the world are to meeting the objectives of the Net Zero Emissions by 2050 (NZE) Scenario, which limits global warming to 1.5 °C, a goal signed by many countries and often referred to as the Paris Agreement. [As of March 2021, 194 states and the European Union have signed the […]
Towards a Common Standard
Investors around the world are demanding consistent, high-quality reporting of environmental, social, and governance (ESG) data. Is there any global governing body for financial reporting that is up to the task? How can an organization ensure that sustainability reporting is comparable, consistent, and comprehensive? Furthermore, is the input from financial professionals welcomed? The answer, apparently, is “yes” on all three counts. On June 21, 2022, Josina Kamerling, member of the Value Reporting Foundation and the CFA Institute, welcomed an audience of hundreds to a webinar titled “Endgame: Will the ISSB become the comprehensive global baseline for sustainability disclosure?” She introduced the representative […]