What a billionaire’s protest means for Sunak’s government

Greetings from New York where I am suffering from a peculiar sense of déjà vu. During the past year, I have watched — with dismay — as a host of anti-woke, anti-green messages have tumbled out of America’s far-right, as part of a colourful campaign to bash the Democrats. This week, however, Britain turned American: Grant Shapps, the UK minister in charge of energy security and the net zero pledge, turned a decision to grant more oil and gas licences into a political football.

“The public have turned against [Labour leader] Keir Starmer’s dangerous plan to surrender our energy security to Just Stop Oil,” he tweeted. “New polling shows Britain backs new UK oil & gas. That’s because the choice is simple: Growth or mass unemployment, keeping the lights on or turning your heating off, security or vulnerability, funding our NHS or taking funds away, following the data or surrendering to the mob.”

Who knows whether this will actually improve the Tory party’s chances in the next election; polls show that they are still lagging well behind Labour. But what is clear is that this policy shift is sparking vociferous protest; see below for one striking intervention from Australian billionaire Andrew Forrest.

And then check out the latest efforts to combat greenwashing in company accounts — along with a striking corporate drive to find a new way of talking about sustainability without using the politicised acronym “ESG”. Let us know what you think might be the best framing; and, more importantly, something that will work on both sides of the Atlantic. The race is on. — Gillian Tett

Mining magnate threatens to pull out of UK after Sunak’s climate pivot

When Rishi Sunak, UK prime minister, made a show of embracing oil and gas development this week, it sparked horror among many non-governmental groups and activists.

But it has also unleashed fierce criticism from an arguably more surprising source: an Australian chief executive and billionaire. Within hours of the news Andrew Forrest, who runs the Australian industrial and mining conglomerate Fortescue that is now deeply involved in hydrogen, warned on Bloomberg TV that he would pull out of Britain if the government did not reverse course.

“We have several hundred million pounds of investment [in Britain],” he later explained to Moral Money, noting that he owns WAE Technologies, the battery group that is an offshoot of the Williams Formula 1 team.

WAE is slated to open an advanced batteries plant in Oxfordshire soon, and when these plans were announced earlier this year they were welcomed by UK leaders as a key step to bolster the electric vehicle industry and reduce reliance on China. The enthusiasm was doubly high since another battery company — Britishvolt — collapsed earlier this year.

“We have other facilities planned for Britain and we are planning to put new tech in Britain,” Forrest said. “But we don’t see why they should be put into a country which is not taking climate change seriously.”

Quite what this means in practice is unclear, since Forrest has not defined how he will judge what is — or is not — “serious” commitment. And since Forrest is a notoriously outspoken maverick, critics might feel tempted to dismiss the threats.

However, even if Forrest’s comments are knee-jerk, they are worth noting for at least three reasons. Firstly, it shows how this summer’s shocking heat is concentrating minds: Forrest says he was prompted to speak out because of the incongruity of the UK government move amid mounting evidence of climate change. “We are seeing the hottest months in history right now,” he says, arguing that “if we are unlucky we will get to 1.5 degrees global warming this coming year”.

Second, Forrest hopes that his intervention will now prompt other business leaders to also speak out. “If you are on a board you cannot ignore this — now is the time for chief executives to demonstrate that we are capable of leading.”

Third, the decision by the UK government will reinforce the perception that America is a more welcoming destination for green tech, Forrest says. While the US is facing its own powerful rightwing backlash, the Inflation Reduction Act has made an (even more) compelling case for green investment in the US, Forrest argues. “The Biden administration has put in place an economic engine,” he says. “This means that if you are responsible for managing other people’s wealth you have to be invested [in the US]. I would like to be invested in Britain but we need policies which move the country away from fossil fuel to clean energy.”

A cynic might retort that it is still far from clear whether Biden’s IRA will survive if Donald Trump were to win the 2024 presidential election. It is also unclear how durable the UK government’s policy shift will prove to be, given that concern about climate change is a fairly bipartisan matter in Britain. In any case, a Labour government is likely to take a far more proactive approach to sustainability.

But in the meantime, the winds of policy change across the Atlantic are clearly shifting course — and leaving the UK more isolated from continental Europe and the current American administration in policy terms. All eyes on whether other CEOs now follow Forrest’s lead. (Gillian Tett)

A new push to stamp out greenwashing

As companies scale up the scope and scale of their sustainability reporting, under pressure from both investors and regulators, the need for high-quality external assurance of these disclosures is increasingly urgent. But as we reported in November, there are concerns about the rigour and consistency of this assurance — and worries that it could even constitute “a form of greenwashing”.

So it’s worth noting an announcement today from the International Auditing and Assurance Standards Board, as it unveils proposed standards for verifying the quality of sustainability disclosures.

Tom Seidenstein, chair of the IAASB, told me that the global trend towards mandatory sustainability reporting meant it was crucial to get relevant assurance standards in place. The proposals for the standards will be open to public comment for the next 120 days, and the IAASB is aiming to have the standards — to be called ISSA 5000 — confirmed and operational next year.

The IAASB’s guidelines for audit and assurance form the basis for regulatory standards around much of the world. It had already published a set of standards called ISAE 3000, which provided broad standards for assurance of non-financial reporting in general. But Seidenstein said that his member companies had made clear the need for more extensive and specific guidance on the assurance of sustainability reports in particular.

He added that the IAASB’s new guidelines could be used to assure disclosures made under all the major corporate sustainability reporting standards — including the International Sustainability Standards Board, the Global Reporting Initiative and the EU’s European Sustainability Reporting Standards.

While these corporate reporting standards differ widely — notably over their definitions of “materiality” — Seidenstein said the new IAASB guidelines would “make sure that the reporting is faithful to whatever reporting framework is being used”.

“The more external assurance you have,” he added, “the more confidence you can get the reporting statements are free of misstatements — and that people could use them for making decisions on capital allocations, or other matters that are relevant to society.” (Simon Mundy)

Why SHH should not become the new ESG 

Larry Fink is not alone. A month after the BlackRock chief said he no longer uses the term ESG because it has been “weaponised” by politicians, a new report shows that other business leaders are similarly shying away from the acronym for environmental, social and governance investing. 

Faced with a growing backlash to ESG, 48 per cent of US companies polled by the Conference Board said they had changed their terminology, using terms like “sustainability” instead. That’s more than four times the number changing the substance of their ESG programmes: ESG’s believers are rebranding, not retreating.

This wariness reflects a belief that today’s heated political climate is unlikely to cool down soon: 43 per cent expect the backlash to be worse or much worse two years from now, while just 29 per cent think it will ease up. 

Paul Washington, who leads the Conference Board’s ESG Center, says the backlash has become “an incredibly hot topic” for its members. “The environment on ESG was starting to feel a little bit like the courthouse scene at Appomattox,” he said, referring to the American Civil War stand-off. As a neutral think-tank, the Conference Board wants companies to recognise that much of the criticism reflects legitimate concerns, not just partisan opportunism.

This should be “a clarifying moment” for companies to explain how ESG furthers their core strategy, Washington says. “Now is the time to engage, not to retreat and not to circle the wagons,” he adds.

“Companies need to recognise the emotional charge behind the ESG backlash but they themselves need to respond in a way that is objective and rational and offer a countervailing view that is also emotionally attractive and inspiring,” Washington argues.

Business, in other words, should use its branding skills to market ESG’s underlying principles, not just to find euphemisms for it. (Silin Chen and Andrew Edgecliffe-Johnson)

Smart read

We enjoyed this feature in The Economist’s 1843 magazine on “the demonisation of Larry Fink”, featuring an extended interview with the BlackRock boss at his farm in New York state.