Green Governance: The future of ESG policy

Tackling the global climate crisis has become one of the primary targets for governments worldwide. In practice, though, it is the private sector – guided by government policies, incentives and regulations – which must implement changes. 

To achieve the long-term temperature goals set out in Paris Agreement, countries need to reduce emissions as soon as possible to achieve a climate-neutral world by mid-century. Governments will occupy a pivotal role in fostering investment through incentives, harmonised standards, and the facilitation of transparent markets. 

As agriculture accounts for approximately 25% of global GHG emissions, it has become critical to the climate debate as the sector seeks to reduce its existing carbon footprint. 

Given agriculture’s potential capacity to mitigate climate change through the sequestration of carbon in the soil, ESG investors are increasingly interested in the sector as a means to counteract climate change. 

According to many sustainable agriculture experts, significant barriers remain despite an increase in ESG investment in the agriculture sector.  

ESG regulations differ depending on location, meaning that companies lack a universal mandate to report ESG information. This lack of a standardized reporting methodology often means that data is incomplete and not directly comparable across companies, sectors, and countries.  

The rush to secure a foothold in the rapidly expanding ESG investment sector has spurred an abundance of voluntary, non-governmental standards, stepping in where official regulation is lacking. As a result, ESG data and analytics providers as well as ESG consulting services have emerged to address the investment communities’ needs. 

Within the EU, ESG regulations ultimately all stem from the European Council’s Sustainable Finance Policy, which sets out the EU’s high-level policy ambitions. 

This ESG policy is complemented by a suite of corresponding European Commission Green Finance Initiatives, the most immediate of which is the Sustainable Finance Action Plan, which has four key elements: 

• The Taxonomy Regulation 
• The Sustainability Disclosure Regulation 
• The Climate Benchmarks Regulation 
• The EU Green Bond Standard 

Regulators need reassurances that investors are genuinely engaging with ESG requirements and meeting the required standards of prudence and care, and not merely engaging in ‘greenwashing.’ 

The process of ‘greenwashing’ has been described by Marcus Björksten of Fondita Sustainable Europe as “a real problem”, with companies increasingly spending more resources on marketing themselves as environmentally friendly than on actually minimizing their environmental impact.  

Ultimately, ESG policies will help to provide clearer and stronger regulations on reporting and disclosure metrics. further policies will drive us toward more sustainable systems and help to meet society’s environmental and climate goals. 

Future ESG policies may also include public lending, insurance and guarantees schemes, financial trading schemes, a bolder approach to ESG investment of public funds and steps to expand green and sustainable bond markets. 

At Farrelly & Mitchell, we believe that by working together, governments, agribusinesses, and ESG services is crucial for steering the agricultural sector towards our shared environmental and climate objectives. 

As governments around the world increasingly emphasize the importance of ESG policies, our role as an agribusiness consultancy service is to assist policymakers and development finance institutions (DFIs) in implementing ESG initiatives that nurture sustainable agriculture and enhance food security. 

Simultaneously, our highly experienced sustainability consultants are on hand to provide ESG consulting services. These services enable organizations to understand and adhere to environmental sustainability and social governance practices. This support extends through our services in sustainable agriculture consulting, food security consulting, and food policy legislation. 

If you would like to know more about our ESG services, talk to our team today.