Is it formally too late to want you a Completely happy New 12 months? As we return to work, listed here are three sustainable finance traits which are prime of thoughts for me, together with three themes that sustainable finance and ESG neighborhood members say they want prioritized in 2024. 

My scorching subjects for 2024 construct on progress made in 2023: laws for ESG assurance; worldwide agreements for transition finance; and the event of requirements and devices to watch funding in nature and biodiversity. Right here’s the place I see issues headed.

Firms are prepping for ESG assurance mandates 

What was as soon as a voluntary train for disclosing local weather and social objectives has advanced right into a full-fledged business of ESG reporting. Up subsequent: the introduction of third-party assurance necessities for sure ESG disclosures. 

California and the European Union are main the best way with the Golden State’s Local weather Company Knowledge Accountability Act, which requires giant corporations doing enterprise within the state to get third-party assurance for Scope 1 and a couple of emissions beginning in 2026. (Firms might want to accumulate 2025 metrics, and file them in 2026). 

Which means 2024 will probably be a giant prep yr: Firms will want programs to gather and handle information to fulfill these assurance necessities, and which means companies should set up and check their ESG controllership technique this yr. 

How? Some corporations are constructing inner groups to supervise ESG information assortment and administration for regulatory reporting. That features hiring for the newly created place of ESG controller. Many giant banks have added this position. Count on to see extra corporations hiring an ESG controller this yr to handle regulatory calls for. 

Transition finance will take the wheel 

An estimated $4 trillion in clear power funding will probably be wanted annually between now and 2030 to achieve net-zero emissions by 2050, in keeping with the Worldwide Power Company. 

That’s why local weather finance was a key agenda merchandise at COP28. Greater than $85 billion in new commitments had been made, with the host nation, the United Arab Emirates, launching a $30 billion world finance options fund that may allocate $5 billion to spur extra funding within the World South. 

This yr, we are able to count on the Inflation Discount Act and Bipartisan Infrastructure Legislation to proceed offering funding alternatives. An instance is the $97 billion out there by means of the Division of Power for clear power tasks. The IRA has additionally contributed to a rise in cleantech investments, which totaled $176 billion within the first three quarters of 2023, or $50 billion greater than the identical interval in 2022. 

One other key IRA provision to observe this yr is for transferable clear power tax credit. By means of this facility, builders can monetize credit they obtain for clear power tasks by promoting them at a slight low cost to corporations that face giant tax payments. This offers a much-needed supply of capital for financing clear power undertaking growth. 

Lastly, higher information for navigating pure capital 

The EU’s Company Sustainability Reporting Directive took impact Jan. 1. It requires giant and publicly traded corporations to reveal environmental and social dangers. The Taskforce on Nature-related Monetary Disclosures launched its suggestions for doing so in September, guiding how corporations ought to talk about nature-related dependencies, impacts, dangers and alternatives. 

As corporations embrace digital applied sciences to gather these nature-related metrics, we’ll see the growth of the “planet economic system,” predicts Lucas Joppa, the previous Microsoft chief environmental officer turned non-public fairness investor. These insights and information swimming pools will give traders extra of the instruments and infrastructure wanted to put money into nature at scale, he stated. 

What 3 sustainable finance leaders see on the horizon 

What ESG accounting or sustainable finance problem would sustainable finance and ESG consultants prefer to see prioritized in 2024? Why? I put that query to subject material consultants late final yr. Listed here are three of their responses. 

Marina Severinovsky — Head of Sustainability, North America, Schroders 

“The way forward for fossil fuels, which was a spotlight of COP 28, ought to stay a precedence in 2024, as reaching web zero would require a wholesale transformation of power programs. Power is a crucial a part of many portfolios, and traders have to assess whether or not corporations can adapt and transition their enterprise fashions at a tempo that may be worthwhile on their path to decrease emissions. Given the calls for on the power system over the following 10-30 years, with out important funding, we will probably be brief power. Standard power corporations are an essential a part of the funding within the power transition sector and are wanted to supply the transition fuels for the worldwide clear power transition. We count on that they are going to adapt their enterprise mannequin to capitalize on the expansion in new power transition applied sciences. Most of the main oil corporations are already beginning to change the place they allocate capital and are already invested in hydrogen, carbon seize, biofuels, and wind and photo voltaic. Sustainable finance funding and engagement ought to concentrate on encouraging and accelerating this transition.” 

Andrew Behar — CEO, As You Sow 

“There are 100 million folks with $10 trillion in retirement accounts invested in an unlivable planet they will’t retire on. That is the yr for each particular person to comprehend that the one who earns the cash has the fitting to take a position it aligned with their values and to vote their proxies to form an organization’s trajectory towards justice, sustainability and monetary outperformance. Click on your heels collectively, Dorothy, it’s your cash — use your energy properly.” 

Jeff Mindlin — Chief Funding Officer, ASU Basis 

“On the ASU Basis, our viewpoint has all the time been that we’re fiduciaries first and wish to keep away from politicizing the endowment. To that finish, in 2024, my hope is that we are going to have handed the greenwashing and greenhushing phases to make precise progress on the matter at hand. I additionally would wish to see standardization of reporting on the firm and fund stage turn out to be a precedence.”