[Commentary] From GHG to ESG: International trends and the shift to broader sustainability considerations.

Sep 19,2024

1. Introduction.

The 'Paris Agreement' was adopted at the 21st Conference of the Parties (COP21) to the UN Framework Convention on Climate Change in 2015.

The Paris Agreement, covering all countries and regions, agreed, among other things, to limit the global average temperature increase from pre-industrial times to well below 2°C, and if possible to 1.5°C. Furthermore, the Glasgow Climate Agreement of COP26 in 2021 set a common global target to limit the increase to 1.5°C or less.

Meanwhile, on 5 June 2024, the World Meteorological Organisation (WMO) published a report analysing the outlook for climate change up to five years from now, which indicated that the average temperature for the entire five-year period from 2024 to 2028 is likely to increase by more than 1.5°C above pre-industrial levels at 471 TP3T, up from last year's report covering the period 2023 to 2027. The report noted that this is up from 321 TP3T indicated by the report [1].

As UN Secretary-General Guterres poignantly called for efforts to curb global warming on the same day [2], there are calls from investors, businesses, NGOs and others for stricter and faster global warming measures.

In recent years, not only GHG but also ESG and sustainability have been attracting attention, and comprehensive information disclosure is required that goes beyond climate change. In line with this trend, a number of organisations have emerged to support ESG measurement, disclosure and reporting.

This paper describes the importance of the shift to ESG, touching on the organisations working against greenhouse gas (GHG) reduction and their specific indicators and targets.

2. examples of specific institutions and indicators

This chapter introduces the agencies and indicators for GHG measurement, disclosure and reporting, and discusses the latest developments. Figure 1 gives examples of institutions involved in GHG reduction, with different roles depending on the size of the sector. A selection of some of these are presented in the text.

Figure 1: Examples of indicators and institutions involved in GHG reduction

◆ IPCC (Intergovernmental Panel on Climate Change)

The IPCC is a UN agency established in 1988 by the World Meteorological Organisation (WMO) and the United Nations Environment Programme (UNEP). It currently has 195 member countries and provides governments with scientific information that can be used to formulate climate policy.

Assessment reports published by the IPCC are an important source of information in international climate change negotiations, as they summarise the drivers of climate change, their impacts and future risks, and the risks of mitigating them, based on assessments in a number of expert papers.

Published by the IPCC.guidelineare encouraged to be referenced in the preparation of the Greenhouse Gas Inventory, which the UN Framework Convention on Climate Change requires developed countries to submit annually.

*Greenhouse gas inventories: documented compilation of emission and absorption quantities and calculation methods of each country.

◆Global Stocktake.:(GST)

At COP28 in 2023, the Global Stocktake (GST) was conducted for the first time since the entry into force of the Paris Agreement to assess global progress towards achieving the targets set out in the Paris Agreement.

Every five years, the GST assesses global progress in meeting the Paris Agreement targets and provides suggestions for action to be taken by countries. Countries then update their national greenhouse gas emission reduction targets (NDCs) based on the results of the GST. Furthermore, each country must implement measures towards the NDC it has set and submit a report every two years.

In this way, the aim is to steadily achieve the goals of the Paris Agreement by repeating the cycle whereby each country formulates its NDC based on the GST, reports on its implementation, and this information is then used in the next GST.

Figure 2: Position of global stocktaking in the Paris Agreement(in...)Ministry of Economy, Trade and Industry, Agency for Natural Resources and Energy website.(Adapted from.)

◆SBTi (Science Based Targets Initiative)

SBTi (Science Based Targets Initiative) is a joint initiative established by WWF and CDP in 2015 with the aim of preventing climate change and increasing the competitiveness of companies in a net-zero economy.SBTi produces SBTs ( Science-based Targets) are common science-based GHG emission reduction targets, and participating companies are required to set their SBTs based on guidance developed by the SBTi.

Compliant companies are awarded SBT certification and must report and disclose their emissions and progress on measures once a year. They then regularly check the adequacy of their targets and re-establish them if significant changes occur. Doing so will lead to recognition from investors and consumers, as well as enable the company to respond to requests for disclosure of GHG reduction targets from companies in its own supply chain.

As of 19 August 2024, 8759 companies worldwide were participating in the SBTi, including more than 1,200 Japanese companies; the SBT is now the international de facto standard and therefore one of the most important indicators with regard to GHG emission reductions.

On 28 February 2024, two reports were published on Beyond Value Chain Mitigation (BVCM), which refers to the reduction of carbon emissions across the value chain. The criteria for BVCM, which until now have been unclear, have been organised, allowing for even clearer climate targets to be set [3].

◆SBTN (Science Based Targets Network)

The Science Based Targets Network (SBTN) is an initiative established in 2019 by CDP and the World Resources Institute (WRI), and can be positioned as a complementary role to SBTi.

The aforementioned SBTi.climatewhereas SBTN focuses not only on climate, but also on biodiversity and environmental impacts across terrestrial, freshwater and marine environments.comprehensiveWe are working on the following SBTs for Nature, a science-based guidance for companies and cities to set nature-related targets that go beyond climate change, and is working to expand this to more companies and cities.

A plan to set SBTs for Nature for cities was presented at COP 28 in 2023; the first guidance is expected to be operational from 2025.

The following article introduces SBTs for Nature.

[Commentary] SBTs for Nature - science-based nature-related targets.

◆GHG Protocol

The GHG Protocol is an internationally recognised GHG emissions accounting and reportingDeveloping standardsThe aim is to promote the use of the system.

The Corporate Standards published by the GHG Protocol, which aim to measure emissions from electricity and other energy purchases by companies, have been used by companies worldwide since their publication in 2001.In 2011, the Scope 3 measurement standard was published and remains influential as the only internationally recognised standard for Scope 3 It remains influential as the only internationally recognised standard for Scope 3.

In recent years, the 'FLAG' (forest, land and agriculture sector) has also attracted attention, with new guidance expected to be issued in the first quarter of 2025 to account for emissions from that sector. [4]

◆ISO 14064/14065 ISO

The International Organisation for Standardisation (ISO) is an NGO whose purpose is to establish internationally accepted plans.

ISO 14064/14065 provides a framework for uniform GHG accounting rules, verification rules and requirements for verification bodies. ISO 14064 is further divided into three parts, with different rules for different processes in GHG accounting. ISO 14065 also sets out requirements for verification bodies.

Table 1: Rules defined by ISO 14064/14065(in...)Ministry of the Environment public documents(Prepared by the author based on)

ISO 14064-1.	Rules for GHG calculation in organisations (companies, factories, etc.).
ISO 14064-2.	Rules for calculating project emission reductions and removals
ISO 14064-3.	Rules on validation and verification of GHG calculations.
ISO 14065.	Sets out requirements for verification bodies.

Note that many aspects of the GHG-related items are common to the GHG Protocol and do not include a comprehensive nature-related standard.

◆CDP(in...)Carbon Disclosure Project) Japan

CDP is a non-governmental organisation (NGO) of British origin that operates a global disclosure system to help investors, companies, states and others manage their environmental impacts (CDP).CDP website(from).

CDP sends the CDP Questionnaire to companies and scores them on environmental risks and opportunities based on their responses. The questionnaire includes questions related to GHG emissions and allows companies to measure GHG emissions in a variety of ways, including disaggregating data by location for large companies; it is aligned with frameworks and standards such as IFRS S2 and TNFD, and helps companies interoperate with multiple frameworks.

On 1 November 2023, the CDP also requested more than 2,100 companies worldwide with high CO2 emissions to establish SBTs. The total Scope 1 and 2 emissions of the targeted companies amounted to 8.3 Gt, which is equivalent to the national emissions of the USA, Japan and the UK. The total market capitalisation of the companies concerned amounts to approximately USD 28 trillion (approximately JPY 440 trillion). The request has been endorsed by 307 institutional investors and financial institutions and 60 global companies [5].

3. shift to ESG - towards comprehensive sustainability information disclosure

While the previous section has introduced indicators and institutions related to GHG emissions, in recent years the importance of comprehensive sustainability information disclosure beyond GHG has increased: compared to the days when the main focus was on GHG-affected climate change, in the 21st century, ESG (Environmental, Social and Corporate Governance) has become more important in achieving a sustainable society since the launch of the PRI (Principles for Responsible Investment) in 2006. ), ESG (Environmental, Social and Corporate Governance) has become more important in achieving a sustainable society.

The most representative examples of the GHG to ESG shift are the TCFD and TNFD The Task Force on Climate-related Financial Disclosures (TCFD), established in 2015, has been working on four It has recommended climate change-related disclosures in terms of four areas.

In recent years, however, it has become clear that nature and ecosystems, including biodiversity as well as climate change, have a significant impact on the business models and financial activities of companies and financial institutions. As information on climate change alone is insufficient for both companies and investors in decision-making, the aim was to create a mechanism for disclosing information on nature and ecosystems as a whole. This is how the Taskforce on Nature-related Financial Disclosures (TNFD) was established in 2021.

[Explanation] What is the TNFD? A new bridge between finance and the natural environment

Furthermore, the establishment of TISFD through the merger of TIFD and TSFD is another important topic highlighting the importance of ESG in terms of inclusive disclosure of inequality and social aspects.

[Commentary] Future course of action of the Task Force on Inequality and Social-related Financial Disclosures (TISFD).

The SBTN, mentioned in the previous section, is another example of the GHG to ESG shift, as it was established to complement the SBTi framework.

4. conclusion

This paper introduced the organisations and indicators involved in GHG emission reductions and the importance of the shift to ESG.

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References.
[1]https://wmo.int/news/media-centre/global-temperature-likely-exceed-15degc-above-pre-industrial-level-temporarily-next-5-years
[2]https://www.un.org/en/climatechange/events/world-environment-day-2024/live-blog
[3]https://sciencebasedtargets.org/news/the-sbti-releases-new-reports-to-help-accelerate-corporate-climate-action-beyond-the-value-chain
[4]https://ghgprotocol.org/blog/land-sector-and-removals-workstream-update
[5]https://www.cdp.net/en/articles/investor/367-financial-institutions-and-multinational-companies-worth-33-trillion-join-forces-to-demand-science-based-targets-in-race-to-15c

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