Marzele Bosch (South Africa)
The unequal burden of sustainable investment on emerging countries
In recent years, investors have been looking beyond commercial gains and considering investments' social, environmental, and cultural impacts. There has been a global call on corporations to take greater responsibility for long-term outcomes. Socially responsible investing (SRI) may use positive/negative screening to include/exclude companies based on specific criteria. The criteria generally comprise three dimensions: environment, social, and governance. This is referred to as ESG investing. ESG investing is all the hype in the financial market. According to the Global Sustainable Investment Association’s global sustainable investment review of 2020, ESG assets surpassed $35 trillion in 2020. Research indicates that investors are willing to spend more when it aligns with their values of social justice and combatting the climate crisis.
However, ESG investing remains deeply contested. ESG is facing increasing backlash in the developed world. The Biden Administration is attempting to reverse Trump’s pushback against ESG investment in the USA. Subsequently, Republican lawmakers claim Biden’s energy policies are responsible for increasing gas prices. Behind the right-wing rhetoric lies policies designed to derail a sustainable investment. Former Vice President and a potential candidate for the 2024 Republican presidential nomination, Mike Pence, publicly denounced ESG investing as a corporate weakness, galvanizing voters and weakening the resolve of prominent asset managers to act on climate change. Right-wing politicians and commercial opponents of ESG investment capitalize on voters’ fears of inflation and direct these fears toward efforts to combat the climate crises and other social ills.
The negative impact of COVID-19 and Russia’s invasion of Ukraine drove oil and gas prices up to their highest levels in nearly a decade. Many countries were forced to reconsider their energy supplies. The Ukraine crisis and subsequent oil and gas spikes have increased the uncertainty in the global oil and gas market. Amid energy crises, many European countries returned to the use of fossil fuels. Developed countries’ return to fossil fuels depicts that when economic growth and energy security become under threat, development and safety will always triumph over climate change.
The current energy crisis means that energy security is taking precedence, and action on climate change will have to wait. Thus, the only thing sustainable about sustainable investing is the Iron Law of the environment developed by Roger Pielke Jr., which states that while people are often willing to make sacrifices to achieve environmental objectives, such willingness has its limits. This, however, appears to only apply to the developed world. Africa remains at the bottom of the electrification process, with approximately 568 million people without access to electricity. African governments have sought to develop new fossil fuel projects to meet local needs. However, Western governments have demanded that multilateral lenders such as the World Bank stop funding those projects to reduce global carbon emissions. While transitioning to renewable and sustainable energy is vital for the global future, Africa should explore a mix of energy sources to meet basic needs.
The entire continent is only responsible got 3% of global carbon emissions. Quite hypocritically, the German Chancellor recently visited Senegal to discuss the development of a gas field. European Union diplomats began talks with Nigerian officials in April to discuss the country as an alternative gas supplier. Italy has struck gas deals with Algeria, Angola, and the Congo. Africa thus faces an unfair burden to pursue renewable, green energy, while European countries return to fossil fuels amid the energy crisis. It is recommended that global policies towards the transition to accessible and sustainable energy should center on the least developed and most vulnerable countries to make meaningful impacts. The most vulnerable countries could not achieve an energy transition and abandon the polluting patterns of developed countries without a viable, fair, and equitable alternative.