Climate change is real | The star
In the recently updated Malaysian Code of Corporate Governance 2021 (MCCG 2021), the issue of sustainability has taken center stage with all of the 4.0 practice devoted to it. Four sub-paragraphs deal with the board’s responsibility for sustainable strategies, priorities and goals.
In addition to climate-related risks and opportunities, MCCG 2021 also calls for an enhanced practice whereby the board identifies a designated person within management to oversee these matters.
When discussing sustainability issues, it also integrates environment, social and governance (ESG) as these are the real pillars of sustainability. Climate change, which is the “E” of ESG, is a hot topic these days because global warming takes precedence.
Human activities are the main culprits of environmental damage
Based on the BBC documentary series ‘A Perfect Planet’, human activities have been reduced as a root cause of our current environmental problems facing the Earth. From the deforestation of the Amazon to dead or dying coral reefs, it is human activities that dictate our land. Dr Niall McCann, explorer and biologist, said: “Humans themselves have become so populous and so destructive today that they are the most influential creature on earth.”
The five-part series covers oceans, volcanoes, sun, weather and humans, and tackles issues related to the environmental damage the earth has suffered, including extreme weather conditions, forest fires and, of course, deadly hurricanes.
What’s interesting about the series is that one of the main drivers of climate change is the production of carbon dioxide or CO2. Humanity today acts like a super volcano from the past. We are releasing CO2 even at a faster rate than the prehistoric mega eruption. In addition, industrialization is also a major cause of the increase in the level of CO2 due to our high consumption of fossil fuels.
On the oceans, the documentary describes it as the largest ecosystem in the world. The ocean covers two-thirds of our planet’s surface and produces around 70% of the world’s oxygen. They are home to up to 80% of all life on earth and more than three billion people depend on them as an important source of protein.
Therefore, when the temperature rises due to human activity, our own resources for survival are challenged. Today we see large icebergs breaking up and the last one, measuring some 4,320 km², or about half the size of Puerto Rico, has just broken off the coast of Antarctica.
As we warm the planet, we create more extreme droughts and floods, making it harder for many animals to survive. Therefore, climate change today threatens the future of life on earth itself. With more CO2 being produced in the atmosphere, time takes a whole new turn.
For every degree of global temperature increase, the atmosphere sucks in 7% more water, resulting in a higher concentration of precipitation, which ultimately translates into greater climate change.
Of course, to help the Earth absorb the excess CO2 produced, our forests and oceans act like sponges that absorb CO2 and, in turn, release the oxygen we need, which humans need. This is how the whole earth maintains its balance and now that balance is under tremendous pressure unless we do something to turn the tide.
Businesses must take a stand on environmental issues
There has been a greater demand among institutional and even to some extent retail investors to embrace companies that adopt ESG and climate change policies in their operations. With greater awareness, the company’s supply chain ecosystem is also slowly but steadily changing.
For example, BMD Group, a rail line contractor for an Australian thermal coal project, is now seeking help from the Australian government over its inability to obtain assurance on ESG concerns, with insurance companies reluctant to be involved. to projects that are harmful to the environment.
That said, in Malaysia we also have our fair share of companies or state governments flouting ESG standards with development or land reclamation projects. Malaysia has an abundance of land and for us embarking on huge land reclamation projects doesn’t make any sense at all.
As it stands, we have seen failed reclamation projects before and this includes the currently nearly empty forest town of Johor and Pulau Melaka. After building them, the Melaka State government is still embarking on massive reclamation projects called Melaka Waterfront Economic Zone (M-WEZ), which will be built on 6,070 ha of reclaimed land and s ‘stretching for 22 km from Umbai to Tanjung Bruas.
Indeed, Melaka is abandoning all of its coasts for a project that will have a significant environmental impact for generations to come.
Another example is that of Langkawi. A local listed company, with part of the Middle East, plans to undertake a mixed RM40bil development project there. It has been reported that approximately 90% of the 1,979 acre site to be developed consists of the ocean and the intention is to build an artificial island which will eventually cover approximately 1,000 acres or 50% of the total area.
As it stands, Langkawi has some 99 islands and is home to rich marine life, a mangrove forest and a Unesco Global Geopark. Any development through land reclamation could potentially cause devastating irreversible damage to these wonders.
In Penang, the state government plans to create three man-made islands from the waters of Permatang Laut in Gertak Sanggul, covering an area of 1,821 ha as part of the Penang South Reclamation project. Again, this will also have a similar impact on the environment and marine life.
In Selangor, there is a much debated issue surrounding the North Kuala Langat Forest Reserve where the state government intends to degas the 931 ha site for a “mixed development project”. Of course, in Kuala Lumpur too, some developers are eager to even develop public parks for their own sake and in the name of providing permanent housing to displaced people.
On the one hand, we want to plant more trees, we create Taman Tugu and spend millions on it, but on the other hand, we destroy what is already given to us by God. Common sense must prevail to preserve our environment and not just based on ringgit and sen.
After identifying issues related to climate change and human activities, regulators and corporate board members should also play a role. The recent addition of sustainability issues in MCCG 2021 was followed by another initiative taken by Bank Negara. The Climate Change Based Taxonomy and Principles (CCPT) was released on April 30, 2021.
Guidelines for Authorized Financial Institutions
The CCPT, which applies to all Authorized Financial Institutions (FIs), has provided guiding principles that FIs should adopt. These guidelines cover climate change mitigation, climate change adaptation, freedom from significant environmental damage, and even a list of prohibited activities, including those that violate environmental laws.
With regulators making the right efforts to preserve the environment, it is hoped that FIs can follow suit and refrain from funding these activities. FIs should restrict all forms of financing for companies engaged in environmentally damaging projects. Naturally, if a company fails to secure financing needs, there is a good chance that it will not be able to carry out its development projects.
Independent directors of a listed company can also play the role of checks and balances as they need to be aware of the impact of the environment on the company and on mother earth, as what is being destroyed today hui can never be replaced.
In conclusion, all of us – members of the public, board members, shareholders, government, FIs, civil society and other stakeholders – must play our part to preserve Mother Earth. Without the land, we have nothing.
If everyone within the business ecosystem plays their part in ensuring that no environmental damage is caused during development, the world will be a better place for all of us today, tomorrow and for generations to come.
Pankaj C Kumar is a longtime investment analyst. The opinions expressed here are his own.