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4 Jun 2024
Insight
Australia
2m read
The dominant ‘E’ factor in ESG is expanding beyond climate change. Broader, interconnected environmental issues include impacts on protected flora and fauna, waste and water management, contamination and amenity impacts on communities. These continue to be reputationally significant and highly visible across certain industries.
Biodiversity is increasingly a central issue in ESG, as focus shifts to nature repair and addressing the alarming decline in flora and fauna. Herbert Smith Freehills Environment, Planning and Communities Partner Heidi Asten observes, “As Australia moves from a ‘no net loss’ to a ‘nature positive’ regulatory environment, and with the pending introduction on reporting for nature, we expect that biodiversity will be an increasing area of focus.”
A global risk-management framework on nature-related financial disclosures, sponsored by the G7 and G20, is now being canvassed in Australia. Environmental protection legislation is also trending away from the approach of ‘punish pollution’ towards a requirement that business effectively manage the risk of harm to the environment. There is an increasing push to hold directors and officers personally accountable for corporate environmental offences. In parallel, environmental regulation in other jurisdictions, such as the European Union’s Regulation on Deforestation Free Products, may also affect Australian companies through their value chain.
“This is the nuance we are starting to see,” Debenham says. “Rewind a number of years, and the sentiment was that a renewable energy project is inherently ‘good’. Now that is not the case. There’s a much more sophisticated dialogue around what ‘good’ looks like in terms of environmental and social impact. These are tricky issues for business and government to navigate in the window of necessity to decarbonise the economy.”
With the increased focus on nature and biodiversity, a growing challenge is how to balance different (and at times, competing) ESG considerations in decision-making. A total of 25% of survey respondents cite project approval lengths as a barrier to ESG investment, with objections based on local nature and biodiversity impacts being a common cause of delay. Even renewable energy projects such as wind or solar farms can be objected to for impacting local nature and biodiversity.
Herbert Smith Freehills Partner Kathryn Pacey, environmental law specialist, agrees. “We are yet to see a consistent regulatory approach acknowledging that timely delivery of significant renewable energy and storage capability is a core requirement if we are to achieve ‘nature positive’ outcomes. Our regulatory system must be capable of envisioning the big picture as well as effectively managing the potential local environmental impacts of those developments.”
Chapters
- Stuck in the Middle? Unlocking ESG Investment in Australia 2024
- Social or ‘S’ issues gain momentum
- The social opportunity for businesses
- Operationalising ‘S’ commitments
- Climate still the top ESG dimension
- Net zero commitments – moving from talk to action
- ‘E’ = more than just climate
- ‘G’ is the common thread
- What lies ahead for ESG?
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© Herbert Smith Freehills 2024