Keeping the green promise
Despite 2021 being a year to forget, there has been promising news for the environment, with ISO standards so often behind it.
The growth of sustainable finance seems certain to continue as most governments worldwide focus on how to cut pollution and greenhouse gases and more regulators require companies to disclose climate-related risks. The renewable-energy sector for electricity, for example, has doubled in the past decade and more than quadrupled in the past 15 years.
Despite an upsurge in investment, much more is needed to meet the targets of the Paris Agreement and United Nations Sustainable Development Goals (SDGs). And the scale of investment required is enormous. According to the World Economic Forum, we need to devote around USD 5.7 trillion annually to green infrastructure, whilst the International Energy Agency has determined that we need at least USD 53 trillion in the next 15 years to combat climate change. And more is needed for other areas of sustainability, such as the emerging circular economy.
Evidence shows that robust, credible, fully developed and widely accepted standards are urgently needed. International Standards can help structure the emerging sustainable finance market and create the trust and confidence that investors need. Experts leading the development of standards for sustainable finance are very lucid when explaining why. “International Standards will deliver harmonization, credibility, transparency and trust,” states John Shideler of Futurepast Inc., who is heading a group of experts in ISO/TC 207, Environmental management, the ISO technical committee in charge of developing a series of standards for green bonds and loans.
Evidence shows that widely accepted standards are urgently needed.
Green bonds and beyond
“We need standards to avoid greenwashing,” explains Hayden Morgan of the international Green Investment Group, who fronts another group of experts in ISO/TC 322, Sustainable finance. “The work done in this group is aimed at supporting organizations across the globe to integrate sustainability principles into their activities,” he explains. “Without that, we have greenwashing, such as the overstating of environmental credentials.”
So what exactly are green bonds? Green bonds, also known as climate bonds, are designed to fund positive environmental or climate projects. Not all green bonds are created equal, however. Greenwashing, or at least the perception of it, has been one of the obstacles that has hindered their growth by deceiving green bond investors into believing in purported climate-related benefits.
Green bonds have been around for almost 15 years and, since then, a range and diversity of trade standards, guidance and rules have emerged, aimed at providing a firm foundation and, moreover, to counter greenwashing. Whilst important in a fledgling market, we now need ISO standards to provide structure, transparency and credibility through internationally recognized certification schemes that will unlock the trillions of dollars needed for sustainable development. These are the objectives of a brand-new series of standards covering green bonds, green loans, a taxonomy for green bonds and a fourth standard for verification.
So how will ISO 14030 help? The aim is to provide clarity and describe what is required to determine the eligibility and credibility of green-debt instruments, as well as a robust reporting mechanism, so that investors will have the results they need to make informed decisions, explains Shideler. Buy-in from the financial sector is crucial for the success of such standards, and the working group has been fortunate to have had good support. “This has helped to produce standards which are both consistent with the green bonds standards and green loans principles,” Shideler concludes.
A BIODIVERSE WORLD
Many investors are starting to realize that if biodiversity suffers, so do their returns. It’s in their interest, therefore, to measure and tackle the issue. In early 2020, ISO formed ISO/TC 331, Biodiversity, to support the variety of life on Earth with dedicated standards. “The desire is to turn the tables to create a healthier relationship between our economies and our ecosystems, a relationship that encourages the preservation of biodiversity whilst creating opportunities for sustainable development,” explains Caroline Lhuillery, the Committee Manager for ISO/TC 331. “Its aim is to develop requirements, principles, frameworks, guidance and supporting tools, doing so in a holistic, unifying and global approach,” she adds.
Threats to biodiversity from all sources are quickly reaching a critical level that may precipitate widespread changes in the number and distribution of species, as well as the functioning of ecosystems. Current extinction rates are a thousand times higher than prehuman levels and projected losses of habitat from land conversion, as well as increasing competition from non-native species, will probably push this rate higher still.
“ISO standards for biodiversity will encourage organizations, including government and business, to embed biodiversity issues into their strategies, decision making and actions,” she adds. There are already national standards and protocols available to assess and manage biodiversity, but evidence suggests that these are fragmented and disparate. Even when legislation and supporting tools do exist, there can still be considerable regional and national variations in approach.
This is where harmonized standards will help enormously. “To act, organizations need a common understanding of what biodiversity is, a demanding framework to take actions, methods, tools to assess impacts, progress and concrete examples”, explains Lhuillery. In short, what we need is a harmonized, global approach. “Future standards will include standardized terms and definitions to be used globally, methodologies for impact analysis, frameworks for defining strategies and action plans, monitoring and reporting tools.”
DEVELOPING INTEREST
The transition to a carbon-neutral economy will affect every aspect of how we produce goods, provide services, move around and consume. It will also impact how we work. A report from the EU Commission states that the transition to a carbon-neutral economy will create more than one million jobs by 2030.
ISO is working to support all this by accelerating the movement towards a decarbonized society. The London Declaration represents ISO’s historic commitment to combat climate change through standards. This crucial role for standards was further highlighted by leaders of the G20, as well as at COP26, and ISO stands ready to turn its commitments to action.
The transition has begun in many far-sighted communities and companies, but progress toward sustainability takes time. How fast this transition to more sustainable forms of production and environmental management will proceed, and whether it can effectively mitigate the effects of large-scale environmental change, is the real question. What we do know for sure is that standards will certainly play a key role in generating the greener ways of living to which the world aspires.
We all agree on a few things. We want the air we breathe, the water we drink and the food we eat to be free of toxins. We want to leave our children a world that is at least as good as the one our parents and grandparents left us. An environmentally sustainable world is needed to meet all of these goals. Goals that can only be achieved by developing standards and leveraging them on a global scale.