This article first appeared in The Edge Malaysia Weekly on February 19, 2024 - February 25, 2024

Almost half of the global population will be going to the polls in 2024. This promises political drama, and alongside the ongoing wars and geopolitical conflicts, a slowdown — or, in some cases, a reversal — in ESG adoption in 2024 is likely.

“It is definitely a year of waiting. We’re waiting for politics; we’re waiting for elections. We’re sadly in the throes of geopolitics as well,” Chan Wai-Shin, head of the Climate Change Centre and ESG Research at HSBC, tells ESG during his recent visit to Malaysia.

“But we are waiting on the positive side for more ambitious climate pledges that could come out this year. There’s a lot of preparation for things to happen in 2024, as opposed to the action that was part of 2023.”

A spike in anti-ESG sentiment is expected in the US due to its elections, but Chan does not think this will spread elsewhere. Instead, he expects an acceleration in ESG adoption in Asia, Asean countries and the UK.

That said, the climate does not wait for anyone. The US National Aeronautics and Space Administration has confirmed that 2023 was the warmest year on record, and there are expectations that it will be worse in 2024.

“It could continue this year because El Niño is still affecting the region quite strongly and is forecasted to remain that way until at least June. However, the effects of El Niño will lag and still be felt for about six months after. That does mean we’re going to see a lot more extreme events again,” says Chan.

While climate change may not be at the top of the agenda for politicians, its physical impacts are a reminder1 of the problem. That’s the silver lining in this rather negative context, observes Chan.

These extreme weather events could catalyse the electorate to pressure politicians to do more to mitigate and adapt to climate change.

“We saw that with the 2022 elections in Australia, where the incumbent government was not dealing with the floods in Brisbane and the bushfires in South Australia. The electorate voted for change,” says Chan.

The energy sector will continue to receive scrutiny in its sustainability strategies, given its significant contribution to global emissions. The execution of these strategies will be key, especially when it comes to the readiness of grids to receive and store variable energy from renewable sources, says Chan.

The emission of methane, which is a more potent greenhouse gas than carbon dioxide, will become a focus. Much of the methane released is from the oil and gas, waste and agriculture sectors.

Another development that Chan has his eye on is biodiversity. The Living Planet Index by WWF and the Zoological Society of London shows that wildlife populations have fallen by an average of 69% between 1970 and 2018, and extinction risk is growing for many species.

Biodiversity is important for the provision of ecosystem services such as clean air, healthy soil, clean water and food sources.

“We only have around 25 national biodiversity strategies, as opposed to 198 climate strategies, so there’s a long way to go. Every country needs to prepare and submit a national biodiversity strategy before the end of October (at the 16th Convention on Biological Diversity). That does not give us a lot of time,” says Chan.

Businesses will have to think about how their activities impact biodiversity and disclose them under the Task Force on Nature-related Financial Disclosures.

In the longer term, Chan is observing the development of climate technologies. Additionally, the impact of mining for minerals in the ocean, as well as ocean heatwaves, is on his watchlist. The effects of these events on currents, the weather and marine ecosystems are still not well understood.

As for the 29th United Nations Conference of Parties (COP29), which will be held in Azerbaijan in November, Chan does not think it will be a major COP. It will likely still draw attention because it is the third year in a row that COP is held in a major oil and gas-producing nation. But it is seen as a “preparatory” meeting for COP30 in Brazil, where countries are expected to submit more ambitious climate pledges, he says.

Malaysian businesses are facing external pressure from importing nations and foreign clients that demand more sustainable practices. This puts Malaysia on a defensive stance to ensure its economy is not left behind or negatively impacted by new regulations and trends.

But in Chan’s view, the country is doing well by improving its sustainability disclosures and publishing its energy transition and industrial strategies.

“Once we get through the fact that Malaysia is on the receiving end of tighter sustainability regulations elsewhere, I think we’ll begin to see that as a positive because Malaysia is moving more quickly [on that] than other markets, not just in the region but possibly globally. I think that the strength that comes from being a part of Asean is also important,” says Chan.

While much of the pressure is now from the Western nations, this might be demanded from other exporting nations going forward as well.

“For now, we can go, for example, away from Europe into China. But in a few years, we’ll have to go away from China into other markets. We’re going to run out of places unless we go back to improving the sustainability quality of whatever it is we’re manufacturing. I feel that’s the way it’s going,” says Chan.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.