Are current laws effective?
Singapore
THE growing number of rules and regulations governing ESG behaviour certainly add to a company's compliance burden, but how much of a difference do they make in global efforts to avert a climate crisis?
Not much, says Lan Luh Luh, associate professor of law at the National University of Singapore (NUS).
Prof Lan, who specialises in company law, corporate finance law and corporate governance, says that current laws serve to make companies aware of their environmental responsibilities, but do not mandate positive behaviour - which make them ineffective when it comes to making enough of a difference in mitigating climate change.
"For example, laws governing emissions, such as carbon emissions trading systems and carbon taxes, generally aim to increase the cost of operations for businesses that emit excessive greenhouse gases or do not consider climate change in their corporate strategies, but they do not restrict the amount of carbon any company can or should produce," she said.
"A company that continues to produce more carbon will just have to pay more taxes. And, some companies may, at the end of the day, do a cost-and-benefit analysis and decide that it is all right for them to pay more tax if they still make an overall profit - despite the fact that it doesn't benefit the environment.
"The rules may add a cost, but do not compel actions that are environmentally friendly."
She is similarly sceptical of the impact of newer ESG regulations, such as the US SEC's proposal to impose new rules for disclosures over climate change, human capital management, and board diversity, and the EU's intention to publish legislation requiring companies to conduct environmental and human rights due diligence.
"(Like current laws,) these efforts serve to make companies more alert, more aware of their actions and impact, but they do not mandate positive action. Disclosure in itself is indirect and insufficient.
"Our climate and the environment around us are deteriorating at an unprecedented speed that it is no longer correct to say that climate change issues are long-term problems. Immediate actions are necessary. The fear is that these measures may not be sufficiently strong to evoke a serious change in corporate behaviour in the near future," Prof Lan said.
