Jan 7 - By Sharon Kimathi Energy and ESG Editor, Reuters Digital

Hello! Happy New Year Switchies! I hope you had a refreshing holiday season. The new year wasted no time making headlines from the Tesla Cybertruck explosion outside the Trump International Hotel in Las Vegas to Canada’s Prime Minister Justin Trudeau’s resignation this week. It’s clear this year will be keeping us on our toes at Sustainable Switch. Last year's opening newsletter covered Japan’s and Indonesia's deadly earthquakes and Australia's flash floods - setting the stage for 2024's relentless extreme weather. The focus for today’s newsletter is on environmental, social and governance $(ESG.NZ)$ policy rollbacks at U.S. companies as boardrooms cut back on diversity, while Wall Street banks leave one of the world's top banking sector climate coalitions.

Anti-DEI and anti-woke trend Directors and board advisers said conservative backlash through litigation and other means had pushed diversity, equity and inclusion $(DEI)$ policies down the priority list for companies, often in subtle ways - a trend that some experts said could accelerate under the incoming Trump administration. It was not that long ago when several Republican lawmakers referred to Vice President Kamala Harris as a "DEI hire," implying that her selection as the Democratic presidential candidate was based on diversity considerations rather than merit. Additionally, conservatives campaigned against companies implementing DEI policies, accusing them of engaging in "woke" practices - yet another term that has been weaponized against marginalized groups. For those not in the know, the term ‘woke’ originated in African-American Vernacular English (AAVE) and was used as a call to stay awake or ‘woke’ to systemic injustices, particularly around issues of racism, inequality, and social injustice. It encouraged awareness of societal oppression. But over the last few years, conservative and right-wing groups have used it as a pejorative and derogatory term to mock or dismiss progressive movements.

Backlash in the boardroom Interviews with corporate directors and advisers, as well as a recent study on corporate boards, paint a stark picture of how pronounced the fallout of that backlash has been. Among Russell 3000 companies, the number of new Black directors fell to 12% in 2024 from 26% two years ago, according to the study by business research group the Conference Board and data firm ESGAUGE. At the same time, the number of new white directors rose to 69%, up from 52% in 2022. The gap widens for a broader set of companies. Only 8% of the directors at Russell 3000 companies are Black, according to the Conference Board. One recruiter, for example, said many companies no longer made diverse candidate slates a top requirement in director searches. "A couple of years ago more searches had diversity as number one or two criteria than have it there now," said Richard Fields, head of the board effectiveness practice at search firm Russell Reynolds. DEI policies got a boost after George Floyd's murder by a white police officer sparked national outcry and energized the Black Lives Matter movement. Nearly five years later, DEI policies are facing major challenges despite academic proof of the benefits diversity has in the boardroom. A 2024 report published by the academic peer-reviewed journal Theoretical Economics showed the positive effects of diversity on corporate boards being key to better decision-making and innovation.

Climate coalition exit Elsewhere, Goldman Sachs announced on Dec. 6 it was leaving the Net-Zero Banking Alliance (NZBA) and was soon followed by Wells Fargo, Citi, Bank of America and Morgan Stanley. The exit of some of the world's biggest lenders means the NZBA, whose members aim to align their financing with the global climate fight, now includes just JPMorgan among the Big Six U.S. banks. The exodus was prompted for most after Republican politicians warned that membership in the group, particularly if it led to reduced financing for fossil fuel companies, could breach antitrust rules. Banks that have pulled out may now reduce their commitments to climate-friendly policies, said Patrick McCully, senior analyst for energy transition at Reclaim Finance.

Talking Points

* Grenfell: Seven years on from Britain’s deadly Grenfell Tower blaze in 2017, contractors who fitted cladding panels that didn't meet fire-safety standards in place when installed have largely escaped financial liability, according to a Reuters review of more than 100 buildings. Click here to read the full Reuters exclusive.

* Kenya protest deaths: Reuters spoke to three police officers who work in a unit deployed during protests who said that Kenyan police at times mischaracterize deaths caused by officers as “death by accident”, “mob justice” or “drownings” in morgue logs to cover their tracks. Click here for the full exclusive article.

* Workers’ rights: Contract talks covering 45,000 dockworkers in the U.S. East and Gulf Coasts are set to restart this week in a labor dispute that will help set the pace of automation at ports stretching from Maine to Texas.

ESG Lens Tibet earthquake: A major earthquake rocked the northern foothills of the Himalayas near one of Tibet's holiest cities on Tuesday, according to the China Earthquake Networks Centre, killing at least 95 people and shaking buildings in neighbouring Nepal, Bhutan and India.

ESG Spotlight Today’s spotlight shines a light on elder care protection in China as the country has launched a national plan to address the rapidly growing prevalence of dementia. Authorities in China say dementia is becoming "a widespread societal concern" and poses "significant challenges" to the well being of the elderly and their families. Fifteen Chinese government departments, including the National Health Commission, contributed to the plan to tackle dementia. The proposal outlines seven key tasks and targets to be in place by 2030, the official Xinhua news agency reported. Click here for the full Reuters article.

Today’s Sustainable Switch was edited by Mark Potter

Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Earthquake hits holy city in China's Tibet

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>