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ESG Monthly News Update: July 2023

General ESG News

GreenBiz: Study Reveals ‘Explosion’ in Climate-related Litigation Since 2020

  • According to an analysis from the Grantham Research Institute on Climate Change and the Environment, 26 “climate-washing” cases were filed against corporate actors in 2022, compared to less than 10 in 2020.

  • The study found that more than 50 percent of these climate cases have direct judicial outcomes that are favorable to climate action and have sometimes led to well-documented changes in policy.

  • Joana Setzer and Kate Higham, the authors of the report, stated that “One of the most significant groups of climate-washing cases to emerge in recent years have been cases challenging the truthfulness of corporate climate commitments, particularly where these are not backed up by adequate plans and policies." They said, “The growth in climate-washing cases reflects broader concerns with corporate accountability for climate pledges along with ongoing debates about the role of companies in climate decision-making."

GreenBiz: The future of sustainability: 4 fast-emerging trends

  • The top four emerging topics in the corporate sustainability ecosystem for the next one to three years include mining and critical minerals, oceans as a solution for sustainability, artificial intelligence applications, and social justice in business models.

  • The challenges of achieving global decarbonization and the role of critical minerals in the energy transition are being explored, including the use of blockchain technology for traceability.

  • Oceans are seen as potential accelerators for a more sustainable future, with proposals focusing on seaweed-based solutions and addressing ocean plastic pollution.

  • Artificial intelligence is becoming more tactical, with applications in ESG reporting and supplier transparency.

  • Social justice is being considered in specific contexts, intersecting with sustainability, human rights, and traceability in supply chains.

Bloomberg: COP28 Host UAE Has ‘Insufficient’ Climate Plan to Meet 1.5C Goal

  • The United Arab Emirates' (UAE) emissions-cutting efforts have been labeled as insufficient. Nonprofit Climate Action Tracker has stated there is “too little action in the real economy.”

  • The UAE is planning to increase fossil fuel production and consumption, making their efforts to reduce emissions impossible.

Reuters: US Companies’ Diversity Efforts Are Legal, Democratic Officials Say

  • Democratic U.S. state attorneys general have pushed back against Republican claims stating many corporate workforce diversity programs result in illegal discrimination. Democratic officials then stated a majority of company diversity, equity, and inclusion programs are designed to set aspirational goals or diversify the applicant pool (not to 'treat individuals differently based on race').

  • New Mexico Attorney General, Raul Torrez, states the main goal of workplace diversity programs is to address difficulties that people from disadvantaged backgrounds experience and to help them better navigate the system.

Investment Trends

ESG Today: Up to $4 Trillion Investment Needed in Materials Supply Chains to Meet Decarbonization Goals: McKinsey

  • The materials supply chain is key to the development of technologies that are crucial to propel the net zero transition, e.g., renewable energy infrastructure, battery storage, and electric vehicles.

  • This investment will address the shortages forecast for semiconductors, electrolyzers, process materials, and crucial metals and minerals.

  • Mining, refining, smelting, capital expenditure, exploration, and ongoing projects will benefit from the anticipated increased investment.

  • Additional labor capacity by mining specialists and energy supply are also expected outcomes of the necessary investment.

Bloomberg: What One of Climate Tech’s Earliest Investors Thinks Is Coming Next

  • Sean O’Sullivan, founder of venture capital firm SOSV, has been a leading investor in more than 250 climate technology start-ups for nearly two decades.

  • According to O’Sullivan, climate tech is far bigger than just energy tech – it includes a broad range of industries and even more than have yet to be created. He predicts massive investment opportunities in the space for the next few decades.

  • Even in current economic conditions, climate tech companies are still doing pretty well in comparison to the tech industry overall, and while there are concerns about the pace of investment, there has not been a slowdown in corporate customers for climate tech.

Reuters: Few ‘Sustainable’ Funds Aligned With EU Green Criteria, MSCI Finds

  • A majority of European funds marketed as sustainable say they are not aligned with the EU’s list of climate-friendly investments. The EU’s taxonomy system is designed to classify which investments can be marketed as sustainable. The system aims to improve transparency.

  • MSCI found that nearly nine out of 10 so-called Article 8 funds and 63% of Article 9 funds said they did not have taxonomy-aligned investments, proving how few firms disclose sufficient information.

  • Article 8 funds: those partly focused on environmental, social, or sustainability issues.

  • Article 9 funds: those with clear sustainability objectives.

  • MSCI also calculated that “only 2% of European-domiciled equity funds, and zero fixed income funds, had at least 20% of their revenue taxonomy aligned.”

ESG Ratings, Standards, and Reporting

GreenBiz: How the new sustainability disclosure rules can work for you

  • Many corporations are concerned about the recent announcements from the IFRS and government regulators about forthcoming sustainability disclosure standards and requirements for public companies. There are worries related to the complexity of the standards, as well as the human and technological resources needed to learn and execute the new requirements.

  • Despite these concerns, the new rules and standards can be a strategic opportunity for companies. While there is little flexibility in what metrics must be reported, companies can choose what to highlight and what story they want to tell. Three recommendations include:

  • Filling in the blanks – leaning on existing voluntary disclosures wherever possible.

  • Going beyond – developing insights and adding context to tell your company’s unique story.

  • Collaborating with the communications, legal, finance, and risk departments to build a playbook and to get everyone on the same page to streamline the process.

ESG Today: Investors, Banks Push Back on EU Plan to Ease Sustainability Reporting Rules

  • A coalition of investment and sustainable investing groups, along with 90 asset managers, has published a joint statement that calls on the European Commission to reconsider its recently proposed changes to the European Sustainability Reporting Standards (ESRS). The changes would ease several aspects of the Corporate Sustainability Reporting Directive (CSRD).

  • The changes would affect investors’ ability to obtain important sustainability-related information that is required for investment decisions, according to the statement.

  • There are also concerns that the changes would also impact investors’ ability to meet their own new reporting requirements under the EU Sustainable Finance Disclosure Regulation (SFDR).

  • Ultimately, according to the statement, it will be up to corporates to decide what is material to report and to explain – beyond mandatory reporting of key climate metrics like Scope 1, 2, and 3 emissions – why certain topics are or are not included.

ESG Today: 82% of Business Leaders Confident in Meeting New Sustainability Disclosure Requirements: Honeywell Survey

  • A survey by Honeywell reveals that over 80% of business leaders globally are confident that their companies' reporting processes will meet emerging disclosure requirements.

  • 93% of respondents reported having formal plans in place for reporting on progress towards sustainability goals, and 82% are optimistic about meeting future sustainability reporting requirements.

  • 86% of companies plan to increase spending on environmental sustainability initiatives in the next 12 months, with emissions reduction seeing the strongest growth.

  • However, confidence in achieving sustainability goals decreased slightly, with 74% of respondents feeling optimistic about achieving their 2030 sustainability goals.

GreenBiz: Missed the congressional ESG hearing? Here’s what you need to know

  • In mid-July, a three-hour hearing was held to discuss the U.S. Securities and Exchange Commission’s role in requiring mandatory ESG disclosure.

  • During this meeting, the wide divide between the Republican and Democratic representatives on the issue of ESG materiality was highlighted, as the majority in attendance were anti-ESG policy.

  • Republicans emphasized that the mandates are an overreach of SEC action, while Democrats reiterated the need for companies to provide investors a transparent way to consider the ESG-related risks to a company before investment.

  • As forthcoming European ESG mandates are being phased in, it is likely that some U.S. company operations will be impacted and forced to comply.

  • Advocates for ESG mandates emphasized that investors want to know how businesses are addressing current climate-induced events that impact businesses across the country, as climate events have already posed an existential threat to revenue in some industries.

ESG Today: Singapore Proposes Mandatory Climate Reporting for both Public and Private Companies

  • Singapore plans to implement mandatory climate reporting for public and large private companies.

  • The proposal aims to maintain Singapore's position as a global business hub and contribute to the Singapore Green Plan 2030.

  • All listed issuers, including overseas companies, business trusts, and REITs, will be required to report climate-related disclosures from fiscal year 2025.

  • Non-listed companies with at least $1 billion in revenues will begin reporting in FY2027, with a review planned to extend the requirement to non-listed companies with $100 million in revenues around FY2030.

ESG News: U.S. EPA Proposes Updates to Greenhouse Gas Emissions Reporting Requirements for the Oil and Gas Sector

  • The proposed revisions to the EPA’s Greenhouse Gas Reporting Program requirements would improve the accuracy of reporting emissions of greenhouse gases from applicable petroleum and natural gas facilities. It would address gaps in the total methane emissions reported by facilities by adding new sources such as “other large release events.”

  • The EPA is proposing that these revisions would become effective in January 2025. The EPA will take comments on the proposal for 60 days after publication in the Federal Register.

Companies and Industries

GreenBiz: 3 Reasons to be optimistic about climate tech in the second half of 2023

  • Climate tech startups experienced a boom following the Inflation Reduction Act (IRA) in 2022.

  • While some of the IRA’s clean energy credits took effect immediately in 2022, others began taking effect in 2023 —this delayed effect was engineered to continue the drive for climate tech innovation.

  • Venture capital funding for climate tech has slowed in 2023, but investors continue to make strategic bets on promising startups.

  • Climate tech jobs are on the rise, with over 100,000 jobs announced between August and January, attracting laid-off tech workers looking to make a difference.

  • The IRA, which provides significant federal funding for climate solutions, is expected to drive growth and innovation in climate tech in the coming years.

Sustainable Brands: 50+ CEOs Join Aviation Industry Initiative to Transform Airports into Clean-Energy Hubs

  • A partnership between Airports Council International World and the World Economic Forum’s (WEF) Airports of Tomorrow has formed, enabling CEOs in the aviation industry to engage with existing needs so that a net zero future can be achieved by 2050.

  • 52 organizations make up the Airports of Tomorrow initiative and intend to collaborate to develop infrastructure for sustainable aviation fuels, hydrogen, or electricity, as well as the necessary capital.

  • An investment of about $175 billion annually is projected by WEF to ensure that a net-zero aviation industry, and the necessary technology, is created.

  • Meeting net zero goals in the aviation industry could cause electricity consumption to be five times what it is currently.

  • Utilizing land that airports own is a great location for the installation of solar farms to fulfill this need and generate a portion of the clean energy required.

Sustainable Brands: Report Shows Path to Zero-Emission Passenger Transport with 'More Mobility and Less Mining'

  • A new report highlights the importance of achieving zero-emission urban mobility and reducing car dependence to combat carbon emissions.

  • The U.S. is transitioning toward electrified transport, with plans to ban gas-powered vehicles by 2035 and incentives for electrification.

  • However, many U.S.-made EVs are large, leading to increased lithium demand for their batteries and negative environmental impacts.

  • The report suggests reducing car dependency, limiting EV battery sizes, and focusing on lithium recycling to achieve deep decarbonization and create a just, sustainable urban transportation system.

Bloomberg: Battle Over US EV Credits Heats Up With Carmakers Left Idling

  • The use of materials from foreign entities of concern (FEOC) to manufacture EVs will likely impact the vehicle’s eligibility for a $7,500 tax credit.

  • In 2025, an EV will be ineligible for this credit if its battery contains critical minerals that were extracted, processed, or recycled by an FEOC.

  • As the transition to relying on EVs continues, carmakers argue they need increased leeway as it’s currently impossible to produce EV batteries without inputs that have at least some Chinese ownership.

  • As the final decision is still under debate, this ruling could impact the use of minerals from Indonesia, Chile, and Australia, otherwise friendly countries where Chinese investors own or fund large production sites.

  • By banning the influx of metals from China, the U.S. strives to create a competitive domestic EV supply chain.

  • Guideline clarity for the supply chain that continues to fuel the production of EVs in the transportation industry is key for swift and comprehensive action.

Bloomberg: Making Solar Panels Is’ Horrible’ Business. The US Still Wants It.

  • In the next three years, 1TW of solar power will be added to the global grid, and the U.S. is finally joining the competition. The Inflation Reduction Act has provided incentives to expand American-made clean tech.

  • Solar manufacturing has never been a particularly reliable business, but companies in the U.S. have ambitious goals for rapid growth and the deployment of low-cost solar energy.

  • The factories needed to manufacture solar panels – specifically the cells – are expensive to build and run, and they are energy-intensive facilities. Fortunately, technology throughout the industry is improving and supporting the ability to scale and manufacture cheaply.

  • Currently, the U.S. accounts for only about 10% of global solar demand and installations, but from the perspective of curbing emissions, the expansion of solar in America is particularly interesting. And with the incentives from the Inflation Reduction Act, many companies are now looking to manufacture solar in the U.S.

  • Beyond the manufacturing process, the solar industry is also finally starting to ‘wake up’ on the topic of end-of-life management of solar panels. As the first generation of solar farms starts to reach the end of their useful lives, cost-effective recycling will need to become a reality.

ESG Today: Deloitte, Salesforce, AT&T Collaborate on IoT-Powered ESG Data Management Solution

  • According to Deloitte, the new approach will address the difficulties companies are facing when collecting ESG data across their value chains using an IoT-powered and connectivity-based approach.

  • The collaborating companies state that combining direct connectivity to emissions sources with their sustainability management solutions will help organizations reduce the burden of manual data collection while improving the integrity of the data used in reports and disclosures.

  • The collaboration will also build on Deloitte and Salesforce’s commitments to AT&T’s Connected Climate Initiative, which launched in 2021 and aims to reduce one billion metric tons of GHG emissions by 2035.

ESG Today: Amazon to Require Suppliers to Report Emissions, Set Climate Goals

  • Over 75% of Amazon’s total greenhouse gas emissions are Scope 3. So, in an effort to meet its net zero goal by 2040, Amazon is requiring its suppliers to both share their carbon emissions and set carbon goals.

  • In 2022, Amazon’s total GHG emissions decreased by 0.4%, and its Scope 3 emissions decreased by 0.7%, while the company was also able to achieve a 9% revenue growth.

  • Amazon reported that the company's size and scale would be used to support suppliers that are committed to decarbonization by providing products and tools to track and reduce emissions.

  • Additionally, Amazon plans to help selected suppliers transition to carbon-free electricity, as Amazon is on track to achieve its goal of being 100% powered by renewable energy by 2025.

Bloomberg: Plugging Methane Leaks From Derelict Oil Wells for Carbon Credit

  • Rebellion Energy Solutions LLC has shifted the focus of their company from drilling and managing new oil and gas wells to plugging abandoned ones.

  • The Environmental Protection Agency (EPA) estimates that the U.S. has maybe 3.7 million derelict oil and gas wells. Many are leaking major volumes of methane.

  • Rebellion assesses state and company records to locate old wells and dispatches a team with special cameras and laser equipment to measure the emissions. Contractors pour tons of cement into the hole while others come to decontaminate the land and aerate the soil. Once a project is verified by environmental auditing companies and the American Carbon Registry, the credits can be sold. Staci Taruscio, CEO, stated, “It’s not waiting years for a forestry project...We stopped the leak. There were emissions; now there’s not.”

Government Policy

Bloomberg: Biden’s Climate Law Will Supercharge Emerging Green Tech Globally

  • Emerging technologies, such as sustainable aviation fuel, clean hydrogen, and direct air capture could decrease carbon emissions by 99 million to 193 million metric tons per year after 2030.

  • These technologies differ from wind, solar and electric vehicles because they are not yet scalable.

  • The cost of these technologies is likely to decrease as development continues, enabling them to be used worldwide by the end of the century, multiplying the potential emissions reduction.

  • The impact of these technologies could cause an average of 401 million to 847 million MT of CO2 abatement outside the U.S. annually by 2080-2100.

  • Rhodium’s model predicts that for every ton of CO2 avoided in the U.S., 2.4-2.9-ton emissions would be reduced around the world due to incentives included in the Inflation Reduction Act.

  • The IRA includes the 45V tax credit for clean hydrogen and an enhanced 45Q tax credit for direct air capture.

Reuters: G20 panel says additional $3 trln needed by 2030 towards climate action

  • According to a G20 panel commissioned by the Group of 20 nations to propose reforms for multilateral development banks (with a focus on increasing funding for sustainable development goals), additional spending of about $3 trillion each year by 2030 is required to make the incremental investments in climate action needed to meet climate targets.

ESG News: EU Proposes Rules to Support Sustainable Management of Textile Waste

  • In alignment with the EU Strategy for Sustainable and Circular Textiles, the EU Commission has proposed rules to support the sustainable management of textile waste and make producers responsible for the full lifecycle of textile products.

  • The introduction of Extended Producer Responsibility (EPR) will force producers to cover textile waste management costs, thereby incentivizing waste reduction efforts and improving circularity efforts.

  • ‘Eco-modulation,’ the adjustment of payments into the EPR scheme based on the company’s environmental performance, will be used to determine payment amounts.

  • Implementing extended producer responsibility in the EU will provide funding for separate collection, sorting, reusing, and recycling of textiles.

  • The issue of illegal exports of textile waste to countries ill-equipped to manage it is also addressed in this proposal.

  • The clarification of textile waste vs. reusable materials will help deter the practice of exports of waste disguised as being done for reuse, assuring that waste is managed in an environmentally sound manner.

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