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ESG Monthly News Update: June 2024




General ESG News 


  • The Science Based Targets initiative (SBTi) will require financial institutions to phase out most coal-related activities by 2030 and publicly declare their plans to stop financing non-compliant projects with the Paris Agreement. 

  • Effective November 30, the update mandates shorter timeframes for meeting near-term emissions reduction targets, requiring them to be achieved within five to ten years. 

  • The financial sector update requires targets to be recalculated every five years, cover at least 67% of a portfolio, and include criteria for halting and transitioning fossil fuel activities. 

  • This update will increase pressure on corporations from investors and lenders to set and achieve credible emissions reduction targets, necessitating closer collaboration between finance and sustainability teams to integrate climate strategies into financial planning. 

 

  • California AG Rob Bonta announced an amended lawsuit to seize "illegally obtained profits" from several major oil companies for falsely advertising the environmental sustainability of their products. 

  • The lawsuit, originally filed in September 2023, accuses Exxon Mobil, Shell, Chevron, ConocoPhillips, and BP of a decades-long campaign to deny and create doubt about the impact of fossil fuels on climate change, despite knowing the truth since the 1960s. 

  • The complaint includes new allegations of greenwashing, citing examples such as Exxon’s “Synergy” fuels and Chevron’s “Techron” fuel additive being misleadingly marketed as environmentally friendly. 

  • Under CA law AB1366, if found guilty, the companies would be required to deposit profits from their violations into a Victims of Consumer Fraud Restitution Fund for restitution to consumer fraud victims, with the AG emphasizing the goal of abating harm and recovering ill-gotten gains for Californians. 

 

  • A U.S. congressional committee report accuses Wall Street firms of colluding with advocacy groups to force companies to reduce greenhouse gas emissions, potentially violating antitrust laws. 

  • The investigation targets climate coalitions and ESG-focused investment products, alleging these initiatives harm jobs in the fossil fuel industry. 

  • Republicans criticize President Biden's administration for not investigating the alleged collusion, while Democrats argue that climate efforts promote competition by standardizing emissions disclosures. 

  • The report highlights Climate Action 100+ for pressuring asset managers to support climate proposals, leading to some members withdrawing due to fears of antitrust action. 

  • Subpoenas were issued, and key figures from organizations like Ceres and CalPERS were called to testify. The Republicans describe major asset managers as part of a "climate cartel." 

 

  • Many companies are not aligning their public decarbonization commitments with the actions of the industry associations they belong to, creating a blind spot in their climate change efforts. 

  • Trade associations are powerful intermediaries between government and corporates, and they can significantly influence climate policy, especially in the context of opposition to the European Green Deal. 

  • There is a lack of accountability and transparency in trade associations regarding climate issues, with most companies not reviewing or ensuring their associations' lobbying is aligned with the Paris Agreement. 

    • New standards and initiatives, like the Global Standard for Responsible Climate Lobbying and Climate Action for Associations, aim to improve alignment and transparency between companies and their trade associations. 

  • Companies are encouraged to disclose the climate policy positions of their trade associations to force them to align their engagement with most of their members on climate policy, rather than the most oppositional voices. 

 

  • Science-based target setting, initially for climate, is expanding to nature with the Science Based Targets Network (SBTN) providing guidelines for companies to set robust nature-related targets. 

  • SBTN’s methods and tools are derived from the latest science and global frameworks, ensuring companies first avoid, then minimize, and finally remediate negative impacts on nature without using offsets.

    • The SBTN guidelines help companies assess their nature footprints and integrate nature into their sustainability strategies, crucial for achieving net-zero goals and maintaining competitiveness. 

  • Investor awareness and robust data on nature-related risks remain low, but initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD) and combined climate-nature reporting by CDP aim to fill this gap. 

  • The effectiveness of science-based targets depends on companies’ actions; while guidelines provide a foundation, timely and impactful action is essential to address the urgent state of the natural world. 

 

  • ESG criteria have become prominent in evaluating corporate sustainability, but critics argue they lack specificity and consistency, undermining their effectiveness, and making them susceptible to manipulation. 

  • In contrast, climate transition focuses specifically on decarbonization and adaptation measures to combat climate change, offering a more targeted approach than traditional ESG strategies. 

  • The urgency of climate action is underscored by rising global temperatures and record-high greenhouse gas levels, highlighting the critical need for swift emissions reductions. 

  • Businesses embracing climate transition can capitalize on opportunities for innovation and growth, driven by the rapid expansion of renewable energy and potential job creation in sustainable sectors. 

  • To integrate climate transition effectively, companies should set ambitious emission reduction targets, invest in renewable energy, adopt sustainable practices in supply chains, build resilience to climate risks, and engage stakeholders to advocate for supportive policies. 

 

 

ESG Ratings, Standards, and Reporting 


  • The Global Reporting Initiative (GRI) has launched a review of its labor-related standards to enhance transparency on workplace labor and human rights impacts. 

  • GRI's standards are widely accepted for sustainability reporting, enabling consistent communication across companies and industries. 

  • The review begins with consultations on revised standards for labor/management relations, employment, and market presence, focusing on factors like non-standard employment, data protection, and gender pay gaps. 

  • The redrafted standards are developed with input from workers' and employers' organizations and aligned with international business and human rights instruments. 

  • Additional consultations on working life, career development, and workers' rights are planned, with updates to 11 GRI standards over the next year. 

 

  • The Integrity Council for the Voluntary Carbon Market (ICVCM) has approved the first carbon credits to be labeled with its Core Carbon Principles (CCP), promoting transparency and growth in voluntary carbon markets. 

  • The ICVCM, launched in 2021 and supported by 250 organizations, aims to establish high-integrity standards for carbon credits to ensure verifiable and impactful emissions reductions. 

  • The new CCP label is now applied to seven carbon credit methodologies, covering 27 million carbon credits from projects like methane capture and destruction of ozone-depleting substances. 

  • Additional assessments are ongoing for 27 more carbon credit categories, including popular types like REDD+ and clean cookstoves, representing a significant portion of the market. 

  • ICVCM's Chair, Annette Nazareth, emphasized the CCP label's role in helping buyers identify high-quality credits and the ongoing efforts to evaluate and approve more crediting methodologies. 

 

  • RepRisk has launched Due Diligence Scores to help investors and businesses identify specific ESG risks across various themes, addressing the growing regulatory requirements for sustainability-related due diligence. 

  • The new solution offers disaggregated ESG scores, assessing risk factors such as biodiversity and human rights on a 0-100 scale, and helps ensure compliance with regulations like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). 

  • Informed by RepRisk’s extensive ESG risk database, the scores quantify risk based on factors like the frequency and magnitude of incidents, using data from over 260,000 companies globally and screening over 2,000,000 documents daily. 

  • Users can choose from ready-to-use packages or customize their own set of over 200 individual scores to align with specific risk priorities, including E, S, and G pillars, various frameworks, and specific issues like climate and greenwashing. 

  • Alexandra Mihailescu Cichon, RepRisk's Chief Commercial Officer, emphasized that the Due Diligence Scores provide transparent, off-the-shelf metrics for banks, investors, and businesses to streamline due diligence and make informed decisions. 

 

 

Companies and Industries 

  

  • Tesla, Hyundai-Kia, and General Motors now offer electric vehicles (EVs) with over 300 miles of range at prices below the average new gas-powered car in the US, with Hyundai’s 2024 Ioniq 6 being the most affordable. 

  • The US automotive industry is in a fiercely competitive phase, with brands striving to make EVs affordable and appealing to a wider customer base, recognizing the importance of battery range, charging speeds, and cost-effectiveness. 

  • Stellantis CEO Carlos Tavares emphasized the critical need for affordable EVs, revealing plans to launch a $25,000 electric Jeep and highlighting the necessity for manufacturers to cut costs and potentially sacrifice profit margins during this transition period. 

  • Although EVs are still generally more expensive than typical cars, the gap is narrowing as new, affordable models like the Chevy Equinox emerge, benefiting from federal tax credits and driving the shift toward mainstream EV adoption. 

  • Federal incentives make leasing EVs particularly attractive, with dealers passing on tax credit savings, resulting in leasing costs for long-range Hyundai and Tesla EVs being up to 37% lower than comparable gas models. 

  • With 300 miles of range becoming the standard for EVs in the US, price parity with gas-powered cars, excluding gas savings and subsidies, is crucial for broader adoption, with the International Energy Agency predicting this parity by 2030. 

 

  • Shareholders approved Shell's revised net-zero transition plan, reflecting a lack of urgency among major investors to enforce strict climate commitments. 

  • The plan reduces Shell’s 2030 carbon intensity and Scope 3 emissions targets and removes the 2035 interim target aligned with the Paris Agreement goals. 

  • Shell commits to investing $10 billion-15 billion in low-carbon energy solutions by 2025, focusing on reducing carbon intensity rather than absolute emissions, allowing for potential increases in overall emissions. 

  • Shell's approach, supported by major shareholders, prioritizes financial stability over aggressive emissions reductions, highlighting the "complex reality" of balancing short-term financial performance with long-term sustainability goals. 

 

  • Chemical and manufacturing groups have filed a lawsuit against the federal government challenging a new drinking-water standard aimed at reducing PFAS chemicals, known for their links to health risks including cancer. 

  • The groups argue that the EPA exceeded its authority under the Safe Drinking Water Act by imposing stringent cleanup requirements on municipal water systems. 

  • The EPA defends the new standard, implemented in April, stating it could prevent thousands of deaths and reduce tens of thousands of serious illnesses associated with PFAS exposure. 

  • Water utilities have also voiced concerns about the costs of compliance, estimating it could reach $1.5 billion annually, with potential impacts on taxpayer-funded water rates. 

  • Despite the legal challenges, the Biden administration supports the new standards as necessary for public health, with provisions in the bipartisan infrastructure law earmarking $9 billion to address PFAS contamination nationwide. 

 

  • CRH, the top seller of construction materials in North America, aims to slash its emissions by 30% by 2030, including those from suppliers, using circular production methods. 

  • In 2022, CRH recycled 43.9 million metric tons of industrial waste, cutting virgin material use by 9%, and recycled about 40 billion gallons of water in 2023. 

  • Chief Sustainability Officer Eunice Heath discusses CRH's strategies for reducing emissions through circular production, creating new revenue from recycled materials, and collaborating with partners like Google and Cargill on lower-emission products in an upcoming Climate Pioneers interview. 

 

  • Microsoft and Anew Climate agreed to a new purchase of over 970,000 tons of carbon removal credits from improved forest management projects across the U.S. 

  • The carbon credits will be sourced from projects on forestlands owned by Aurora Sustainable Lands, Acadian Timber Corp., and Baskahegan Company. 

  • This agreement supports Microsoft's goal to become carbon-negative by 2030 and follows other major carbon removal deals and commitments with tech giants to grow the nature-based carbon removal market. 

 

  • Microsoft launched its "Datacenter Community Pledge" to ensure datacenters address societal challenges and benefit local communities, focusing on sustainability and community well-being. 

  • The pledge targets three areas: (1) contributing to a sustainable future (carbon negative, water positive, zero waste by 2030), (2) advancing community prosperity (economic, social, environmental benefits), and (3) operating responsibly as a good neighbor. 

  • This pledge seeks to bolster the company’s existing ESG program which aims to achieve 100% renewable energy by 2025, replenish more water than used in operations, create jobs and training opportunities, and partner with local entities to foster digital skills and sustainability practices. 

 

  • An Australian federal court ruled that superannuation fund Active Super trustee LGSS Pty Limited misled members about its ESG investments by continuing to invest in areas it claimed to avoid, such as gambling, coal mining, and Russian investments. 

  • The Australian Securities & Investments Commission (ASIC) filed a suit highlighting 28 holdings, including Skycity Entertainment Group and Russian companies Gazprom and Rosneft, contradicting Active Super's stated ESG exclusions. 

  •  The court found there was no distinguishment between direct and indirect investments, contradicting Active Super’s defense.  

  • ASIC has had a continuous focus on greenwashing, with more actions anticipated to ensure truthful sustainability claims in financial services. 

 

  • The US Plastics Pact released Roadmap 2.0, a strategic plan to transform plastic packaging use, focusing on creating a circular economy through reuse, recycling, and composting. 

  • Significant progress has been made since the original Roadmap was released: problematic plastics were reduced from 14% to 8%, recyclable packaging increased from 37% to 47.7%, and the Pact's membership grew from 62 to over 130. 

  • Roadmap 2.0 aims to enhance reuse innovations, design all plastic packaging to be recyclable or compostable, eliminate problematic plastics by 2030, and recycle 50% of plastic packaging through improved infrastructure. 

  • Emphasizing the need for cross-sector collaboration and innovation, the plan addresses social impacts and aims to harmonize efforts globally. Roadmap 2.0 will start on January 1, 2026, providing time for members to prepare. 

 


Investment Trends 

 

  • ESG criteria are critical for evaluating company sustainability and ethical practices, influencing investor decisions globally. Challenges in ESG implementation include varying standards, greenwashing risks, and operational complexities. 

  • Successful case studies like the Canadian Imperial Bank Of Commerce (CIBC) highlight the importance of governance, disclosure, and stakeholder engagement in overcoming ESG hurdles. 

  • Best practices involve using standardized frameworks, leveraging technology for data management, and transparent communication of ESG efforts. 

  • Building investor trust requires consistent reporting, meeting ESG commitments, and educating stakeholders on sustainability impacts. 

  

  • Traders are increasingly betting on higher UK carbon credit prices, expecting tougher climate policies under a potential future Labour government. 

  • Since Prime Minister Rishi Sunak called a general election, UK carbon market allowances have risen 9%, reaching £47 per tonne of CO₂ from a low of £31 earlier this year. 

  • Speculation about a Labour government tightening targets and reducing surplus allowances has driven hedge funds and asset managers to hold record net long positions worth £300 million. 

  • Labour has not confirmed market intervention plans but indicated a commitment to advancing the UK's clean energy agenda if elected. 

  • Factors influencing the market include expectations of scarcer permits in the future, recent energy demand shifts, and potential implications of EU carbon border taxes compared to UK prices. 

 

  • The food sector significantly contributes to climate change, biodiversity loss, and freshwater withdrawals— food systems are responsible for one-third of annual greenhouse gas emissions and 70% of freshwater use. 

  • Institutional investors are pushing for regenerative agriculture, which includes practices like low tillage and the use of biochar, aiming to halve global food system emissions by 2030 and reduce negative farming impacts on the environment. 

  • However, regenerative agriculture can and will increase costs for smallholder farmers, highlighting the need for companies higher up the supply chain to share the cost burden more equitably. 

  • Efforts to support smaller farmers include payment of premiums, carbon credits, and partnerships for financial incentives,  

  • If we hope to reduce the negative environmental impacts of farming of, placing farmers at the center of environmental goals is paramount to ensure successful sustainability programs and results. 

 


Government Policy 


  1. Energy Secretary Jennifer Granholm emphasized the Biden administration’s support for nuclear energy at the opening of the Vogtle nuclear plant in Georgia, despite its high costs and public skepticism. 

  2. 2024 is a pivotal year with significant elections in the U.S., U.K., France, and other countries, influencing future climate policies as nations seek to move away from coal and address extreme heat issues. 

  3. The Inflation Reduction Act led to the creation of 1,300 clean energy jobs and $950 million in investments in May, highlighted by major projects like a green hydrogen facility in Arizona and a clean energy manufacturing hub in Georgia. 

  4. The G-77 and China propose global taxes on defense, apparel, and tech sectors of wealthy nations to raise $441 billion for climate initiatives, stressing the need for political will to prioritize climate action. 

 

  • Initiative 2117 aims to repeal Washington State’s Climate Commitment Act (CCA), which established a cap-and-invest program to achieve 95% emissions reductions by 2050 and prohibits the establishment of future carbon taxes. 

  • Proponents argue that the CCA effectively prices carbon and raises funds for pollution reduction, job creation, and community assistance, having generated $1.82 billion in 2023 alone. 

  • Critics claim the CCA fails to meaningfully reduce emissions and increases costs for fuel, food, and energy, disproportionately affecting low-income residents, suggesting a need for more effective policies. 

  • Supporters argue that carbon pricing incentivizes cleaner technologies, while opponents believe the policy unfairly burdens local citizens and does not achieve significant emission reductions. 

  • Governor Jay Inslee and major companies like Amazon, Microsoft, and BP support the CCA for its comprehensive and equitable approach to climate policy and its potential to inspire similar programs in other states. 

  • Repealing the CCA could create uncertainty for businesses, disrupt long-term climate investments, and set a precedent for rolling back environmental regulations, affecting market stability and state budgets. 

  • The fate of the CCA will be decided by Washington voters on November 5, with significant implications for state and national climate policies and carbon market strategies. 

 

  • The White House has introduced a federal definition of zero-emissions buildings (ZEBs), aiming to set a new standard for building energy performance across the US. 

  • This new definition, while not legally binding, is intended to signal the future of sustainable building practices and encourage the private sector to adopt these standards. 

    • ZEBs are defined as buildings that are energy-efficient, produce no on-site greenhouse gas emissions, and are powered entirely by clean energy, applicable to both new constructions and existing buildings. 

  • The initiative addresses the urgent need to make buildings more energy-efficient, as they contribute to one-third of carbon emissions in the U.S. 

  • The definition was developed with input from over 1,000 stakeholders and aims to support decarbonization efforts, driving investment in clean energy technologies and setting a framework for assessing zero-emissions buildings. 

 

  • Many EU countries are pushing to ease new rules aimed at preventing greenwashing, responding to political pressure to relax parts of the EU's climate law. 

  • The EU's Green Deal, which targets net zero emissions by 2050, is a contentious election issue, with conservative parties blaming it for industrial decline and bureaucracy. 

  • Proposed green claims rules, designed to prevent false eco-credentials, are being simplified due to concerns about overburdening companies with verification processes. 

  • The simplified procedure allows companies more self-assessment of their environmental claims, and the stance on carbon offsets remains contentious, with some member states supporting their use early in decarbonization efforts. 

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