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ESG Monthly News Update: May 2024




General ESG News 


  • The Integrity Council for Voluntary Carbon Markets (ICVCM) has initially approved five major carbon credit programs, including Verra and Architecture for REDD+ Transactions (ART), for meeting its Core Carbon Principles. 

  • The ICVCM aims to standardize the market for carbon offsets to help companies buy high-quality credits and support environmental projects such as mangrove restoration. 

  • The voluntary carbon market's growth has faced challenges due to concerns about the credibility and effectiveness of certain credits and the validity of related environmental claims. 

  • Supported by the Bezos Earth Fund and Children's Investment Fund Foundation, the ICVCM strives to ensure companies can confidently invest in genuine carbon credits, avoiding accusations of greenwashing. 

  • By adding Verra and ART, the ICVCM now oversees programs representing 98% of the market share, and it plans to start issuing Core Carbon Principle-labelled credits while evaluating 100 methodologies used to generate credits, with first decisions expected in June. 

 

The New York Times: The Doom vs. Optimism Debate 

  • The climate narrative encompasses both optimism, due to rapid growth in renewable energy, and pessimism, due to rising carbon dioxide levels and worsening climate effects. 

  • Recent data highlights record-breaking gains in wind and solar power, with 30% of global electricity now generated by renewables, driven significantly by China’s contributions. 

  • Concurrently, the highest-ever increase in atmospheric CO2 levels was recorded, illustrating that planet-warming emissions continue to rise and exacerbate climate challenges. 

  • The Biden administration faces pressure to maintain and enhance support for clean energy initiatives, ensuring sustained momentum from the Inflation Reduction Act. 

  • Experts emphasize the importance of continued and accelerated action to reduce fossil fuel dependence, warning that positive developments in renewables should not lead to complacency. 

 

  • Universities are central to the debate over boycotts and divestments as strategies for social change, with concerns about the impact of private sector funding, particularly from fossil fuel companies, on research integrity and public perception. 

    • Activists often stigmatize academics who accept industry funds, but the terms of funding and negotiated contracts should be the focus, as public sector and nonprofit funds can also carry political biases. 

  • Students call for boycotts and divestments to influence policy changes, but the effectiveness and opportunity costs of such actions vary, with divestments primarily serving to stigmatize and cause reputational damage. 

  • Divestments need to be massive to impact major multinationals, while research indicates that university endowments could transition to socially responsible funds without financial loss. 

  • Boycotts tend to be more effective than divestments in influencing corporate behavior and public policy (as seen in recent examples) and should be considered by activists for their proven efficacy in consumer-driven change. 

 

  • The Science Based Targets Initiative (SBTi) is set to revise its Corporate Net-Zero Standard by 2025, addressing stakeholder feedback and challenges in setting Scope 3 commitments. 

  • Key objectives of the revision include aligning with the latest climate science, providing new guidance for Scope 3 targets, offering tools for assessing progress, and clarifying how other standards interact with science-based targets. 

  • The revision process involves research, consultation, pilot testing, and approval by the Technical Council and SBTi Board of Trustees, with feedback from companies and stakeholders welcome. 

  • SBTi aims to address concerns about environmental attribute certificates, including carbon credits, and plans to publish a public draft of the standard revision by the end of the year for further consultation. 

 

  • Less than half of leading U.S. companies have net-zero targets, with significant variations across sectors. 

    • Scope 3 emission reduction targets are notably lower, with the financial sector aiming for just a 10% reduction. 

  • Interim targets for net-zero commitments cover a low share of emissions, particularly in carbon-intensive sectors like energy. 

  • Only 15% of S&P 500 CEOs have monetary incentives tied to emission reductions, though this is increasing, especially in high-emission sectors. 

  • Growing pressure from regulations and investors may drive more companies to adopt net-zero targets and transition plans. 

 

  • The Department of Energy (DOE) announced 10 potential high-voltage transmission line corridors on May 8, with $4.5 billion available from the Transmission Facility Financing (TFF) and Transmission Facility Program (TFP) to enhance grid stability and bring renewable energy to demand centers. 

  • These proposed lines aim to update the aging power grid and mitigate supply interruptions from intermittent renewable sources, with Secretary of Energy Jennifer Granholm empowered to designate each corridor as a National Interest Electric Transmission Corridor (NIETC) under the amended Federal Power Act. 

  • The new transmission lines would improve grid reliability and renewable energy availability for businesses, potentially spurring further infrastructure like grid-scale battery storage, despite possible legal challenges from landowners and local governments. 

  • The DOE's announcement initiates a 45-day public commentary period, with utilities and stakeholders able to discuss impacts and risks, and introduces funding opportunities through the transmission financing program and public-private partnerships, including $2 billion in direct loans from the Inflation Reduction Act. 

 

  • More than one-third of S&P 500 companies have financial incentives tied to emissions reduction, with increasing rates for employees but fewer at senior executive levels, including CEOs. 

  • Less than half of large listed US companies have set net-zero targets, with a focus on Scope 1 and 2 emissions rather than the more challenging Scope 3 emissions, which represent the majority of their carbon footprint. 

  • Energy companies lead in linking CEO compensation to emissions reductions, followed by materials and utilities sectors, while net zero commitments are most common in utilities and least in materials. 

  • Net zero commitments are more common for Scope 1 and 2 emissions than for Scope 3, with variations across sectors, highlighting the challenge of addressing emissions beyond direct operations. 

  • Despite net zero commitments, interim targets for emissions reductions are limited, potentially hindering rapid decarbonization, especially in the energy sector where only a small percentage of emissions are covered by interim targets. 

 

 

ESG Ratings, Standards, and Reporting 


  • SBTi's proposal to allow carbon offsets for Scope 3 emissions faced strong backlash, including internal dissent labeling the move "non-science-based" and calling for Board changes.  

  • Critics argue that carbon offsets, supported by Jeff Bezos' Earth Fund, could undermine real emission reductions by enabling companies to pay to pollute rather than cutting supply chain emissions.  

  • Joanna Cabello from SOMO warns that offsets may falsely appear to reduce emissions while allowing overall increases. The controversy highlights ongoing issues with the credibility and effectiveness of offsets, including concerns over additionality and permanence.  

  • While some argue offsets should be treated like renewable energy certificates, others believe insetting within supply chains is a better approach. 

  • SBTi's internal turmoil and public credibility issues underline the complexity and challenges in corporate climate action.  

  • Ultimately, the debate on the role of offsets in achieving net-zero targets is crucial and must continue, with companies bracing for a challenging journey towards sustainability. 

 

  • The EU and the International Sustainability Standards Board (ISSB) agreed on joint guidance to reduce overlap and minimize reporting burdens for companies on climate-related disclosures. 

  • These stricter climate-related disclosure regulations are replacing voluntary norms at a global level to combat greenwashing and ensure transparent reporting on climate impacts. 

  • The EU's European Sustainability Reporting Standards (ESRS) are in effect and currently cover more extensive social and governance issues than the ISSB standards. 

 

  • The Corporate Sustainability Reporting Directive (CSRD), adopted in November 2022, mandates sustainability reporting for publicly traded and privately held EU businesses starting in 2024.  

  • The European Council approved a two-year delay for the full enactment of the CSRD, and postponed sector-specific disclosure standards for non-EU companies until 2026. 

 

 

Companies and Industries 


  • President Biden’s climate law has spurred $16 billion in solar manufacturing investments in the U.S., but high borrowing costs and low panel prices have led to delays or cancellations of several projects. 

  • Despite incentives from the Inflation Reduction Act, the U.S. solar manufacturing sector faces challenges due to market conditions and competition from cheap imports, which undermine efforts to reduce dependence on China's green tech. 

  • Some manufacturers, like Enel SpA and Mission Solar Energy, have slowed or halted their plans, while others are pushing for revised government guidelines to better support domestic production; meanwhile, successful expansions include First Solar Inc. and Qcells North America. 

 

  • Lowe’s addresses Scope 3 emissions through webinars led by a senior analyst, Campbell Weyland, helping suppliers understand emissions reporting and energy efficiency. 

    • More than 160 suppliers attended, leading to increased reporting of emissions to Lowe’s, as part of the company's goal to achieve net-zero emissions by 2050. 

  • Weyland’s outreach evolved from a lengthy email to simple requests via merchants, facilitating engagement and understanding among suppliers. 

  • Suppliers receive education on emissions reporting and efficiency improvements, with Weyland acting as a consultant and hosting welcoming webinars. 

  • Lessons from Lowe’s sustainability processes are shared, helping suppliers calculate emissions and implement changes, such as greener alternatives and value stream mapping, to reduce emissions and improve efficiency. 

 

  • U.S. electricity demand is surging after two decades of stability, driven by a spike in data centers, manufacturing resurgence, and electric vehicle adoption. 

  • Electric utilities have nearly doubled their power forecasts for 2028, with peak summer demand expected to grow by 38,000 megawatts in the next five years, posing challenges for already strained grids. 

  • To meet rising demand, some utilities plan to build new gas and coal plants, conflicting with climate goals to reduce greenhouse gases and transition to pollution-free energy sources. 

  • Critics argue that utilities often prefer building gas plants due to financial incentives and familiarity, urging a shift towards more renewable energy integration, energy efficiency programs, and innovative grid solutions to avoid exacerbating climate change. 

 

  • UK Prime Minister Rishi Sunak’s delay of the ban on petrol and diesel vehicles highlights policy inconsistencies that present an obstacle to the banking sector's climate change efforts, as noted by Heather Buchanan, CEO of Bankers for Net Zero. 

  • The High Court ruled that the Sunak government’s Carbon Budget Delivery Plan breached the 2008 Climate Change Act, worsening investor uncertainty and risking the transition agenda. 

  • Despite frustrations with policy and regulation inconsistencies, banks and corporations represented by Bankers for Net Zero remain committed to integrating climate risks into their financial models. 

  • Effective climate policies, such as the U.S. Property Assessed Clean Energy scheme, are needed for consistent progress, as ad-hoc government schemes like the UK's Green Deal have been ineffective due to short durations. 

  • Buchanan advocates for a “pact” between business, finance, and government to address policy blockers and enhance trust, emphasizing the need for detailed, transparent transition plans despite potential inconsistencies. 

 

  • Global carmakers are ramping up investments in hybrid technologies due to consumer reluctance towards fully electric vehicles, driven by high interest rates and inadequate charging infrastructure. 

  • Executives from major car manufacturers like General Motors, Nissan, Hyundai, Volkswagen, and Ford emphasized the importance of hybrids at the Financial Times' Future of the Car Summit, indicating a strategic shift towards plug-in hybrids. 

  • The growing competition from Chinese electric vehicle manufacturers has intensified the focus on hybrids, which offer better profit margins compared to often unprofitable fully electric vehicles. 

  • Despite the current pivot to hybrids, the industry still views fully electric cars as the ultimate goal, with companies like Toyota significantly increasing spending on new technologies following strong hybrid sales. 

 

  • California leads the nation in solar electricity production but faces a timing issue as solar power peaks during the day and diminishes by evening, when demand is highest. 

    • Since 2020, California has installed extensive battery storage systems, second only to China, to store excess solar power for evening use, reducing reliance on fossil fuels. 

  • On April 30, batteries provided over 20% of California's evening electricity, with a peak output comparable to seven nuclear reactors, highlighting their crucial role in the grid. 

  • Across the U.S., power companies are increasingly using large batteries to address the intermittency of renewable energy, indicating a broader shift in energy storage practices. 

  • The nation's battery storage capacity has grown tenfold in three years, reaching 16,000 megawatts, with significant expansions expected, particularly in Texas, California, and Arizona. 

    • Advances in lithium-ion technology, driven by the electric vehicle industry, have reduced battery costs by 80%, making large-scale power storage economically viable. 

  • Utilities are deploying batteries for various purposes, including managing solar and wind generation fluctuations, reducing transmission congestion, and preventing blackouts during extreme weather. 

  • California aims for 100% carbon-free electricity by 2045, planning to nearly triple its battery capacity by 2035, as batteries start to displace natural gas use. 

  • The industry faces hurdles such as fire risks, dependency on Chinese suppliers, regulatory barriers, and competition from traditional energy sources, complicating the widespread adoption of battery storage. 

  • While lithium-ion batteries dominate currently, the development of long-duration storage technologies is essential to manage seasonal disparities in renewable energy production and achieve extensive decarbonization goals. 

 

  • PepsiCo announced its Northern Spain beverage plant aims to be the company's first to achieve net-zero emissions by 2025, following substantial investments in innovation and sustainability. 

  • The Álava Basque Country plant, which produces Pepsi, KAS, and Bitter KAS, has been using renewable electricity since 2015 and will now fully electrify its operations, eliminating 1,849 tons of CO2 annually. 

  • This achievement aligns with PepsiCo's broader sustainability framework, pep+, launched in 2021, which includes goals like achieving net zero emissions by 2040 and becoming water-positive by 2030. 

  • In Spain, PepsiCo introduced 100% recycled plastic bottles for its Pepsi range in 2021 and sourced renewable energy for all its sites in Spain and Portugal in 2022. 

  • PepsiCo also opened a €300 million plant in Poland in 2023, described as its greenest factory in Europe, which aims to be climate neutral by 2035, integrating renewable energy and circular economy measures. 

 

  • Competition Bureau Canada is investigating Lululemon for alleged misleading green claims following a complaint by Stand.earth, but no wrongdoing has been concluded yet. 

  • The investigation centers on Lululemon's "Be Planet" program, which includes targets for sustainable materials, renewable energy, carbon emissions, and waste reduction. 

  • The complaint alleges the athleisure company made false or misleading claims about its environmental impact, including overemphasizing minor benefits and setting unrealistic goals. 

  • Lululemon maintains confidence in its environmental claims and continues to work on sustainability initiatives, like using recycled materials, despite the ongoing investigation. 


  • BCG and World Energy have entered a five-year agreement for BCG to purchase sustainable aviation fuel certificates (SAFc) to support its net zero climate goals. 

  • The agreement, BCG's largest SAFc purchase, aims to reduce 100,000 metric tons of CO2 emissions over the next five years. 

  • World Energy, a leader in sustainable fuel production, is investing $15 billion in renewable fuel projects, enhancing decarbonization efforts in hard-to-abate sectors like aviation. 

  • BCG's commitment to sustainability includes a 2030 net zero target, a 48.5% reduction in business travel emissions by 2025, and active participation in initiatives like the Clean Skies for Tomorrow coalition. 

 

  • Google, Meta, Microsoft, and Salesforce launched the Symbiosis Coalition, committing to contract up to 20 million tons of nature-based carbon removal credits to support high-impact restoration projects. 

  • The coalition aims to address climate goals by enhancing the nature-based carbon removal market, guided by quality pillars such as durability, social benefits, and ecological integrity. 

  • The initiative responds to IPCC reports highlighting the need for large-scale carbon removal solutions, emphasizing the potential of nature-based methods to significantly reduce emissions. 

  • The coalition's advance market commitment intends to overcome market barriers, signaling strong demand to encourage the development of high-quality projects and fostering broader public confidence in these solutions. 

 

  • Wall Street banks identified significant data gaps hindering the proper management of climate-related risks during a Federal Reserve pilot exercise highlighting challenges with building characteristics and insurance coverage data. 

  • Six major banks participated: Goldman Sachs, JPMorgan Chase, Wells Fargo, Bank of America, Citigroup, and Morgan Stanley. 

  • Banks relied on external vendors to address data and modeling gaps and found it difficult to measure and incorporate climate-related risks due to uncertainty around their timing and magnitude. 

  • The Federal Reserve's climate program, unlike traditional stress tests, has no capital or supervisory implications and aims to prepare banks for climate risks and the transition to a low-carbon economy amidst increasing scrutiny from Republicans. 

 

  • Global carmakers are increasing investment in hybrid technologies due to consumer hesitation over fully electric vehicles, driven by high interest rates and inadequate charging infrastructure. 

  • Executives from major companies like General Motors, Nissan, Hyundai, Volkswagen, and Ford emphasized the need to tap into the growing demand for hybrids at the Financial Times’ Future of the Car Summit. 

  • The resurgence in hybrid vehicle sales comes as the growth of electric car sales has slowed, leading to discounts and concerns about government support for the rapid transition to electric cars. 

  • Competition from Chinese manufacturers producing cheaper electric vehicles is pushing global carmakers to focus on hybrids, which are more profitable. 

 

 

Investment Trends 

 

  • A federal appeals court dismissed a lawsuit by four Republican-led states aiming to block an SEC rule requiring investment funds to disclose proxy votes on ESG matters, citing a lack of ‘demonstrated direct harm.’ 

    • The 5th U.S. Circuit Court of Appeals ruled that Texas, Louisiana, Utah, and West Virginia lacked standing to challenge the rule. 

  • The SEC rule, effective from July 2022, mandates funds to report votes in 14 categories, including climate change, human rights, and diversity issues, to provide investors with more information. 

  • The court found the states' claims of increased compliance costs and harm to industries speculative but allowed them to re-file the case. 

 

 

Government Policy 


  • The EPA has finalized a rule to enhance methane emissions reporting for oil and natural gas facilities, incorporating advanced technologies like satellite data and direct monitoring to address significant reporting gaps. 

  • This rule is a key component of the Biden administration's climate strategy, supported by more than $20 billion from the Bipartisan Infrastructure Law and the Inflation Reduction Act, to rapidly reduce methane emissions, a potent greenhouse gas. 

  • EPA Administrator Michael S. Regan highlighted the integration of advanced tools and strong standards to track and cut methane emissions, reinforcing U.S. leadership in the global clean energy transition. 

 

  • The EU Council has approved a directive to delay the adoption of sector-specific sustainability disclosures and sustainability reporting for non-EU companies under the CSRD. 

  • This final decision follows the European Parliament's approval of the directive earlier in the month, aiming to reduce reporting burdens for companies. 

  • The delay was proposed by the EU Commission in October 2023 as part of its 2024 Commission Work Programme, prioritizing reduced reporting burdens. 

  • The postponement allows companies to focus on implementing the initial set of ESRS and provides more time for developing sector-specific and non-EU reporting standards. 

  • The new deadlines shift the adoption of sector-specific ESRS and non-EU companies' reporting standards from June 2024 to June 2026, with lawmakers urging the early publication of standards when ready. 


  • The EPA requires new natural gas power plants to reduce emissions by 90% by 2032, and existing fossil fuel plants to comply or shut down by 2039, necessitating investment in carbon capture and sequestration/storage (CCS) technologies. 

  • EPA administrator Michael Regan believes CCS is financially viable, with utilities encouraged to leverage federal programs like the Inflation Reduction Act (IRA), which provides enhanced tax credits and direct pay provisions for carbon capture. 

    • Managed by the Department of Energy, this $2.5 billion fund supports coal, natural gas, and industrial facilities to implement and demonstrate commercial-scale CCS technologies, helping to reduce future costs through early learning and engineering studies. 

  • Following the Supreme Court’s West Virginia v. EPA decision, future lawsuits are expected to challenge the new regulations. The outcome of the pending Chevron doctrine decision may also influence the EPA's regulatory authority but is expected to take years to impact implementation. 

  • Utilities are advised to comply with the regulations despite potential legal delays, as adherence to CCS requirements could attract investment by providing certainty and alignment with EPA mandates, improving capital acquisition for projects. 

 

The New York Times: Carbon Offsets, a Much-Criticized Climate Tool, Get Federal Guidelines 

  • The Biden administration introduced guidelines to improve the credibility of carbon offsets, aiming to bolster confidence in their effectiveness. 

    • Carbon offsets, intended to counteract emissions through projects like reforestation, have faced criticism due to issues with their actual impact and measurability. 

  • The new federal guidelines emphasize "high-integrity" offsets that deliver verifiable and additional emissions reductions and encourage businesses to prioritize reducing their own emissions first. 

  • Critics argue the guidelines lack specificity and enforceability, potentially allowing ineffective offsets to persist in the market. 

  • The administration views offsets as a way to channel investment into developing countries for climate action, complementing direct emission reduction efforts. 

 

  • The UK may delay support for carbon capture projects due to rising costs, potentially making the first stage of roll-out smaller than planned. 

  • Chancellor Jeremy Hunt committed £20 billion over two decades for carbon capture, but inflation and higher borrowing costs have increased project expenses significantly. 

  • The UK focuses on a regional cluster system for carbon capture, prioritizing the East Coast Cluster and Hynet with eight projects, aiming for final investment decisions this year and operation by the end of the decade. 

  • Projects less developed in planning might be delayed, though the UK government claims it remains committed to carbon capture, emphasizing affordability criteria for investment decisions. 

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