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ESG Weekly News Update: August 26, 2022

General ESG News

Forbes: We Must Both Mitigate And Adapt To Climate Change

  • The intensification of climate change through the presence of extreme weather events has caused widespread power outages and disrupted critical infrastructure in our communities. Allan Schurr, COO of Enchanted Rock, a provider of electrical resiliency-as-a-service provides some key points to address this crisis.

  • Mitigation – There's an urge to build a transition away from emission-heavy fuels such as coal and diesel. Natural gas can serve as an integral part of the energy transition until renewable energy technology is more cost-effective.

  • Adaptation – Communities need to be well prepared and infrastructure like buildings and operations need to be more resilient. It is important to anticipate extreme weather events and be prepared to withstand outages caused by climate change-induced events

  • It is important to reduce emissions and build resilience simultaneously. Microgrid services in partnership with cleaner fuels, such as natural gas can reduce their carbon footprints and improve local communities.

GreenBiz: Navigating the Bermuda Triangle of sustainability communications

  • Failing to effectively communicate ESG and sustainability messaging can be an obstacle for companies making real strides and working toward ambitious goals.

  • Effective ESG communication relies on the alignment of three critical business functions: sustainability, communications, and legal (the “Bermuda Triangle” of sustainability messaging).

  • The sustainability team is working with data and jargon that can present a confusing message to general audiences.

  • The communications team works to turn that message into external-facing prose, but they must do so without losing the meaning.

  • The legal team is responsible for protecting the company from blowback from regulators, activists, and more, and may end up removing entire sustainability marketing claims.

  • One way to help navigate these challenges is to have sustainability, communications, and legal professionals collaborate in real-time and share their perspectives to craft messages together.

Forbes: What's All The Hype About ESG And HR?

  • Social and environmental concerns have become factors of individuals’ consideration of prospective employers. People are now less likely to separate personal passions from professional roles. They are increasingly seeking organizations that have a mutual mission and purpose.

  • Now is a crucial time for companies to coherently communicate human capital strategies, and “HR can add value by shepherding the narrative around the impact on workforce and community, diversity and gender equity, employee rights, charitable activities, community work, use of agency workers, etc.”

  • Robust ESG initiatives can increase retention, attract top talent and new customers, and satisfy stakeholders while transparently gaining a competitive advantage.

Reuters: Eighteen U.S. states join Missouri probe into Morningstar ESG

  • Last month, Missouri Attorney General Eric Schmitt initiated an investigation into whether Morningstar Inc. violated consumer-protection law as it evaluated companies' performance on ESG issues. Eighteen attorneys general, 15 of which being Republican and three not identified, have joined the investigation. Republican politicians have been pushing back against ESG investing.

  • Schmitt requested information on Morningstar’s new sources and “whether the firm and its Sustainalytics ESG ratings unit violated a Missouri law aimed at protecting Israel from a campaign to isolate the Jewish state over its treatment of Palestinians.” The Illinois Investment Policy Board in June unanimously found that Morningstar did not violate a state law against boycotting Israel and closed its own investigation.

GreenBiz: How to navigate your way through the sustainability field

  • Coursework, certifications, and volunteer opportunities relevant to the area of sustainability are advantageous to developing a sustainability career.

  • Sustainability roles are found in all kinds of organizations, industries, and functions, so an individual considering a new role or sector in sustainability should lean on the skills they are good at as they familiarize themselves with the position and work.

  • Skills are transferable. People in new roles should stretch their skills and the organization’s capacity to be more sustainable with their new ideas and perspectives.

Bloomberg: Your House Is Due for an Electrical Upgrade

  • Obstacles to reducing greenhouse gas emissions include the large expenses to install new electrical panels in homes. The Inflation Reduction Act supports home electrification with a $4,000 rebate.

  • An internet-enabled “smart” electrical panel is an alternative for a new electric panel, which manages all circuits within a home and “can regulate a home’s energy use to avoid spikes in demand that would otherwise require a larger conventional electrical panel.” Another tip is to use electric appliances instead of fossil fuel ones to avoid overloading existing panels.

  • A “solar collar” is a device that can simplify a home solar system and replace the electric panel. This device is a rooftop solar setup plugged directly into the utility meter that saves installation costs and does not require an electrical panel upgrade.

Forbes: ESG -- A Defense, a Critique, and a Way Forward: An Evidence-Driven Pragmatic Perspective

  • ESG backlash has been prevalent in the past few months, with the Economist declaring that the term ESG amounts to “three letters that won’t save the planet.” Examining the objections and claims made against “woke” capitalism is vital to the future of ESG.

  • Claims are made that:

  • CEOs take leftist positions on social issues, though CEOs typically take a stand on issues to address pressure specifically from their employees. Therefore, as conservatives blame CEOs, they should rather be looking at the employees.

  • This will lead to corporatism, a system where business, government, and unions all share in decisions making, though when evaluating a region where “corporatism” is used often like Europe, there are no European equivalents of Google or Amazon.

  • Shareholder capital is diverted to causes shareholders and employees never intended to support, this claim is like the first in that if shareholders and employees martially disapprove of the CEO’s actions, valuation discounts in stocks would be clear.

The Wall Street Journal: China, U.S. Trade Climate Barbs as Ties fray

  • China retaliated after House Speaker Nancy Pelosi visited Taiwan this month by ceasing to discuss with the US ways to combat global warming.

  • The U.S. and China are currently the two biggest greenhouse gas emitting countries.

  • The Secretary of State, Antony Blinken, states that China’s actions don’t just punish the US, they punish the world.

  • It's been recommended that the US refrains from any further action that could escalate the current tension.

  • Talks with China about global warming are a key strategy in encouraging other countries to adopt more ambitious climate goals.

  • Both the US and China have made significant moves in working toward climate goals, yet China has stepped out with its clean energy progress.

  • Currently, Bejing has made no comment on what the halt of climate talks entails.

Bloomberg: Ad Campaign Promotes New Law’s Climate Provision to Voters

  • A new 30-second ad, which is part of a national campaign, is rolling out this week as the U.S. government is finally joining the fight against the current climate emergency.

  • The ad is being funded by the League of Conservation Voters and Climate Power.

  • The hope of these groups is to make sure the Inflation Reduction Act is understood and perceived correctly.

  • There is concern that Republicans will misinform the public about what the bill is.

  • The ad will be run on both cable channels and streaming platforms.

Bloomberg: Net Zero Will Make or Break One of the UK’s Wealthiest Cities

  • Aberdeen, the UK’s oil capital, knows well how oil can transform the lives of the locals. As demand grows for cheap home-grown energy with Russia’s war in Ukraine influencing supplies, the city is shifting its focus to renewables.

  • The city finds itself in a situation with politicians in Westminster and Edinburgh deeply involved as the energy sector is seen as a pawn in arguments over Scottish independence. This year, the UK has changed from begging for investment in North Sea oil and gas to implementing a three-year windfall tax on the same companies’ profits.

  • Changes in prices and the decline of North Sea oil production have given residents an idea of what the future could look like without a transition to renewable energy. The city wants to leverage its experience in energy projects to become a hub for renewables.

Bloomberg: One of Europe’s Hottest Cities Is Using 1,000-Year-Old Technology to Combat Climate Change

  • For many years, Seville has built awnings on houses and buildings to provide shade during the scorching summers that have only gotten worse in the last few years.

  • The city has also implemented the same “policy of shade” to taxi stops, public playgrounds, schools, hospitals, and more.

  • The city has also installed public fountains, trees, and heat-reflecting construction materials.

  • Awnings won't be effective in the increasing temperatures so Sevilla has created CartujaQanat.

  • CartujaQanat is a pilot project that is aiming to lower temperatures around one street by 10 degrees Celsius.

  • The city plans to use ancient Persian technology and will be installing quanats. These are underground canals that carry water across areas that need to be cooled.

  • The cooled water will then be pumped above ground and directed towards the top of buildings and trickle-down porous walls to help lower outside and inside temperatures. People will also be able to use the walls as a place to sit to recover from the heat.

Diversity, Equity, and Inclusion

GreenBiz: The intersection of ESG and reproductive rights

  • Suzanne Biegel, an advocate of “gender-smart” investing and a GreenBiz panelist, explores the link between gender issues and the world’s struggle to address climate change.

  • One direct connection Biegel notes is that extreme weather and heat connections can prevent access to healthcare overall. Additionally, women losing access to reproductive healthcare services can affect their ability to work and be part of a productive labor force. For women to be working and leading, and working in climate-smart companies, their overall labor force participation is a key consideration.

  • Biegel also discusses the UN Sustainable Development Goal (SDG) 3 -- “Ensure healthy lives and promote well-being for people of all ages” -- which she argues is directly talking about ensuring universal access to reproductive healthcare, family planning, information education, and access to services. The issue also connects to SDG 5, which deals with gender equality, and SDG 10, which is “reduce inequalities.”

  • Companies are beginning to leverage each other’s policies and practices to expand their benefits and offerings to employees, and Biegel lists a few resources companies can use to find policy language and other helpful information.

  • Biegel closes the conversation by stating, “If a company really sees themselves as a responsible business, then they want to be supporting people and planet. If you want to get really serious from a business standpoint, it’s a human capital issue. If you think about the longer-term implications, if we are not addressing this now, then all of those unwanted pregnancies are going to result in a burden from an economic standpoint that is going to not only be on the U.S. by globally.”

Forbes: For AMD There Is No Diversity And Inclusion Without Belonging

  • AMD recently published its 27th CSR report, and the company notes that it sees the persistent lack of diversity in the tech industry as both a challenge and an opportunity. It plans to focus on creating a sense of community and purpose, which adds “belonging” to its diversity and inclusion strategy.

  • The company’s percentage of under-represented groups’ hires in the U.S. increased in 2021, and it has linked its Diversity, Belonging & Inclusion (DB&I) goals to executive compensation.

  • AMD is building sustainable engagements with organizations like the Society of Women Engineers and the National Society for Black Engineers, and it has set a goal to reach 70% of employees voluntarily participating in employee resource groups and other inclusion initiatives by 2025. The 2021 progress was reported as 52%.

ESG Disclosures, Standards, Rankings, and Reporting

Reuters: EU watchdog backs ESG ‘quality label’ for market benchmarks

  • The current criteria behind EU market benchmarks vary widely and leave room for greenwashing claims. The EU markets watchdog said that a quality label for these benchmarks would help present investors being misled by ESG claims.

  • The European Securities and Markets Authority (ESMA) notes that specifying minimum methodology standards should underpin this quality label, and compilers of ESG benchmarks based outside of the EU should comply with the forthcoming EU rules if they want EU investors to use them.

Investment Trends

ESG News: Vanguard Unveils ESG ETFs That Exclude Controversial Assets

  • The global investment group, Vanguard Group Inc. Will offer two exchange traded funds tied to indexes that track large corporates and small to medium-sized businesses in both Europe and the U.S. The plan is to give investors more options to build out ESG portfolios as part of Vanguard’s long-term strategy to enable clients to reflect their ESG preferences in their portfolios.

  • The asset manager is also adding the ESG ETFs as the financial industry adapts to new EU rules introduced this month requiring firms to ensure they know retail investors’ sustainability preferences and offer appropriate ESG products. The requirements are part of EU efforts to retool its economy as extreme floods, fires and droughts provide glaring evidence of climate change’s disastrous effects.

  • The strategy of exclusion makes the ESG goal of a product clear, as it helps ensure the products don’t run afoul of regulators who are cracking down on fund managers that promise more than their ESG products can deliver.

The Wall Street Journal: The ESG Investing Backlash Arrives

  • Recent events in the ESG Investing world caused a backlash from states around the country. 19 Attorney Generals, including Arizona AG Mark Brnovich, are seeking answers from investing giant BlackRock about its political agenda.

  • These AG represent states with public pension funds that invest in BlackRock and want to know if they are getting the best financial returns possible in the market to meet their commitments to retire.

  • The AG’s letter, shared with the financial community, questioned BlackRock's relationship with climate-change advocacy groups, its support for net-zero carbon emissions, and how its ESG advocacy conflicts with its fiduciary duty to investors, among other things.

Reuters: BlackRock warns Wall Street watchdog new ESG rule could harm investors

  • The world’s largest asset manager BlackRock warned the U.S. Securities and Exchange Commission (SEC) that the new proposed rules targeting “greenwashing” might bring extra confusion for investors and fund managers.

  • Regulatory bodies are concerned that U.S funds are using the popularity of ESG to cash in and in return mislead shareholders over their ESG credentials. Meanwhile, BlackRock argues that further oversight will only lead to the disclosure of proprietary information about these strategies, reducing the competitivity advantage of those unique insights.

  • The Managed Fund Association released a statement in support of the SEC’s goal to promote better disclosure, but with concerns: “Requiring ad adviser to provide extensive disclosures concerning how it integrates ESG factors – no matter how incidental the consideration may be – will result in undue emphasis on an otherwise immaterial strategy.”

Companies and Industries

ESG Today: Pandora Launches Jewelry Collection With Recycled Gold, Lab-Created Diamonds Made With Renewable Energy

  • The Pandora Brilliance collection, launched in the U.S. and Canada, includes jewelry made with recycled silver and gold and lab-created diamonds made with 100% renewable energy. The company has also announced that it will end its use of mined diamonds since lab-created alternatives have a carbon footprint that is 95% lower.

  • The new collection includes rings, bracelets, necklaces, and earrings, and Pandora states that the lab-created diamonds have the same optical, chemical, and physical characteristics as their mined counterparts and are graded by the same standards.

  • The company has also committed to crafting all of its jewelry from recycled silver and gold by 2025.

The New York Times: Under Pressure, McDonald’s Shakes Up Its Board

  • One long-time McDonald’s board member will be retiring, and three new directors will be joining as the company faces the effects of inflation, tensions with franchisees, and more.

  • The corporation has been criticized by shareholders for having a “weak consumer sentiment about the world and the possibility of a global recession.” Shareholders have recently voted against the board’s chairman and compensation committee chair, though all members were ultimately re-elected.

  • Activist investors recently targeted the compensation committee chair, who also sits on the sustainability and corporate responsibility team, over the company’s pork sourcing and unfulfilled commitments in this area. The new directors are expected to bring experience in areas where the company is looking to improve, including global health care, franchise relations, and digital strategy.

Bloomberg: Rice, Lithium and Metals at Risk in China’s Extreme Summer

  • Goldman Sachs Group released a report highlighting the extent of damage extreme heat can cause in the southern region of China. Droughts and power curtailments are threatening supplies of commodities in multiple industries.

  • The disruption is expected to be short-lived, but rice harvests will be at the greatest risk if the severe weather is prolonged. There are about 6 regions suffering droughts that accounted for almost half of China’s rice output in 2021.

  • Sichuan, a province with strong production of lithium chemicals, represents over 20% of China’s capacity. Due to heavy energy cuts, companies like Contemporary Amperex Technology Co. Already stopped operations.

  • About 15% of polysilicon used in solar panels comes from Sichuan, and prices for the material were already at a decade-high on strong demand for clean energy. The extension of the electricity curbs will heavily affect supply.

Forbes: Talking ESG With T-Mobile's Brigitta Witt

  • Brigitta Witt is T-Mobile's VP of Corporate Responsibility and Sustainability. Brigitta was interviewed to find out more about T-Mobile's 2021 Corporate Reasonability report.

  • Although T-Mobile is a little late in the game in terms of reporting on CSR topics, they have stood out in some areas.

  • T-Mobile is focusing on the importance of education, volunteering, recycling, and lowering overall emissions.

  • T-Mobile hopes to become the first wireless company to source 100% renewable energy using solar, wind, and renewable energy credits.

  • The company has also looked at reducing Scope 1, 2, and 3 emissions and currently has an A– on their 2021 CDP assessment.

Bloomberg: Climate Disasters Risk Putting a Damper on Electric Car Making

  • As automakers work to create more electric vehicles, climate change is already impacting the industry. The Sichuan province in China, where a fifth of the country’s lithium is produced, experienced extended electricity cuts this week as the most extreme heat wave in over 60 years depleted reservoirs used for hydropower.

  • The Volkswagen factory in the region was affected by the power shortage, resulting in delays. Toyota and CATL, a battery manufacturer, have closed factories. Tesla and China’s SAIC Motor predict difficulties maintaining production as a result.

  • Operations in Europe have been affected by drought which has threatened the Rhine River, critical for trade. Carmakers are listing climate change as a business risk factor. Though companies are aware of the threats posed, they continue to implement water-intensive manufacturing sites in water-scarce regions.

  • Many automakers are using renewable-energy generators in factories and are working to be more resource-efficient. While EVs are expected to reduce CO2 emissions from transport, the process of making EVs still emits significant amounts of greenhouse gas.

Government Policy

The New York Times: Expansion of Clean Energy Loans Is ‘Sleeping Giant’ of Climate Bill

  • President Biden signed the Inflation Reduction Act last week, which will provide up to $350 billion to energy and automotive projects and businesses.

  • Nearly ten years ago, conservatives criticized the Obama administration’s climate and energy policies based on the failure of Solyndra, a solar company that borrowed approximately $500 million from the Energy Department. Supporters found the program sustainable overall as about 40% of the $31 billion disbursement has been repaid.

  • The department plans to lend $2.5 billion to General Motors and LG Energy Solution to establish electric-car battery factories in Michigan, Ohio, and Tennessee. The administration has offered billions of dollars to help existing nuclear facilities remain open. The loans may also prompt the development of other clean energy sources.

Reuters: As Mexico Stalls Major Solar Projects, Companies Turn to Smaller Workarounds

  • Companies are turning to small-scale renewable energy options in Mexico to cut carbon emissions as alternative energy projects are stalled due to controversial energy reforms.

  • Distributed generation (DG) solar projects are surging significantly, as they are a smaller and less regulated power source, with a threshold of 500 kilowatts, able to power around 200 households.

  • Companies like Grupo Bimbo, a bread producer, and Engie, a French energy firm, are turning to DG which usually can only support 10-20% of a company’s energy needs. There is doubt that DG will allow Mexico to address its energy transition without an accompanied change in government policy

  • Mexico’s President, Andres Manuel Lopez Obrador, has increased the state's control of the energy market increasing tension with the U.S. and Canada. Lopez Obrador’s policies have increased uncertainty in the renewable energy sector as nine major projects are stalled waiting for permitting from the state power regulator.

Reuters: U.S. to Pause Oil, Gas Leasing on 2.2 Million Acres in Colorado Over Climate Impact

  • The Bureau of Land Management (BLM) is pausing oil and gas leasing on Colorado’s public lands as environmental groups are concerned the current management plan failed to adequately consider climate impacts.

  • The settlement made in the Colorado federal court requires the government to conduct a new analysis to adequately consider the climate impacts of oil and gas leasing on public lands. Furthermore, the government must consider the impacts on the endangered Gunnison sage-grouse and its habitat.

  • A lawsuit in 2020 alleged that BLM had violated the National Environmental Policy Act, which outlines how the government must consider the environmental impacts of leasing when approving a plan. The settlement will pause all new leasing in the area of North Fork Valley.

ESG News: Australia to target vehicle emissions to boost electric car supply

  • The Australian government is looking to introduce vehicle fuel efficiency standards to help encourage the buying of electric vehicles and reduce emissions.

  • Currently, only 2% of cars sold in the country are electric and the absence of a mandatory fuel efficiency standard could be a factor.

  • Australia has a current target of cutting carbon emissions by 43% from their 2005 levels by 2030.

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