ESG Weekly News Update: February 18, 2022
General ESG News
Forbes: Is Your ESG Program Reflective Of Your Company’s Values?
Companies across industries are facing a continuing battle to retain and attract talent and ensure the sustainability of their business. Merely “checking the ESG boxes” will not suffice in attracting and retaining employees with ESG values, and the following aspects of a values-based approach are critical:
Diversity and inclusion
Benefits and wellness
Talent development
Community impact
Then, metrics must be measured to sustain ESG success, and incorporating these values will help companies to empower and invest in the leaders of tomorrow.
GreenBiz: 4 reasons to be hopeful about the climate fight in 2022
Scientists are in unanimous agreement that the world must have carbon emissions by 2030 to even have a chance of avoiding the worst impacts of climate change, and businesses must lead the way. There are four major shifts we can expect to see this year:
Carbon removal will become a distinct category from traditional offsets.
Businesses will prioritize climate-driven purchasing decisions.
Software will play a significant role in the climate fight.
Climate-conscious employees will make decisions based on corporate (in)action.
The Wall Street Journal: In Clampdown on U.S. Methane Emissions, Belching Cattle Get a Pass
The Biden administration is tightening pipeline regulations and spending to clean up abandoned coal mines, but the agriculture industry, which is also a significant source of methane emissions (about 27%), is not receiving the same treatment.
While the administration has researched cattle diets and gas-capturing systems, it has not proposed any new pollution regulations for the agriculture sector. Some critics argue that the administration is aiming to avoid a political battle with the powerful farm lobby.
Industry experts argue that voluntary measures will be the best way for the industry to lower its emissions, but environmentalists do not agree.
Oil and gas companies have not pushed for regulation of agriculture largely because they want to avoid upsetting lawmakers in rural districts.
Methane capture projects for farms can be very expensive, and most farms cannot afford to do them on their own. Some are worried that regulators will mandate methane rules for farms that are too costly. However, the USDA says it is counting on market incentives, funding, and research to curb cattle methane (not mandates).
Forbes: Sustainability Issues That Jumped From The Bench To The Game, And One That Is About To
In recent decades, sustainability issues have gone from invisible issues or even jokes to real, meaningful issues. The article author identifies five issues that have morphed into world-changing movements:
Veganism
Feminism
Conversation
Electric vehicles
Climate justice (and just transition)
Reuters: European group raises funding to $4.6 billion to prevent plastics in seas
The Clean Oceans Initiative, led by the French and German development banks and the European Investment Bank, is targeting plastic pollution of the seas. Its target funding goal for 2025 is now four billion euros.
The group has already allocated 1.6 billion euros to projects in China, Egypt, and Sri Lanka that will benefit more than 20 million people. Improving waste management in developing countries will help stop significant amounts of plastics and other pollution that enters waterways.
Insurance Business America: Global business leaders ‘not confident’ in their firms’ reputational and ESG approach
A recent survey from Willis Towers Watson of 500 global executives from 250 major companies across 20 countries found that 83% of respondents take reputational risks seriously, but 77% are not fully confident in their company’s reputational and ESG risk readiness.
The survey also found that 70% of senior executives are more concerned about reputational damage caused by an internal event than an external one, and 86% have reserved budgeting to cover the costs of damage caused by a reputational event.
Crucially, 75% of companies surveyed do not hold their boards accountable for reputational and ESG risks, which can create a negative perception among the staff.
Diligent: The risk of not talking to clients about ESG is losing them, RI expert says
The pandemic has changed how investors view responsible investing, highlighting global inequalities. A recent survey from The Responsible Investment Association found that 77% of advisors want their financial advisors to inform them about responsible investing, but only 27% indicated that their advisors are having that discussion.
The article author indicates that advisors will not lose clients by bringing up responsible investing (they may even gain clients), but some who have failed to bring it up have lost clients.
JD Supra: ESG – From “Nice to Have” to “Need to Have”
Historically, companies have not seen the value in investing in ESG, CSR, or sustainability because it didn’t result in revenue growth. Most action taken was to appease customers and employees. However, the pandemic and other factors led to stakeholders raising ESG concerns, which resulted in new regulations.
Now, for ESG to be prioritized as a “need to have,” there needs to be global adoption. Fortunately, there has been a push from the private sector (and institutional investors) ahead of government regulation.
With the recognition that ESG matters are financially material to the business, organizations disclosing ESG metrics and making meaningful progress are more attractive to the public and will be well-suited to meet forthcoming regulations.
JD Supra: A Plan with a Purpose: Incorporating ESG Into Your Corporate Strategy
A common pitfall organizations fall into when implementing an ESG strategy is having a strong mission statement without matching actions and measurement, or implementing good practices but without a common goal or strategy to make it a cohesive mission. Firms should start by:
Mapping and assessing existing ESG efforts
Defining priorities and developing policies to fit them
Generating an action plan guided by a mission
Determining how to measure impact
Identifying ways to communicate ESG impacts internally and externally
Sustainability Mag: ESG certification is critical for SME vendor sustainability
For organizations that have attained sustainable certifications, they are required to demand that their vendors also become certified, but for small-to-mid-sized enterprises (SMEs), many believe these certification programs do not exist.
67% of world employment is through SMEs, and these enterprises are critical to driving ESG impact. There are global sustainability certification programs for SMEs, and as consumers increasingly move their business toward sustainable companies, this certification can be incredibly important for sales.
A robust ESG certification program would focus on employee performance and health enhancement, take a holistic view of the organization, involve a third-party audit process, use a respected global standard, focus on continual improvement, promote the certification, update annually, and have a reasonable cost.
GreenBiz: ESG is far from perfect, but…
The complexity of climate-related issues reminds us that ESG provides does not provide the ultimate cure or a short-term fix, it is much more than that. The Climate Policy Initiative has estimated that climate finance flows will increase by at least 590% to meet internationally agreed upon targets on reducing emissions by 2030.
When Microsoft acquired Activision, a popular narrative that was discussed was Microsoft was risking its own reputation by purchasing Activision, and ESG laggard. Although, it is very likely that Microsoft will put forth its ESG leadership to improve Activision’s policies and practices.
ESG is subjected to consistent scrutiny. There is plenty of room for improvement, as many have discussed ESG investments needing to incorporate outcomes achieved rather than actions taken.
GreenBiz: Why Sustainability Professional Are Key to a Net-Positive World
‘Eco-anxiety’ is more prominent than ever. Sustainability has risen in the corporate and global agenda throughout the pandemic as more leaders recognize the systemic nature of the challenges we face.
The goal of the net positive movement is for companies to renew our societies and ultimately profit by fixing the world's problems, not creating them. Companies that pivot towards this model reap rewards through building trust, attracting the best people, increasing innovation, and securing resilience and relevance in the market.
It is imperative for companies to collaborate with their critics, their competition, society, and governance on the systemic problems we cannot tackle individually.
Forbes: 14 Smart Ways for Companies to Incorporate ESG Into Their Branding
Adopting ESG practices and policies is becoming important to customers as well as investors, thus making sustainable business practices good for business as well as your brand. 14 members of the Forbes communication council detail how to incorporate ESG into your branding to promote loyalty among your customer base.
Go beyond branding.
Share policies with customers.
Communicate your authentic values.
Clarify commitments for customers and employees.
Empower your employees to participate.
Live your core values.
Do your research and take action.
Be sincere.
Spend more on stakeholder engagement and strategy.
Satisfy social and environmental need.
Beckon the commitment of all concerned humans.
Use storytelling and statistics.
Incorporate ESG into organizational goals.
Use a seal to demonstrate your commitment.
Allens: The Era of Responsibility – Top ESG Trends for 2022
Earlier this year, Allen's looked at the global ESG themes shaping the Australian legal outlook. Below are some of the trends that were found.
ESG license to operate (e.g., satisfying stakeholders and the public).
ESG due diligence in merger and acquisition transactions.
Continue focused on ‘just transition.’
Continued growth in ESG-related disclosures and reporting.
Testing ESG integrity litigation.
‘E’ trends: continued testing of public commitments to targets, more standardized disclosure frameworks, carbon offsetting is likely to dominate the conversation.
‘S’ trends: domestic legislation on modern slavery and other human rights, the bar will continue to be raised on anti-discrimination standards, COVID-19 will continue to affect how businesses interact with employees.
‘G’ trends: Integration of compliance responsibilities, expectation of cyber literacy in boards, continued momentum in corporate criminal responsibility reforms.
The Hill: Climate Change Is No Longer A Probability It's Time To Face The Reality
Humans rely on what author Michael Shermer calls ‘folk numeracy’ and flawed intuitive sense of an events likelihood of occurring to override the numerical possibility of it taking place. This relates to climate change as the climate change problem is so large and so all-consuming that we fail to wrap our minds around it. Shermer also states that we as a humankind fail almost completely to account for era-shifting tipping points.
The more recent climate events may be finally forcing our attention to shift, as people begin to actually see, and acknowledge the very reality of, climate change; the fires will get worse, the storms will get bigger, and the water scarcity will intensify.
JD Supra: Best Practices in ESG: Internal Management of Public Companies ESG Programs
Internal ESG management systems and processes vary widely depending on the organization. Many companies express they would benefit from understanding how their peers are approaching ESG matters. JD Supra conducted a study of ESG internal management practices with 19 public companies headquartered in the USA. The study identified five key ESG management best practices, they are as follows:
Effective Oversight by the Board
Ownership by Executives
ESG Specific Functions
ESG Reporting
Setting Achievable ESG Goals
Diversity, Equity, and Inclusion
Lybra Clemons, chief diversity, inclusion, and belonging officer at Twilio, has been developing and managing diversity and recruitment for Fortune 500 companies for more than a decade. At the core of her successful programs is her commitment to becoming anti-racist.
According to Clemons, the difference between DEI and anti-racism is the need for active self-awareness and personal accountability in anti-racism.
Clemons also recounts personal obstacles she has faced as a black woman in an executive role, including mistrust, doubt, and being discredited. She urges those facing similar challenges to be confident in themselves and to not be afraid to choose their own career journey and move at their own pace.
Comparably: Companies with Cutting Edge DE&I Policies
Medallia: The company’s DEIB team confronts inequality and creates a culture where everyone is seen, heard, and respected. It provides training, sets goals and establishes benchmarks, and provides employee resource groups (ERGs) with resources and support.
Everbridge: The company works to create “One Everbridge” with ERGs, hiring and engagement programs, a diverse interview policy, a final slate diversity policy, and partnering with university campuses to work with underrepresented groups. In 2021, 57% of the company’s leadership roles were filled by female candidates.
Uber: The company operates under the Mansfield Rule, which requires a certain percentage of candidates considered for leadership roles to be from historically underrepresented groups. Also, the company is committed to pay equity, creating internal teams dedicated to ensuring accessibility and fairness, and seeking employee feedback.
ESG Today: Netflix Surpasses 50% Employee Representation for Women, Diverse Race & Ethnicity
Netflix has reported that women now account for more than half of the company’s global employee and leadership base, and people from historically excluded racial and ethnic backgrounds make up more have half of its U.S. workforce. The company also grew significantly in 2021.
The company is also expanding inclusive hiring training for managers and adding Hispanic Serving Institutions and more HBCUs to its pipeline program.
ESG Today: Principles for Responsible Investment Calls on Investors to Expand, Broaden Focus on DEI
The PRI has announced a report encouraging investors to improve DEI performance, and it outlines actions for investors to follow to address DEI issues in their organizations, their portfolios, and across society.
The PRI discusses growing regulatory pressure and legal requirements in many jurisdictions that aim to ensure businesses are delivering social value.
Specific actions outlined in the report include incorporating factors like workforce and value chain DEI performance into investment stewardship processes, as well as engagement with policy makers and other stakeholders.
ESG Today: Apollo Commits to Over $1 Billion in Diverse Spend with Minority, Women-Owned Businesses
Apollo has launched its Supplier Diversity program with the goal of achieving $1 billion in spending with diverse businesses, including MWBE. The new program will be offered to all the firm’s portfolio companies.
Apollo has joined the National Minority Supplier Development Council (NMSDC) and the Women’s Business Enterprise National Council (WBENC) to help achieve its goal and provide portfolio companies with access to platforms that can promote relationships with qualified diverse suppliers.
GreenBiz: State Street Acts on Racism and Inequality
Attention has recently been given to the financial services industry's massive influence on the technical realm of climate solutions. Many questions have been posed regarding their racial inequity and systemic injustice plans and actions.
State Street's approach to DEI action includes increased board diversity by 25% in 2021, incorporating ten actions against racism in inequality in their business operations, committing to vote against portfolio companies in 2022 that don't have at least one director from a minority community, increasing spending with diverse suppliers, and holding the firm accountable for strengthening Black and Latinx-owned businesses it works with.
ESG Disclosures, Standards, Rankings, and Reporting
Forbes: ESG’s Biggest Champion Talks Tax Transparency and Reporting
Eelco van der Enden, the new CEO of the Global Reporting Initiative (GRI), and Tax Notes contributing editor Nana Ama Sarfo discuss the evolving landscape of ESG and taxation.
Van der Enden’s vision for GRI is a stakeholder economic vision, and he explains that public tax disclosures are important, and multinationals face serious consequences if they fail to be transparent about their tax activity.
Van der Enden goes on to describe the different roles of GRI, SASB, the ISSB, and the European Financial Reporting Advisory Group. They are not competitive forces, but rather complementary. He argues that you “can’t have a stakeholder model without sustainability reporting on behalf of society.”
The initiative to draft a standard on tax was taken by U.S. private equity firms, not governmental organizations. Investors reached out to GRI to ask for more detailed tax information. The GRI standard is so popular because it provides a platform for comparable data that is important to investors.
Van der Ended also argues that tax is inherently an ESG metric, and for companies committed to being transparent in reporting beyond the legal requirements for financial disclosure, why not report on tax?
Telling the “story” about a company’s tax history also explains to society how the company operates – why it has a high or low tax rate. This results in a double materiality of tax and ESG reporting.
Harvard Business Review: We Need Universal ESG Accounting Standards
The International Sustainability Standards Board (ISSB) has emerged as the frontrunner in offering a single source of ESG reporting guidance, standards, and global baselines. The ISSB will support the work being done by the U.S. SEC and the EU’s CSRD.
The ideal outcome is that the ISSB becomes a global standard that integrates the work of all the previous standards and frameworks that focus on investor needs.
Standard setting can be slow, and the corporate community will play a key role in ensuring the success of the ISSB, especially as investors are increasingly demanding information on companies’ sustainability performance.
Companies also have legitimate concerns about what the costs will be to implement the forthcoming standards. However, it is important to acknowledge that there is an initial investment needed to have quality internal control and measurement to support reporting needs.
One major challenge to overcome will be to converge the financial conversation with the sustainability conversation to have the right executives, investors, and other stakeholders align and actively participate in the standard-setting process.
The Transition Pathway Initiative (TPI) has published its Sectoral Decarbonization Pathways, which are a detailed framework guiding investors in assessing corporate climate targets in high-emitting sectors, including energy, industrials, and transport sectors like oil and gas, aluminum, cement, diversified mining, paper, steel, auto, aviation, and shipping.
The framework considers the unique challenges of each sector, where emissions are concentrated, and how costly they are to reduce. It then outlines three pathways for alignment with different climate change scenarios.
ESG Today: European Markets Regulator Targets Greenwashing, Transparency in New Sustainable Finance Roadmap
The European Securities and Markets Authority (ESMA) has released its Sustainable Finance Roadmap outlining priority areas in the rapidly evolving sustainable finance market.
Financial markets have the role of promoting the capital flows and investments necessary to facilitate the global low-carbon economic transition.
One of the key challenges for regulators is the risk of greenwashing, and the ESMA roadmap outlines its strategy to investigate, better define, and help find common EU-wide solutions for greenwashing.
The roadmap also addresses key priorities like reviewing SFDR disclosure requirements, contributing to the development of sustainability reporting standards to improve the reliability of ESG ratings, and monitoring carbon markets.
Harvard Business Review: We Need Universal ESG Accounting Standards
A uniform set of standards for measurement and reporting on ESG is imperative. The International Sustainability Standards Board (ISSB) will develop standards for companies to report their performance to investors. It will provide a global baseline for high quality sustainability reporting that will support the work being done by the SEC and the EU's Corporate Sustainability Reporting Directive.
The ISSB is focused on single materiality, the ESG information that drives valuation and matters to investors. It is important to keep in mind that the EU’s CSRD focuses on double materiality, covering information that is of interest to stakeholders even if it's not of interest to investors.
Companies must actively participate in standard setting processes and move aggressively to adopt these standards.
SIA Partners: Impact of Stricter ESG Reporting Requirements In The U.S.
The SEC is in the process of developing a comprehensive framework that produces reliable climate-related disclosures. The SEC Public Statement on Climate Change Disclosure listed three main disclosure frameworks for consideration: the Task Force on Climate Related Disclosures (TCFD), Climate Disclosure Standards Board (CDSB), and Sustainability Accounting Standards Board (SASB). The International Sustainability Standards Board (ISSB), from the International Financial Reporting Standards Foundation, is a consolidation of the Value Reporting Foundation and Climate Disclosure Standards Board. The ISSB is set out to develop a comprehensive global baseline of high-quality sustainability disclosure standards.
As the SEC is increasing focus on climate related disclosures, financial institutions must be prepared for potential strict disclosure requirements and regulatory scrutiny. Educating your employees as well as your clients and investors and establishing new governance structures and resources will allow you to be more prepared in anticipation of stricter ESG reporting regulations.
Market Watch: This Is What You’re Getting Wrong About ESG Ratings
There are a multitude of ESG rating and ranking scoring companies. The following are five widespread misconceptions about how ESG ratings are calculated and used:
ESG ratings are like credit ratings.
Regulators have standardized what ESG data companies need to release.
ESG rating firms rate risk the same way.
ESG ratings are consistent across rating firms.
The companies behind ESG ETF's have a standard way to use ESG ratings.
Forbes: RepRisk’s Risk Platform Aims To Bring Transparency Into ESG Corporate Reporting
The OECD, World Bank, and International Monetary Fund (IMF) have recommended that governments pursue an inclusive, green recovery to build a more resilient and sustainable economy. A Harvard Business School and University of Oxford Blavatnik School of Government report recommended adopting a few highly relevant and controllable metrics so companies can learn and expand disclosures related to their environmental and societal performance. The World Economic Forum mentioned that more transparency into ESG would help improve the allocation of capital and business investments which could then boost income and employment.
For the past 15 years, RepRisk has built a consistent data set that allows investors to check how a company manages ESG issues and conducts business. It allows companies to identify and assess ESG risks for decision making and ways global collaboration can accelerate ESG adoption. They use big data combined with human intelligence to produce ESG insights, provide the financial sector with information to develop new ESG investments, and promote stronger global collaboration that can accelerate ESG standardization.
It is easy for investors to focus on capitalizing on ESG trail blazers. But to capture unrealized value and move towards net zero, investors should continue to invest and prioritize active engagement with ESG laggards on their response to climate change.
Maddyness: The Problem with ESG Scores
The Organization for Economic Cooperation and Development (OECD) report on the Asia Pacific region questioned whether current ESG ratings are ‘fit for purpose’ and called for improved coordination and transparency.
Many ESG ratings measure the risk the world poses to the company instead of the impact a company has on the earth and society.
MIT research found the correlation between six major ESG rating agencies to be 0.61. In comparison, the three largest credit rating agencies are correlated between 0.94-0.96 on their debt ratings. The International Organization of Securities Commissions (IOSCO) has said conflicts of interest can arise due to ESG rating and data providers offering other services to companies relating to ESG performance. This meaning, providers can assist companies in improving their ESG performance while also providing them with rating and data products, which can be considered a conflict of interest.
Investment Trends
Fortune: Shareholders are putting more pressure on companies over environmental and social issues
While companies are increasingly shifting toward “stakeholder” capitalism, pressure for ESG improvement is largely coming from shareholders. Shareholder proposals addressing ESG issues increased significantly in 2021 from recent years.
Support for these proposals also increased in 2021, and the proposals receiving the highest level of support were related to workforce diversity and those requiring companies to publicly disclose climate-related lobbying.
Scrutiny around executive compensation is also increasing, and the number of directors who failed to receive majority support for elected has more than doubled in recent years.
Forbes: The Future of ESG Investing
Investors recognize that solving the climate crisis is one of the biggest challenges of this decade. 77% of ESG funds that existed 10 years ago have survived, compared with 46% of traditional funds.
The new evolution of ESG can be credited to the evolution of technology, regulators playing a role in building out ESG data disclosures, the government providing guidance on corporate disclosures, and increased demand from consumers, among other things.
As society and ESG move forward, investors should engage in conversations with their advisors about the optimal diversification of ESG funds, envisioning the best possible risk and return of their overall portfolio.
CSR Wire: For Private Equity – ESG Momentum Is Peaking
Preqin reports ESG investments now account for more than 36% of private capital under management with an estimated $3.1 trillion committed. For private equity, the momentum behind ESG focused investing has been increasing.
The data available to investors and consumers for private equity is very limited. The number of companies signing up to the United Nations Principles for Responsible Investment is on the rise and many private equity firms are making high level hires to guide their ESG programs. Now more than ever, it's imperative for private equity firms to consider how to best get their message out to potential investors and the broader market.
ESG Today: BlackRock Launches Suite of ESG Index Funds Targeting UK Wealth Market
BlackRock announced on Wednesday the launch of iShares ESG Enhanced Equity UK Index Fund Range, a new series of sustainable index funds targeted at the UK wealth market. The new range addresses a gap in the UK wealth market for indexing-based strategies that help clients make sustainable transitions. It aims to meet investor needs and the accelerating trends across wealth portfolios.
Manuela Sperandeo, BlackRocks EMEA Head of Sustainable Indexing said this new range will “allow investors to build low cost, global equity portfolios with the flexibility to adjust exposures according to their asset allocation needs.”
Finextra: ESG Commitment Increasingly Important to Retail Investors
New research from behavioral finance experts Oxford Risk shows nearly 63% of the retail investors questioned say they have or have considered moving investments to new advisors because they are dissatisfied with the ESG focus from their wealth managers. 20% say they have already done so and 43% say they would change wealth advisors. The study also found 31% of clients rate their current advisor’s commitment to ESG highly and very highly.
Advisor Perspectives: To Meet Net Zero, Prioritize ESG Laggards
It is easy for investors to focus on capitalizing on ESG stars. But to capture unrealized value and move towards net zero, investors should continue to invest and prioritize active engagement with ESG laggards on their response to climate change.
Denying debt or equity investments to a company before it can set out its plans for the transition to net zero is counterproductive. Instead, managers can fund the transition for companies that demonstrate a realistic and credible commitment to net zero. Walking away from these types of companies exacerbates the problem; responsible investors must stay engaged with companies that perform low on ESG measures.
World Economic Forum: Venture Capital Must Embed ESG To Back the Companies of The Future
Venture capitalists must implement ESG due diligence to help them create long term multi-stakeholder value. This will give their funds a commercial advantage as they will improve mitigating material issues relating to new investments.
It is highly recommended that venture capitalists that have a portfolio with companies operating in high-risk domains adopt a proactive approach to ESG before more demanding regulation is implemented. Failure to consider these regulations will be costly in the long run.
The Economist: The Truth About Dirty Assets
Bloomberg Intelligence, a research firm, predicts the value of investments in financial products that claim to abide by ESG rules will exceed $50 trillion by 2025. Many funds claim there is no tradeoff between maximizing profits and green investing and ESG funds often seek to meet their goals by excluding shares of firms in polluting industries from their portfolios.
Many public firms are selling their most polluting assets to please ESG investors and meet their carbon reduction targets. Instead of these polluting assets shutting down, they're being bought by private companies and funds that have alternative sources of capital and stay out of the public eye. More opaque institutions are taking these dirty assets.
This is problematic for two main reasons: The claims being made by listed firms that are helping decarbonize the planet are questionable, as dirty assets pass into private hands it becomes harder to tell if their owners plan to reduce their output overtime or expand it.
Some ways to proactively move forward include Imposing more carbon taxes or carbon prices, institutional investors and endowment and insurance personnel should consider the entire carbon footprint of their portfolios moving forward, and investors should question the idea that the best way to make polluters pollute less is to dump their shares.
Companies & Industries
Yahoo! Finance: Bel Announced Ambitious Carbon Reduction Commitment to Help Achieve Paris Agreement Objectives
Bel has strengthened its carbon reduction target to help limit global warming to below 1.5 degrees Celsius, and it will reduce the emissions throughout its entire value chain by 25% by 2035. It will implement a carbon tracking tool to help steer its activities.
Bel has chosen to deploy a carbon impact analysis tool at all levels of company decision making. According to the company, each of its brands and products helps contribute to its transformation toward healthy, diversified, and accessible products that are a force for positive impact.
The new report from Coning & Company, the second in a series that examines how the insurance industry is integrating ESG concerns into operations and reporting, has been added to ResearchAndMarkets.com’s offering. Key topics covered include:
Measuring the social portion of ESG
Underwriting and the social issues at the heart of insurance
AI and automated underwriting
The NAIC’s progress on DEI, and more.
Insurance Business Mag: Why is ESG so important for insurance companies right now?
The COP26 conference in 2021 and the Glasgow Financial Alliance for Net Zero (GFANZ) have contributed to the “explosion” of ESG and the focus on financial firms, and GFANZ has placed climate change at the center of its work.
Some companies, despite being the subject of ongoing criticism, have made progress toward climate objectives. Focusing on directing resources toward solving “right size” problems is key, and it helps protect capital in the long-term and to help ensure community support.
Pressure on insurance companies is coming from environmentally motivated class actions, as well as regulators and internal stakeholders.
Marathon’s new climate goal now encompasses its Scope 3 emissions, which represent most of the the company’s climate impact. The new emissions goal includes reducing Scope 1 and 2 emissions intensity by 30% by 2030 (from 2014 levels) and cutting absolute Scope 3 emissions by 15% by 2030 (from 2019 levels).
MPLX, Marathon’s diversified limited partnership, has also announced a goal to reduce methane emissions intensity by 75% by 2030.
ESG Today: Blackstone Integrates Carbon Accounting Solutions from Sphera to Help Decarbonize Portfolio
Data and consulting services provider, Sphera, announced Tuesday that its carbon accounting solutions will be integrated by alternative investment manager Blackstone. Sphera works with organizations to help them surface manage and mitigate risks in the environmental health and safety and sustainability, operational risk management, and product stewardship areas.
James Mandel, Chief Sustainability Officer at Blackstone, states “We believe Sphera’s deep technical rigor on greenhouse gas inventories will be tremendously valuable in our ESG risk mitigation efforts and are thrilled to integrate its software suite consulting services and data into our platform of resources.”
ESG Today: UBA, Standard Chartered, BNP Paribas Join New Carbon Markets Platform
Development-stage voluntary carbon marketplace, Carbonplace, announced Wednesday the addition of three major global banks: UBS, Standard Chartered, and BNP Paribas. Carbonplace aims to provide the IT infrastructure to facilitate reliable, secure, and scalable trading of high integrity carbon credits. It will be fully operational by the end of this year.
The banks aim to facilitate increased delivery of high-quality carbon offset projects, a liquid carbon marketplace, the creation of strong ecosystem to support the offset market, and the development of tools to help clients manage climate risk.
“Carbonplace will reduce barriers to entry in the voluntary carbon market,” says Chris Leeds, Head of Carbon Market Development, Standard Chartered, and Board Member of the ICVCM.
ESG Today: New Carbon Emissions Accounting Initiative Launched by Microsoft, Leading Organizations
The Climateworks Foundation has launched its Carbon Call, which aims to address the need for a global carbon emissions accounting system. It was founded by more than 20 companies and organizations including UNEP, Microsoft, and Linux Foundation.
Carbon Call aims to fix gaps in existing global carbon accounting systems, focusing on carbon removal and lad sector, methane, and indirect emissions. It will mobilize investment toward improving reporting from companies and supporting the underlying data to produce accurate and comparable disclosure.
Companies that have already signed into the initiative include EY, GSK, KPMG, Microsoft, and Wipro.
Sustainable Brands: There’s an Opportunity for Purpose Leadership in The Metaverse Gold Rush
The boom of the metaverse is here, aka the evolution of the internet. Many companies getting into the gold rush of the metaverse will forge ahead with little thought to implication on its users, but corporations can choose to proactively factor in ESG planning into the early stages of this industry.
With the increase in the metaverse, it is important to set industry standards and expectations for corporate conduct. Using resources like the Responsible Business Alliance and other organizations, along with experts in internet issues and related topics such as data protection, privacy, cyber bullying, and safety, is a great starting point as we continue into the next phase of the internet.
CBC: Renewable Natural Gas Could Help Slow Climate Change, But by How Much?
Renewable natural gas is a biomethane. Methane comes from biological sources which could include landfills, sewage, agriculture, and forestry waste. Because renewable natural gas ultimately comes from plants and captured carbon, it's theoretically carbon neutral when it's burned. When burned instead of being released directly, methane is converted into water and carbon dioxide, a greenhouse gas with much lower global warming impact than methane itself. Renewable natural gas has the potential to be carbon negative due to these avoided emissions.
According to the International Energy Agency (IEA), biogas is a mixture of methane and other gases produced when plant or animal matter decomposes with oxygen. It is processed into renewable natural gas by removing most of the nonmethane gases.
Renewable natural gas can be doubled to 10 times the cost of regular natural gas. The federal government in Canada has helped fund several recent gasification pilot projects across the country. The government is also allowing some credits for use of renewable natural gas by gasoline or diesel producers under its Clean Fuel Regulations.
Business News Wales: Carbon Offsetting: Businesses Must Commit to Going Further
While reducing an organization's carbon footprint should be applauded it is crucial that companies think bigger than just offsetting, this means taking steps to reach carbon negative status.
Rod Tonna-Barthet, CEO at Kyocera Document Solutions UK states “the first step for organizations to playing out their carbon negative status is to conduct a comprehensive examination of business operations to understand where energy usage and waste can be reduced… When it comes to sustainability every little helps.” He also stressed sustainability initiatives “require hard work and long-term commitment but embracing the challenge wholeheartedly and maintaining ambitious dreams of how we want our work and lives to be, there's every reason to be optimistic.”
Forbes: ESG And The Dangerous Structural Increase In The Price Of Oil
At over 100 million B slash D, global oil demand is back to above record levels. Those that predicted a drop in oil demand in the beginning of the pandemic were wrong. The world has a growing fleet of about 1200 million oil-based cars and just about 13 million electric cars, and in EU S electric cars constitute less than 1% of our fleet. Electric cars are already facing surging costs that could make them less affordable.
Oil demand is increasing, and supplies have struggled to keep up JP Morgan warns that oil could easily hit $120 if the Russia Ukraine crisis escalates. There has been a lack of access to financing because of climate concerns, investor demands to decarbonize, and a shortage of sufficient investments in new supply for many years.
The OPEC’s production cut bloc has added lower volumes to the oil market. The loss of OPEC’s spare capacity is a problem because they have generally been the one to help handle supply disruptions. According to the author, the anti-oil business doesn't grasp that high and volatile oil prices are threatening the reduction of greenhouse gas emissions.
Government Policy
The New York Times: How Billions in Infrastructure Funding Could Worsen Global Warming
Research shows that widening highways and paving new roads often spurs people to drive more. Colorado is the first state to adopt a climate change regulation that pushes transportation planners away from highway expansions and toward projects that cut vehicle pollution (like buses and bike lanes).
Experts are increasingly warning that cutting transportation emissions will not be accomplished by selling more electric vehicles, but states will need to also encourage people to drive less.
Other experts note that infrastructure is often a blind spot for politicians who claim to care about climate change, and new highways are “carbon infrastructure.”
Environmentalists point to “induced traffic demand,” or the increase in traffic that results from expanding highways.
Under the new Colorado rule, planners will have to estimate the expected emissions from future road planning and adhere to an overall emissions budget. If the budget is exceeded, the government can withhold funding.
ESG Today: Biden Commits $5 Billion to Build National EV Charging Network
The Biden administration has announced a series of initiatives meant to facilitate the transition to electrified transport, including the allocation of $5 billion over five years to develop an EV charging network across the interstate highway system. The new funding is being made available under the Bipartisan Infrastructure Law’s National Electric Vehicle Infrastructure (NEVI) Formula Program.
The charging network program will build on the Department of Transportation’s Alterative Fuel Corridor Initiative that required states to designate highway sections with infrastructure to support electric, hydrogen, propane, and natural gas vehicles. States will need to submit EV infrastructure deployment plans to get access to funding.
The DOE has also announced plans to invest nearly $3 billion to strengthen the supply chain for advanced batteries to help meet the growing needs for EVs ad energy storage.