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ESG Weekly News Update: February 24, 2023

General ESG News

ESG Today: Green Hydrogen Tech Company GeoPura Raises $44 Million, Backed by GM, Barclays

  • GeoPura, a producer and provider of green hydrogen power raised £36 million with the help of Barclays Sustainable Impact Capital and General Motors’ investment arm, GM Ventures.

  • GeoPura produces hydrogen from water via electrolysis powered by renewable energy in Hydrogen Power Units (HPUs) as opposed to the traditional process of extraction from natural gas which produces pollutants and greenhouse gas emissions.

  • The company primarily provides off-grid power, long-term backup, energy to augment the grid, and power at temporary sites. This new investment will allow GeoPura to manufacture HPUs in mass, increase hydrogen production, and expand its operations globally. Additionally, the company wants to target high diesel use sectors such as outdoor events, construction, and back-up power.

Forbes: Despite Economic Headwinds, Employees Still Want To Work For Companies That Care

  • Research commissioned by Paul Polman, former Unilever CEO, found that out of 2,000 U.S. employees surveyed, 76% want to be employed by a company that is aiming to positively impact the world.

  • 35% of respondents had already quit a job because employer values did not align with their own, and over half indicated that they would resign from their job for the same reason. This opinion was more marked in younger generations.

  • However, Randstad’s annual Workmonitor report showed that 52% of the 35,000 respondents were worried about job security in the current economy. This was especially true for the value-conscious younger generations (aged 18-24) with 43% worried about job security, a ten percent increase from last year.

  • Although concern over job security has increased, value alignment remains a priority for many employees.

Bloomberg: How Europe Ditched Russian Fossil Fuels With Spectacular Speed

  • Europe has rapidly decentralized its energy sourcing from Russia in a single year since the start of Russia’s war on Ukraine. While this transition has been “far from the kind of climate-first transition that Europe has envisioned for its long-term future,” it does show how quickly Europe can create change under pressure.

  • Several factors came together to make this switch possible. First, battery storage, solar, wind, and electric vehicle sales all increased in Europe in 2022; this combined with warmer temperatures due to climate change and lowered the demand for heat as well as the need for fossil fuels.

  • However, renewables at this stage would not be enough to replace fossil fuels from Russia. Europe made up for this by importing liquefied natural gas from Algeria, Norway, and yes, even Russia. Russian coal was used as an intermediate fuel source as Russia cut off the natural gas supply until EU sanctions took effect.

  • Oil was a more difficult fossil fuel to replace. To meet this need, Europe increased oil imports from the U.S., Saudi Arabia, and Norway. Additionally, the European Union and the Group of Seven countries and Australia put a price cap of $60 per barrel of Russian crude oil to reduce Russian oil profits.

  • The EU is continuing to reduce electricity from fossil fuels and is taking key decarbonization steps such as banning the sale of fossil-fuel-powered cars by 2035. It remains to be seen how the EU will respond to global competition to become greener.

Sustainable Brands: Economic Centers in China, US Top Global Ranking for Climate and Extreme Weather Risks

  • The Cross Dependency Initiative (XDI) very recently released its Gross Domestic Climate Risk data set; XDI uses projections to model the effects of extreme weather and climate change on the built environment in over 2,600 jurisdictions globally. It also ranks jurisdictions that will see the largest upswing of modeled damage from 1990 to 2050.

  • Results show that provinces in China and several U.S. states will be the most affected, with two large sub-national economies in China – Jiangsu and Shandong ranking first and second. More than half of XDI’s top 50 jurisdictions are in China.

  • The U.S. has 18 states in the XDI top 100 for high physical climate risk; Florida is the highest-ranking state followed by California and Texas.

  • Other areas in the top 100 include India, Buenos Aires, São Paulo, Jakarta, Beijing, Hồ Chí Minh City, Taiwan, and Mumbai with Southeast Asia experiencing the greatest damage escalation from 1990 to 2050.

  • “Since extensive built infrastructure generally overlaps with high levels of economic activity and capital value, it is imperative that the physical risk of climate change is appropriately understood and priced."

Green Biz: Why Reuse Programs Shouldn’t Wait for Consumers

  • Europe is moving toward reusable containers and is banning disposables with legislative policies.

  • Like Europe, U.S. consumers are interested in reusables but don’t engage with reusables based solely on sustainability reasons, as they expect them to be less expensive and more convenient than disposables, which creates the intention-action gap.

  • Pilot programs are insufficient to engage consumers and move them away from disposables. Loop has shown in the UK that consumers will engage with prefill options but not as much with returning the packaging when empty and reclaiming their deposits.

  • The Loop pilot in the U.S. was not a representation of the real world, either; consumers want a simpler, cheaper, and more convenient option for reusables.

The New Tork Times: Fighting Corporate Lies

  • Greenwashing: when companies make false or exaggerated claims to fool consumers into thinking their products or services benefit the environment.

  • Governments are working on or introducing new regulations that can help to hold corporations accountable with stricter enforcement of truth-in-advertising rules.

  • There has been a wave of companies in the United States and abroad paying fines for misleading statements.

  • The best way to tackle greenwashing was to require companies to disclose more information to explain what they mean when they present their climate plans or label a product in a certain way.

  • This is difficult with no standard definitions for things like “green” or “low carbon.”

  • Federal Trade Condition seeking to update rules to watch over marketing claims.

Sustainable Brands: More and More Talent Ready to Leave Companies Over Misalignment of Values

  • Potential employees now cite employers' values, commitment to the environment, and social equity as key criteria in deciding where to work. It also revealed:

  • A survey across the U.S. and UK revealed that 66% of workers are anxious about the future of the planet and society.

  • The Great Resignation is continuing due to employee and employer value misalignment.

  • Younger workers want to work at organizations that reflect their values.

  • Workers are increasingly putting the need for purpose and positive impact at the center of their work.

  • Net Positive companies are attracting young talent by:

  • Showing greater ambition on your values and impact;

  • Doing a better job at communicating values/impact

  • Empowering your employees to help you.

GreenBiz: 5 ocean moments to watch in 2023

  • Commitments made in 2022 to make progress in restoring and maintaining ocean health will lead to five major moments in 2023:

  1. Biodiversity Beyond National Jurisdiction (BBNJ)Treaty negotiations

  2. A focus on marine tourism and pollution at the Our Ocean Conference

  3. Advancement of deep-sea mining regulations

  4. Universal Declaration of Ocean Rights

  5. Recognition of the ocean as a fundamental climate component.

Diversity, Equity, and Inclusion

Forbes: Why We Must Tell Challenging Stories During Black History Month (And Always)

  • It is human nature to latch onto the stories that are the most familiar and self-affirming, but in real life, as in Black History Month, stories do not always follow a predictable arc.

  • Nigerian novelist Chimamanda Ngozi Adichie says in her TED Talk that listening to only one kind of story “robs people of dignity” and makes our recognition of equal humanity difficult.

  • Many Americans have a single story of Africa, a story of “catastrophe,” with little recognition that those from Africa are capable of complex feelings, and that humans in general can be more similar than we realize.

  • While many can recite the familiar story of Martin Luther King, Jr., many of the stories about African Americans from the early twentieth century are unheard, and the impacts of systemic racism and intergenerational prosperity remain misunderstood.

  • By telling challenging stories, we can create connection, opportunity, understanding, and dignity.

Reuters: Minority Directors Reach Milestone 20% of Rusell 3000 Board Seats

  • The ISS Corporate Solutions data has shown that racial and ethnic minorities are still underrepresented. At Russell 3000 only one-fifth of board seats are held by minorities. Thus, U.S. companies face growing pressure from investors to add racial representation to their boards.

  • It took four years for African or African American directors to double their share of board seats from 4.4% to 8.3% in 2019.

  • Only 1% of the companies have black or African American CEOs pointing out that companies are not bringing as much diversity to the CEO role.

  • Having a diverse board promotes better decision-making in innovation, risk management, and management.

Forbes: ChatGPT Threatens Authenticity of DEI Communications from Leaders

  • ChatGPT is an artificial intelligence generator. The integrity of DEI using ChatGPT poses a risk to leaders’ integrity.

  • Artificial intelligence could be useful to leaders who don’t quite know what to say to their employees about specific racial, social justice, and DEI issues.

  • CEOs' credibility could be threatened if employees knew ChatGPT wrote emails about DEI topics instead of the leaders.

ESG Disclosures, Standards, Rankings, and Reporting ESG Today: India Proposes Supply Chain ESG Disclosure, ESG Investing Rules

  • The Securities and Exchange Board of India (SEBI), India’s securities and markets regulator released a set of proposals that may require large companies to provide ESG reporting and ESG supply chain-level disclosure assurance.

  • Current rules will require mandatory reporting on ESG factors following the Business Responsibility and Sustainability Report guidelines for the top 1,000 market-capitalizing companies.

  • Stakeholders heavily rely on these reports which are crucial in decision-making; therefore, SEBI’s new proposals would require ESG disclosure assurance for particular key performance indicators within ESG. The top 250 companies will be required to obtain this assurance starting next year, with the top 500 the next year and the top 1,000 the following year.

  • SEBI’s proposals also include measures to increase ESG fund transparency and disclosure as well as rules for fund names. They are seeking comments on the proposals until March 6, 2023.

Reuters: G20-backed standards body approves first global company sustainability rules

  • The International Sustainability Standards Board (ISSB) has approved “global baseline rules” for firms disclosing climate change impacts. The rules are expected to come into effect in January of 2024 for use in 2024 annual reports.

  • Countries like Britain and Nigeria have already announced plans to adopt the rules.

  • The rules come as the ISSB has come under pressure to both combat greenwashing and to make their climate-related disclosures “interoperable” to avoid conflicting regulations that increase compliance costs.

Investment Trends

Sustainable Brands: Understanding the Important Difference Between ESG Risk and ESG Impact

  • A company with a high impact rating and low ESG risk isn’t necessarily a great investment opportunity. Investors must consider if a company has carved an economic moat to protect long-term economic returns and valuation.

  • Tesla is an example of how the principles to revolutionize the automotive market and clean technology space do not always translate to high governance and social metrics due to the behavior of the company's founder and CEO.

  • Other companies like CVS still face high ESG risk. Despite the company committing to improving healthcare and banning the sale of all tobacco products in all its stores, Sustainalytics rates CVS as medium risk, and the company has suffered from backlash over controversial topics, such as its abortion-drug policies and a $5 billion settlement in an opioid lawsuit.

  • ESG risks are the negative externalities that could affect the financial success of a business. Those issues are climate-change mitigation, the cost to manage working and safety conditions, as well as dealing with employee and consumer concerns about human rights, corruption, and legal compliance.

  • ESG impact describes the non-financial outcomes of a company’s activities. It can lead to improvement or harm to the ESG measures of the planet – moving towards net-zero policies or decarbonizing supply chains, to increased efforts on employee safety, gender equality, and living wages to the company and beyond. The ESG measures of the planet – moving towards net-zero policies or decarbonizing supply chains, to increase efforts on employee safety, gender equality, and living wages to the company and beyond.

Forbes: ESG Stocks: What Is ESG And Do ESG Stocks Outperform The Rest?

  • ESG stocks are those that include shares in companies with a clear focus on sustainability and responsible corporate citizenship. Some investors focus their investments on ESG stocks for ethical reasons, while others believe these stocks will outperform the competition.

  • The question of whether or not ESG stocks actually outperform their non-ESG counterparts is still up for debate, especially since there isn’t one central authority that decides whether a business is following ESG practices, and there is limited history to look at when comparing ESG stocks to non-ESG.

Companies and Industries

ESG Today: KBR Launches Technology to Produce Sustainable Aviation Fuel Using Captured Carbon

  • The aviation industry accounts for 2-3% of global GHG emissions. Launching Sustainable Aviation Fuel (SAF) technology from the alliance of Swedish Biofuels and KBR will help decarbonize the aviation industry.

  • SAF is produced from sustainable resources, such as waste oils, agricultural residues, and carbon dioxide.

  • The technology can produce “ready-to-use real jet fuel” without blending components. Currently, airlines can use a maximum of 50% SAGF on flights.

The Wall Street Journal: United Airlines Creates Fund for Sustainable Aviation Fuel

  • United Airlines, one of the most ambitious airlines in acting on climate change, has launched a fund for investments in sustainable aviation fuel-producing startups.

  • United’s venture investing arm has partnered with Air Canada, JPMorgan Chase & Co., Boeing Co., General Electric Co., and Honeywell International Inc. The fund will start with $100 million from these companies and will be capped at $500 million.

  • Startups are using a variety of methods to create sustainable aviation fuel such as turning waste into fuel. Participating airlines are expected to sign agreements to use the clean fuel produced by the startups that they back.

  • As aviation is a difficult sector to decarbonize, these funds will accelerate technological advances. Additionally, the Biden Administration is supplying extra funding to reach its goal of producing 3 billion gallons of sustainable aviation fuel by 2030, up from the current tens of millions of gallons.

Forbes: Ambidextrous CEOs ‘Look To The Future With Optimism’

  • CEOs are looking for efficiency and effectiveness. One way to create new opportunities is to change their views on ESG.

  • Government intervention increased with the pandemic. This growth changed how leaders have accepted regulations on decarbonization and sustainability.

  • Trends that will predict future CEO imperatives include:

  • Building a New Future for the Company

  • Leading an Ambidextrous Agenda

  • Shaping the Organization

  • Leveraging Technology

  • Moving ESG into the Core

Bloomberg: The Cheap, Powerful Climate Fix Energy Companies Are Ignoring

  • Fossil fuel companies emitted more than 120 million metric tons of methane in 2022.

  • According to IEA, preventing routine methane releases could cut emissions from oil and gas. The captured gas can be sold at a profit and this gives the option to reduce methane emissions globally at non-net cost.

  • 260 billion cubic meters of natural gas is wasted through flaring and releases annually, of which the IEA estimates more than three-fourths could be transported to markets.

  • The U.S. Environmental Protection Agency is imposing stricter fines on and gad facilities exceeding methane release thresholds.

Green Biz: Good Jobs and Green Jobs Should Not Be Mutually Exclusive in The US Steel Industry

  • Green steel standards indicate demand for low-emission steel production is primed for rapid growth.

  • The transition to green steel without government intervention could reduce the current number of union jobs. Currently, the U.S. steel industry employs 131,000 individuals domestically.

  • The Inflation Reduction Act (IRA) includes a domestic manufacturing tax credit, supporting domestic steel production, and a program for prevailing wage rates to support fairly paid jobs and protect union workers’ gains.

ESG Today: BMW Sources Low Carbon Aluminum for Vehicle Production

  • The new agreement between BMW group and global metals and mining company Rio Tinto will provide full traceability of the aluminum that will be used in vehicle production in the U.S.

  • This agreement extends to the efforts of BMW to combat climate change to reduce vehicle lifecycle emissions by 40% and reduce supply chain emissions by 20% by 2030

  • The aluminum will be sourced from Rio Tinto’s hydro-powered operations in Canada. The approach can save about 70% of emissions compared to conventionally manufactured aluminum.

ESG Today: AllianzGI to Begin Voting Against Companies that Don’t Link Exec Pay to ESG Performance

  • The investment manager Allianz Global Investors (AllianzGI) has warned that this year, it will start to vote against directors of large-cap European companies that fail to integrate ESG KPIs into executive pay policies.

  • The firm will also be voting against directors of high-emitting companies that don’t have adequate net-zero goals, strategies, or climate-related disclosure.

  • AllianzGI will also be evaluating pay packages that are generous relative to pay increases for the wider workforce, especially if these companies also underwent major layoffs or restructured.

Government Policy Bloomberg: Bill Gates Sees IRA Driving ‘Healthy’ Growth in New Energy Tech

  • Bill Gates stated that the Inflation Reduction Act (IRA) will have a “healthy” impact, in terms of creating a market for green hydrogen. Gates discussed how the funds from the IRA will help to reduce the cost of green hydrogen and allow it to be adopted globally.

  • The author states that solar and wind power needs to be complemented by nascent technologies such as carbon capture and storage, green hydrogen, and industrial battery systems to ensure consistency.

  • One downside of the IRA, according to Gates, is that it “distorts somewhat” electric vehicle trade between the US and Europe; Gates hopes for a refinement of the IRA to allow for more free trade and competition.

Bloomberg: Used EV Prices Are Falling Just in Time for a New US Tax Credit

  • The Inflation Reduction Act (IRA) allows for the first time a federal tax credit for used EV cars for up to $4,000.

  • The credit comes with conditions to apply for it:

  • The buyer has to earn less than $75,000 annually or $150,000 a year in jointly filed taxes.

  • The credit can’t be applied twice to the same vehicle.

  • The vehicle must be at least two years old, sold by a dealer, and cost no more than $25,000.

  • IRA incentives have changed how car dealerships have priced their used EV cars. Consumers are also buying based on the new federal incentives.

Reuters: Germany Throws Weight Behind Energy Transition To Defend Its Turf

  • To boost energy transition technologies Germany has identified three core measures while scaling up green power production and its transmission to defend its home turf.

  • Financial support for investments, hedging tools, and subsidizing innovation.

  • Germany will improve tax provisions to allow the transition to wind and solar power at the national level, and possibly cooperate with European projects.

  • The country’s goal is to produce at least 80% of electricity from the wind and sun by 2030.

  • Joerg Ebel, president of Germany’s solar industry group BSW, said that Germany is behind in production facilities for solar technologies.

Bloomberg: Thailand to Ban Plastic Waste Imports From 2025 to Cut Pollution

  • Thailand has announced plans to restrict plastic waste imports and will ban scrap shipments starting in 2025. Starting this year, plastic waste imports will be restricted to 14 manufacturers located in Thailand’s free trade zone. Next year, inflows will be cut by half.

  • Plastic that enters the recycling programs of rich Western countries often ends up shipped by brokers to poorer nations. Many of the items end up incinerated or dumped in landfills. Countries in the global south have historically borne the brunt of the world’s plastic pollution, and countries like China and Thailand are now taking action to combat it.

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