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ESG Weekly News Update: July 1, 2022

General ESG News

The New York Times: Businesses Are Bracing for the Political and Social Fight Post-Roe

  • Businesses are increasingly caught in the middle of political and social issues in the U.S., with competing demands from customers and clients, activists, shareholders, and elected officials. As one expert notes, the issue “forces politics into the workplace.”

  • U.S. businesses must decide what the Supreme Court decision regarding Roe v. Wade means for employee health care coverage, and they must prepare for the possibility of further destabilizing rulings.

  • Local officials in states that are restricting access to reproductive health care are already threatening to punish businesses that help employees gain access to it elsewhere, and activists are calling on businesses to cut donations to officials who oppose access to reproductive health care and rights to privacy. Many companies are being called upon to confirm their previously-made commitments to support employees and cover travel costs to access certain medical care, including reproductive care.

  • An added layer of complication for businesses is that many are moving operations to lower-tax states, which are now the states that are poised to enact the tightest restrictions.

  • Many international political leaders and business leaders have already spoken out in opposition to the Supreme Court ruling, some even citing the damaging impacts to both the U.S. economy and economic prospects for women that would result from restricting access to reproductive health care.

  • During the COVID-19 pandemic, women crossed the threshold of exceeding 50% of the U.S. workforce; companies cannot afford to remind silent during this “time of reckoning.”

Business for Social Responsibility (BSR): Key Ways for Businesses to Respond to the Fall of Roe v. Wade

  • The recent Supreme Court ruling to overturn Roe v. Wade will unleash pressure on businesses to mitigate harm and meet worker, consumer, and investor expectations. The ruling disproportionately affects women who are already disadvantaged by structural inequalities, and findings from numerous studies reveal that employed adults across all demographics would prefer to live in a state where reproductive care is legal and accessible.

  • Beyond stakeholder expectations, there is evidence that comprehensive access to reproductive health care has an impact on businesses’ bottom lines, and companies in more restrictive states may now suffer a competitive disadvantage in an already challenging labor market. Several points of action to consider include:

  • Mitigating harm and ensuring equitable and inclusive benefits are available to support workers’ health and reproductive health needs.

  • Using large corporate platforms to engage in relevant public policy at the state and federal level.

  • Aligning political contributions with ESG commitments and workforce values.

  • Protecting voting rights.

  • Speaking out and aligning actions with public statements.

  • Supporting relief efforts to mitigate the current and anticipated harm incurred by workers navigating new burdens to accessing care.

Forbes: Indispensable ESG

  • Internal and external stakeholders have become more invested and interested in environmental, social and governance (ESG) practices.

  • Organizations in every industry feel pressure to include ESG practices but the implementation of these practices varies company to company.

  • Organizations feel the most pressure to include environmental and social practices.

  • The manufacturing industry has come out as a leader in ESG implementation due to early scrutiny and having access to necessary resources to be successful.

  • Data and a push from employees have been key in developing company ESG strategies.

Forbes: Manage Supply Chain Risk, Reap ESG Rewards

  • While ESG reporting is still largely voluntary, a broad set of stakeholders now demand increased visibility into ESG-related risks.

  • According to the Deloitte 2020 Extended Enterprise Risk Management (EERM) survey, organizations are investing in key third-party risk domains, including climate risk (74 percent), environmental risk associated with air pollution and water waste (57 percent), and labor and modern slavery risk (54 percent).

  • In order for manufacturers to improve their supply chain management of risk and quality Forbes suggests that companies:

  • Map supply chains

  • Assess risk

  • Trace products

  • Comply with customer audits.

Forbes: Americans Want To Buy Green But They Don’t Trust Companies

  • Most Americans are concerned with the environmental impact of their purchases and are willing to pay more for sustainable products even in the face of today's inflation.

  • A recent study conducted by GreenPrint found that 75% of American consumers are worried about the impact of the things they buy, and 66% are willing to pay more for sustainable products.

  • How to ensure sustainable purchases is unclear to American consumers, as 78% don’t know how to identify environmentally friendly companies.

  • Trust in companies is dwindling, with only 38% of Americans believing companies most or all the time when environmentally friendly claims are made.

Bloomberg: Net-Zero Targets Aren’t Attainable Without Ending Deforestation

  • A net-zero carbon emission goal is not possible for the current global economy without ending deforestation.

  • The Race to Zero campaign, backed by the UN, urges both companies and investors to reduce carbon emissions.

  • Global Canopy, Science Based Targets initiative and the Accountability Framework initiative published a report specifying that for any company that has committed to having zero emissions by 2050 must look at their supply chain and remove any deforestation practices.

  • The protection and restoration of tropical forests can potentially result in an 18% decrease in emissions by 2030.

  • Out of the many companies that the Global Canopy considers essential in reaching the goal to end deforestation, 40% have pledged to reach net-zero carbon emissions by 2050.

  • Slow progress may cause 90% of companies that are part of this pledge to fail but investors are beginning to cut ties with deforestation driven companies.

Diversity, Equity, and Inclusion

Forbes: How Companies Can Drive Diversity, Equity and Inclusion In The Contingent Workforce

  • Focusing inclusion efforts on full-time and contingent employees is essential for business success given that companies have grown their contingent workforce by more than 50% since pre-pandemic.

  • Focusing on the education of employees and managers will increase the knowledge and awareness among the workforce of organizational pain points and actionable steps needed to drive transformational change.

  • Creating accountability and tracking metrics is essential for advancing DEI in the contingent workforce.

  • Sharing progress and setbacks increases transparency in a company's DEI progress and is essential to invite collaboration in improving the workplace.

Forbes: Millennials And Gen Z: Now Is The Time To Reshape Businesses To Harness Their Power

  • Millennials are expected to make up 75% of the workforce by 2025 and Gen Z employees are entering in record numbers, meaning the two generations are poised to have a significant influence on how the workplace transforms in the coming years. There are four strategic areas business leaders should consider to harness the power of the younger generations:

  • Shifting demographics

  • ESG practices

  • Employee value proposition

  • Robust technology.

Forbes: Two Years After George Floyd’s Murder, Is Your DEI Strategy Performative or Sustainable?

  • The murder of George in 2020 was the impetus for a wave of pledges of support for DEI across corporate America, there is evidence two years later that this wave of activity has been largely performative.

  • Companies like Wells Fargo and the National Football League have recently been accused of conducting fake interviews with diverse candidates even after positions had been filled just to meet diversity objectives.

  • Leslie Short, author of the book Expand Beyond Your Current Culture, discusses common pitfalls of DEI strategies and the importance of integrating DEI into the foundation of companies in order to be authentic, accountable, and committed.

Bloomberg: Fostering an Inclusive Workplace (Video; 7:05)

  • Aisha Washington, HPE chief diversity, equity and inclusion officer, discusses how people are looking for organizations that are socially conscious and care about the people. Three things to focus on while developing a DEI strategy are advancement, equity, and inclusion. Diverse talent is a competitive advantage, important for retention, and “it is the right thing to do.”

  • To retain talent, employees seek employers that offer coaching and opportunities like development programs in order to envision their career paths and continue growing. Employees also prefer flexibility, especially women.

Forbes: Talent Is Evenly Distributed; Opportunity Is Not: How Tech Leaders Can Reach Diverse Talent Pools

  • The “Great Resignation” is in full swing and white-collar workers across the US are leaving their thankless jobs in search of better career opportunities.

  • Regardless of high salary offerings and perks many people from marginalized and nontraditional communities have been excluded from many tech careers because of the educational and technical skills requirements.

  • According to the CEO of Springboard, boot camps can help fill this gap by providing accessible, affordable and flexible learning models, while offering new and cutting-edge skill sets.

ESG Disclosures, Standards, Rankings, and Reporting

Bloomberg: Tesla Among Firms Targeted by Investors Over Climate Reporting

  • Institutional investors have criticized Tesla for not disclosing its environmental footprint through global reporting standards. They have called on Tesla, Saudi Aramco, Exxon Mobil Corp., Glencore Plc, Volvo Group, and others to disclose climate, water, and forest impacts through the CDP.

  • More than 13,000 companies use CDP as their disclosure system, as asset managers are increasing pressure on companies to use consistent reporting metrics to avoid greenwashing.

  • Companies that adhere to CDP standards better prepared to deal with stricter ESG regulations, which is becoming more important as the U.S. Securities and Exchange Commission is working to propose tough climate disclosure rules.

ESG Today: EU Markest Regulator Releases ESG Ratings Market Assessment as Part of Process to Regulate Sector.

  • The European Securities and Markets Authority announced on June 27 the publication of its assessment of ESG ratings providers.

  • This publication was done to regulate current ESG ratings providers.

  • Some of the most popular providers include MSCI, Sustainalytics, ISS, and Moody’s/VE.

  • Most ESG ratings users criticized the lack of data for specific industries and minimal methodology transparency.

Investment Trends

Reuters: European fund managers set to go all in on ESG -- Survey

  • A new survey by PwC found that 72% of European asset managers are considering halting all non-ESG product launches, and more than 60% are planning to do so by 2024.

  • The survey revealed that as much as 68% of financial advisors and banks plan to stop their distribution of non-ESG products.

  • According to Oliver Carre market leader at PwC, “As regional regulations become increasingly stringent and as efforts towards the development of global ESG standards intensify, managers – especially those willing to compete at a global level – will be pushed towards an all-encompassing alignment of their products and operations with ESG.”

Bloomberg: Investors Want European Banks To Go Further on Board Diversity

  • The boardroom of European Financial services companies are failing to meet investor expectations in terms of their gender balance and the technology and sustainability expertise they possess.

  • While accountancy, finance and legal expertise is well represented on their boards of the listed firms analyzed, just a third of bank boards have individuals with sustainability backgrounds. That falls to 11% for wealth and asset managers and just 4% of insurers.

ESG Today: Business Leaders Urge G7 to Ramp Carbon Price, Set Policies Enabling Private Market Investment in Climate Action

  • A group of CEO’s from leading companies and financial institutions issued a call upon G7 government to institute policies and practices enabling private sector capital mobilization for investment in the transition to a low carbon global economy.

  • The statement published by the Sustainable Markets Initiative, a global sustainability coalition, includes top executives of professional service firms such as KPMG, PwC, Deloitte, EY, financial service firms Bank of America, HSBC and State Street and others

  • In order to help facilitate the needed private sector investment, the statement highlighted a series of critical action areas for the leaders of large industrial economies, meeting this week at the G7 summit in Germany beginning with the establishment of a meaningful carbon price and effective carbon markets.

Companies and Industries

ESG Today: Neste, ATR, Braathens Operate First 100% Sustainable Aviation Fuel Flight

  • The completion of the first 100% sustainable aviation fuel (SAF)-powered test flight on a commercial regional aircraft was announced by renewable fuel supplier Neste, regional aircraft manufacturer ATR, and Swedish airline Braathens.

  • SAF is produced from sustainable sources like waste oils and agricultural residues and is estimated to generate an 80% reduction in greenhouse gas emissions relative to conventional fuel.

  • This is the latest in a series of sustainable aviation milestones, with the UK pledging to deliver the first net-zero emissions transatlantic flight by the end of next year and United Airlines announcing the completion of the first passenger flight powered by 100% SAF.

Forbes How CFOs Can Mobilize A Company To Meet Climate Goals

  • As more and more companies adopt ambitious climate goals, CFOs are being tasked with turning such ambitions into feasible realities by embedding carbon reduction strategies into operations and strategy.

  • The SEC has proposed new and more rigorous rules for climate risk disclosure that will require management accounting competencies to forecast and assess the impact of climate risks and opportunities on future cash flows.

  • From a skills and competencies perspective, members of the CFO role must be fully conversant in the domestic and international climate, and ESG, and sustainability reporting and disclosure

Wall Street Journal: Tesla, Ford and GM Raise EV Prices as Costs, Demand Grow

  • High gasoline prices are causing many Americans to consider electric vehicles (EVs), but prices for EVs are also increasing, largely because of the increasing costs of the materials used in their batteries, especially lithium, cobalt, and nickel.

  • Automakers are also increasing prices to capitalize on the growing demand for EVs. Overall, the average price paid for an EV in the U.S. in May 2022 is up 22% from last year.

  • Tightening regulations on emissions are prompting automakers to produce more EVs, and the money allocated toward EV development has doubled in the past two years. However, profit margins are expected to be small due to the high cost of EV materials and production. Automakers are working directly with materials producers to protect their bottom lines.

ESG News: World Economic Forum and Accenture Report Finds Achieving Full Circularity in the Automotive Industry Could Increase Valu Chain Profitability by 50%

  • A new report from WEF, Accenture, and WBCSD found that circularity can enable automakers to tap new sources of value beyond current business models, with opportunities to improve profitability across the value chain by 50% and generate lifetime revenues of up to 15-20 times greater than the vehicle sales price.

  • The report predicts that the greatest value will come from “as-a-service" models, including leasing/subscriptions and car sharing, as well as lifecycle services like repair and recycling.

  • To achieve full circularity, automakers will need to expand their perspectives to consider the full vehicle lifecycle, to collaborate closely with partners across the value chain, and to transform their operating models.

Forbes: Footprint Says To Ditch Your Plastic Packaging

  • Footprint is an Arizona-based maker of fiber-based packaging that creates alternatives to plastic-based food packaging. After testing various materials, Footprint currently uses recycled corrugated boxes and virgin fiber that are specifically designed to be recycled or composted.

  • In 2017, Footprint created fiber bowls for Conagra’s Healthy Choice Power Bowls meal line, which built a strong and growing food business for Conagra as Millennial and Gen Z consumers do not want to microwave plastics.

  • Despite the initial premium against plastic, Footprint is now competitively priced compared to plastic with an opportunity to be a saving as plastic prices increase.

  • Troy Swope, co-founder and CEO of Footprint, said, “We know that our demand will grow, and we must accelerate what we’re doing to meet that demand. It will be an immense challenge, but we’re customer-obsessed and are committed supporting our customers’ needs. We are in the process of taking Footprint public which will allow us to raise the capital we need to rapidly scale our business to meet customer demand.”

Bloomberg: Big Tech Gets Caught Up in Europe’s Energy Politics

  • Russia’s war on Ukraine is causing an energy shortage in Europe. During a meeting with EU energy ministers on June 27th, Luxembourg, the Netherlands, Belgium, Germany and Denmark proposed stricter efficiency measures. They hope for all 27 member states to impose the same rules on big tech and protect the EU’s green energy targets.

  • In 2018, EU data centers made up 2.7% of the bloc’s electricity demand, but that percentage is expected to continue increasing towards 3.2% by 2030 as people spend more time on the internet browsing, shopping or streaming movies.

  • Tech giants operating data centers in Europe, such as Meta and Microsoft, claim they already abide by their own high green standards. There are currently no binding comprehensive standards on energy efficiency at data centers across the EU. Although some big tech companies have been pre-approved and in progress to construct and run data centers in Europe, they have paused plans.

ESG Today: Salesforce, AT&T Launch Climate Solutions Collaboration

  • Salesforce is collaborating with AT&T and its Connected Climate Initiative (CCI). CCI joins corporate leaders, universities and non-profits to discuss connectivity solutions with the goal to support businesses in reducing 1 billion metric tons of greenhouse gas emissions by 2035.

  • AT&T also now uses Salesforce’s Net Zero Cloud to measure its carbon footprint with the hope to streamline and improve its emissions reporting. The Net Zero Cloud helps organizations plan and implement net-zero strategies as a greenhouse gas emissions solution for data tracking, analysis, and reporting.

  • Both companies are working together on an IoT solution that integrates AT&T IoT sensor data into Net Zero Cloud, to help companies track and reduce their own emissions.

ESG Today: Sustainalytics Acquires Property-Level Climate Risk Data Provider Aquantix

  • Sustainalytics has acquired Aquantix, a firm that provides climate risk data services for real estate and mortgage lending industries using AI-powered forecasting models.

  • According to Sustainalytics, the demand for this type of data is increasing from real estate investors, banks, and lenders, and the suite of technology solutions provided by Aquantix is expected to help meet these needs.

Bloomberg: Tech Companies Want More Eyes in the Sky for Wildfire Season.

  • Pano AI, a new high-definition camera startup company out of California, has emerged as a key player in detecting and tacking wildfires in Oregon.

  • The high-definition camera provides minute by minute snapshots of its surroundings that in turn help fast detection of wildfires.

  • The technology is so advanced it is actually able to differentiate between regular clouds and fog from smoke clouds.

  • Portland General Electric has five Pano AI cameras currently installed and plans to add 17 more this summer.

  • Other areas such as the state of California and Australia are looking to use this technology too, hoping to reduce the damage wildfires cause each year.

CBC: Nickel is a key element of electric vehicles — but mining it takes an environmental toll

  • According to Greg Dipple, using the waste from nickel mines as carbon sinks has the potential to lower the environmental impact of mining metals used for electric vehicles.

  • The process that Dipple developed is called carbon mineralization where the ground rock byproduct from extracting metals and minerals is used to absorb carbon from the atmosphere and the carbon becomes underground rock.

  • Mining is considered to be critical to the green energy transition, metals and minerals are very important to many renewable energy technologies.

ESG Today: Bank of America Sources 160 MW of Solar Energy to Power Operations

  • Bank of America announced a new agreement with Constellation to purchase solar power and renewable energy certificates from a solar power project.

  • According to Jim McHugh, Chief Commercial Officer of Constellation, “Through this purchase, Bank of America is demonstrating its commitment to addressing the climate crisis by directly supporting the development of a new-build renewable energy asset. We’re focused on expanding our suite of sustainable power options, which will soon include an hourly carbon-free solution, to help our customers reach their net zero emissions goals.”

Government Policy

The New York Times: Supreme Court Strips Federal Government of Crucial Tool to Control Pollution

  • This week, the Supreme Court issued a ruling that limits the Environmental Protection Agency (EPA)’s ability to regulate carbon emissions from power plants. The ruling will make it more difficult for President Biden to achieve his goal of cutting the nation’s GHG emissions in half by 2030.

  • Republicans applauded the ruling, stating that it will limit the power of “unelected, unaccountable bureaucrats” (Senator Mitch McConnell), while the Supreme Court’s three liberal justices dissented, saying the court had stripped the EPA of the “power to respond to the most pressing environmental challenge of our time.”

ESG News: NATO aims to cut emissions by 45% by 2030, be carbon neutral by 2050

  • NATO plans to cut its civilian and military GHG emissions by 45% by 2030 and to become carbon neutral by 2050 in alignment with Paris Agreement targets. NATO is also planning to help allies in reducing their militaries’ carbon footprints, which are often exempted from national emissions reduction targets despite being some of the highest energy consumers and emissions producers.

  • Experts argue that improvements in military vehicle technology will not only help curb emissions but also make the vehicles more advanced and resilient.

Bloomberg: Climate Action Protesters Spark Chaos in Sydney’s City Center

  • Protesters from Blockade Australia blocked major roads in the Sydney’s central business district, because they feel as though Australia isn’t doing enough to stop the current climate emergency.

  • According to a post on the Blockade Australia Facebook page, “Ecosystem collapse is now, it’s happening now. It’s happening now and Australia is blocking it. And we’re here to block Australia.”

  • In the last few years Australian state governments have begun proposing harsher laws to punish climate protesters.

ESG Today: G7 to Launch “Climate Club” to Coordinate Decarbonization, Address Carbon Leakage

  • The recent G7 summit in Germany resulted in plans to establish a “Climate Club” by the end of this year. The Climate Club involves collaborative efforts on climate action, particularly focusing on industrial decarbonization.

  • This new initiative will help address carbon leakage risks, which is a situation where companies move the production of emissions-intensive goods to countries with less stringent environmental and climate policies.

  • The G7 leaders also discussed climate goals, such as a “highly decarbonised road sector by 2030” and “a fully or predominantly decarbonised power sector by 2035.”

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