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ESG Weekly News Update: July 18, 2022

General ESG News

Forbes: Storytellers For Sustainability Needed

  • The urgent need for compelling sustainability storytelling, especially that which resonates with “normal” people, is steadily increasing. One clear example of this is the most recent IPCC Climate Change report now including specific impacts that everyday people can have on climate change.

  • The IPCC notes, “narratives enable people to imagine and make sense of the future through processes of interpretation, understanding, communication and social interaction.”

  • Exercising influence in the storytelling industry is more important than ever. Planet Placement is a guide for TV and filmmakers for making content that will help set the cultural agenda in ways that support the planet, and it was created by the agency Futerra.

  • Currently, failures in sustainability storytelling have led nearly 20% of those under 35 years old to believe it is too late to fix climate change, according to recent research. Storytellers now face both the challenge and the opportunity to inspire individuals to take action in favor of the planet.

New York Times: The Rise and Fall of America’s Environmentalist Underground

  • The destructive Earth Liberation Front became popular in the late 1990s (though condemned by mainstream environmental groups), and has become even more relevant in 2022 as America’s more mainstream environmental movement has started to take a more confrontational and radical approach to inspiring change.

  • New York Times journalist Matthew Wolfe takes an in-depth look at the world of environmental activists and the future of activism in this audio cast.

The Wall Street Journal: Ukraine War Pushes Millions of the World’s Poorest Toward Starvation

  • The global food crisis is being exacerbated by increasing extreme weather and economic disruptions from the coronavirus pandemic and Russia’s invasion of Ukraine. According to the World Food Program, 47 million people have been pushed into acute food insecurity since March of this year, taking the worldwide total to 345 million. The effects are being felt the worst in Somalia, Ethiopia, South Sudan, Yemen, and Afghanistan.

  • While market prices for some staple foods have dropped, these price decreases can take months to have an impact on hard-to-access countries due to supply chain constraints. Beyond this, high fuel prices are making it more difficult to ship food aid and drinking water to these regions.

  • Humanitarian organizations warn that the war in Ukraine is drawing attention and resources away from other crises, and countries like Somalia are being hit all at once by aid cuts, global export restrictions, and negative climate change impacts like prolonged drought.

  • In many of these regions, the food crisis is one of demand more than supply, with prices soaring too high for families to afford staples like grains and cooking oils. Remediation of these negative impacts relies heavily on the stabilization of the global supply chain.

Bloomberg: Green Tech Boom Threatened as Solar Prices Surge to Decade High

  • The prices of polysilicon, a key material in making solar panels, have surged to the highest since 2011 and are causing problems throughout supply chains. These prices could derail solar development projects and slow the global adoption of clean energy.

  • Analysts from Solarbe note that if these high prices continue, “all ground utility-scale projects will be stalled.”

  • Demand for polysilicon has increased faster than countries could build new factories to produce it, but experts hope that relief may come this quarter, as production is expected to increase.

Bloomberg: The World Needs to Spend $110 Billion a Year to Curb Methane

  • The world needs to spend $110 billion a year, a ten-fold increase, to curb methane and avoid the worst of climate change. According to a Climate Policy Initiative report, money put towards reducing methane releases is “one of the highest ratios of global warming benefit per dollar of capital invested.’’

  • Approximately two-thirds of the amount spent on cutting methane leaks is for the waste sector. However, the biggest opportunity to mitigate emissions is from oil, gas, and coal operations, yet this sector currently only receives $100 million out of the $11 billion. Private industry corporations may be the best to address this issue.

  • Methane is the primary component of natural gas and has 84 times the warming power compared to carbon dioxide within its first 20 years in the atmosphere. Agriculture and livestock contribute the most to methane generated from human activity, then fossil fuels and waste.

Forbes: In An Alternate Universe — Early Mover Advantage In Buying Carbon Credits To Offset Your Firm’s CO2 Footprint

  • ESG data measurement is complicated, and carbon offsets can be more problematic, especially for asset managers that consider the carbon footprints of the firm and asset portfolios.

  • A helpful practice may be to identify and evaluate common elements within an enterprise’s footprint, such as air travel. A two-step process to offset a firm’s carbon footprint from air travel may be to:

  • Measure the firm’s carbon footprint from air travel and

  • Evaluate strategies to develop a carbon offset strategy for the firm’s air travel.

  • There is an “early mover” advantage for those who buy carbon offsets because prices increased 30-50% in less than twelve months.

Forbes: Rising Social Unrest Over Energy Food Shortages Threatens Global Stability

  • Sri Lanka has a near-perfect ESG rating of 98.1 out of 100, which may be the reason the country has self-declared bankruptcy as it is now unable to purchase enough fuel and feed its population.

  • This event may provide insight into future trends as an analysis of ESG rankings shows that many nations with high ESG ratings are developing and have the highest risk of experiencing famine.

  • Instability around the world has resulted from fuel shortages, supply chain disruptions, and inflating prices. The United Nations World Food Program has reported 345 million people on the brink of starvation which is a 25% increase from the start of 2022.

  • Some food shortages are resulting from governments prioritizing climate and ESG goals over food production. In Sri Lanka, one cause of the collapse was the decision to switch from chemical fertilizers to organic fertilizers which significantly reduced crop yields.

Forbes: To Win With ESG, Start By Failing

  • Executives are under pressure to integrate ESG practices into their corporate agenda, yet the direct attention from customers and stakeholders is causing a fear of failure.

  • Although the fear of failure is understandable, apprehensive actions can hold a company back.

  • Agile development, or working in small and intentional increments, could be key for a company to integrate ESG ideas while minimizing failure risk.

  • The right people and technology are important for agile development, as well as a connecting process across the entire business.

Bloomberg: This High-Tech Trailer Delivers Green Power When Climate Disaster Strikes

  • The Sesame Solar Nanogrid trailer uses solar panels, battery packs, and a green hydrogen-powered fuel cell for carbon-free power.

  • It was created for climate emergencies such as wildfires, power grid failures, or hurricanes.

  • They can be used as a home or to help provide relief and essential services in case of an emergency.

  • The trailers are 20 feet long and sell for about $100,000 to $300,000 depending on preferred size and power capacity.

Bloomberg: Amazon Deforestation Hits Record High In New Blow to Bolsonaro

  • Deforestation in the Brazilian Amazon reached a record high in the first half of the year. The rate of destruction rose 11% from the prior record a year earlier to almost 4,000 square kilometers, the data shows, and alert tip monthly records four times in 2022, including June.

  • Amazon deforestation has accelerated during the administration of President Jair Bolsonaro, and the deterioration of Brazil’s environmental reputation may be turned against him by challengers as he seeks reelection in October.

Reuters: Shareholder ESG support down but not out, researchers say

  • New data collected by Reuters found that support for shareholder resolutions on ESG topics at U.S. companies dropped to 26.6% in 2022 from 32% in 2021.

  • According to the data to Reuters collected from activist groups and researchers, activists won a majority of support on 34 ESG resolutions so far in 2022, the same level as a year earlier.

  • 266 shareholder resolutions on ESG topics were withdrawn this year- a record- up from 223 in 2021, and single-digit support for a larger number of conservative shareholder resolutions in 2022 helped lower the overall support.

Forbes: Preparing Your Board For Enhanced ESG Requirements

  • According to Forbes Finance Council, in 2022, corporate boards need to be prepared to:

  • Disclose their individual climate-related expertise.

  • Engage with institutional investors on ESG priorities ahead of the proxy season.

  • Provide greater insight into the criteria and methodology used in the company’s ESG disclosures.

Diversity, Equity, and Inclusion

Forbes: Why Personal Sustainability Is Important And How Leaders Can Cultivate It

  • The founder of Regenerate, a training firm focused on sustainable performance for high-pressure career professionals and fast-paced companies, gives insight into how personal sustainability conversations are going in the workplace.

  • If a company forces people to take PTO, they're not seeing the connection between their energy/ personal sustainability and the factors driving the business

  • On an individual level, personal sustainability occurs when you're able to prioritize and compartmentalize your work. It’s important to begin to practice self-disconnection, overcoming the fear of disconnection, and respecting of boundaries.

  • Leaders must encourage people to develop personal sustainability. It's important to ask yourself as a leader: What materially different efforts will be required to make my people successful? How do I position and implement the learning and tools to build the necessary capabilities I wish to see? How do I sustain it over time?

Forbes: How to Create the Ideal Corporate ESG Program to Better Support Women

  • A survey of executives by Deloitte found that “diversity, equity, and inclusion” was the top ESG disclosure topic. There is significant interest in how women are being recruited and the value of their opportunities when employed.

  • Here are five experiences that will make a corporate ESG program stand out and make sure companies aren’t just hiring diverse people but are also giving them opportunities and support:

  • Returnships

  • Flexible hours and remote work opportunities

  • Executive DEI program sponsorship

  • CEO score card representing ESG

  • Safe spaces

HR Dive: Why one DEI pro says class background should get more attention

  • According to CJ Gross, founder of Ascension Worldwide, class background is often overlooked as an aspect of workplace diversity, despite the fact that it is deeply engrained into personal identities and can provide an entirely new perspective on other aspects like race, ethnicity, gender, disability status, etc.

  • Class-based bias can be an obstacle for people before they even enter the workplace, Gross argues. This happens when employers look at resumes and see where people live, where they went to school, etc. One way to help avoid this in the recruiting process is to scrub resumes and applications to remove any information that might lead to this type of bias. Class background also places barriers to entry in different fields, such as consulting.

  • One way to promote equity and support employees from diverse backgrounds is to provide mentoring opportunities – ways to learn from those who have worked to become successful in their field. Genuine mentorship is something that cannot be bought.

Bloomberg: More Workers Ready to Quit Over ‘Window Dressing’ Racism Efforts

  • According to data collected by Edelman, Black and Asian employees have declining trust in their employers to do the right thing regarding racism.

  • In 2020, after the murder of George Floyd many companies made lofty multi-million-dollar pledges to address racial inequality, but “there’s a gap between the expectations that were raised and the delivery. It didn’t happen,” said Edelman’s U.S. CEO Lisa Osborne Ross.

  • The Edelman survey revealed that diversity chiefs earned the least credibility from employees, Ross said “the responsibility for that lies squarely with CEOs who often sideline DEI efforts or don’t include the head of DEI among their direct reports.”

ESG Disclosures, Standards, Rankings, and Reporting

The Wall Street Journal: Businesses Urge SEC to Consider Mergers in Climate-Disclosure Rule

  • Companies are urging the Securities and Exchange Commission to alter its proposed climate-disclosure rule to allow deal makers adequate time to report information about acquired companies. Businesses worry the proposal could delay or hasten merger or acquisition deals.

  • Climate-related disclosures could expand the due-diligence period or make a deal less appealing if buyers are required to report on acquired businesses without adequate time to integrate them into financial statements.

  • Conducting this process on a target company can take one to three months, though specific information requirements and timeline have not yet been released, executives and lawyers are concerned about the effects it may have.

Forbes: Prepare Now - ESG Investors On New SEC Climate Rules

  • The comment period for the SEC’s proposed climate rules closed after receiving approximately 14,000 comments. The SEC will now have to review the comments before releasing the final rules, which will likely differ from the proposed rules.

  • Kristina Wyatt is Persefoni’s Senior Vice President and Deputy General Counsel as well as a former member of the SEC team that developed the SEC proposed climate rules. Wyatt anticipates legal challenges to the rules and said, “I think those are two lines of debate. One goes to the legal authority that the SEC has, or doesn't have…Then, the other is just sort of the scope of the proposals, whether they go too far, whether they go far enough, and there's certainly a lot of debate about that.”

  • Wyatt also calls on public companies to prepare greenhouse gas inventories, reports, and strategies because regardless of what ends up in the final rules, climate disclosure rules are coming.

Investment Trends

Reuters: Analysis: Bear market puts ESG investing to its first big test

  • The bear market that began this year, a result of rising interest rates and political concerns, is testing investors’ commitments to ESG funds, which had been previously outperforming but are now seeing record-low outflows.

  • However, for interest in these funds to be truly deteriorating, it would need to be happening faster and more severely than the broader market, which is also suffering.

  • One reason ESG funds have been underperforming recently is due to the fact that oil and gas stocks, which are excluded or underrepresented in ESG funds, have been outperforming in the recent energy crisis.

  • Investor surveys aiming to gauge future responses have seen mixed results. However, investment advisers note that client interest in ESG investing has been growing over the past year despite the recent underperformance.

ESG Today: BlackRock: Net Zero Transition Not Yet Fully Priced into Markets

  • According to a new publication by BlackRock, markets are still in the early stages of pricing in the effects of the net zero transition. In its 2022 Midyear Outlook “Back to a Volatile Future,” BlackRock expresses its view that the prolonged period of steady growth and inflation is over and investors should position for long-term volatility.

  • The publication presents positioning for net zero, bracing for volatility, and living with inflation as its three key investment themes.

Companies and Industries

Reuters: Volvo Cars to leave ACEA car lobby group over climate goals

  • The European Automobile Manufacturers Association (ACEA) consists of Europe’s 16 major car, truck, van, and bus makers. The ACEA has been the industry's primary lobbying group since its establishment in 1991.

  • The European Union proposes to ban fossil-fuel cars starting in 2035. In response to the EU’s 2035 deadline, the ACEA said that "any long-term regulation going beyond this decade is premature at this early stage." Conversely, Volvo has committed to having a fully electric car range by 2030. Volvo Cars plans to leave the ACEA by the end of 2022 due to the misalignment between Volvo's zero-emission strategy and the ACEA’s perspective. Stellantis, another top global carmaker, intends to leave the ACEA by the end of 2022.

Forbes: Living In A VUCA World: Stability Vs. Sustainability

  • There is growing pressure over sustainable actions from companies, especially in an environment where short-term fundamentals, such as oil prices and valuation of house markets are so relevant.

  • Stability in leadership is important. When companies reduce environmental fluctuation, they provide a strong space for economic development and trust in communities.

  • The ability to combine grounded sustainability plans with a stable path to success creates an impetus for organizational stability and employee retention while building out the business on a medium- to long-term growth path.

The Wall Street Journal: The Startups Predicting Climate Risk for Bond Investors

  • Historically, bond investing is used to predict and forecast interest rate fluctuations and how likely borrowers will repay their debt. This might be changing with the adoption of climate risk assessments.

  • Geospatial analysis could also help bond buyers better evaluate the credentials of ESG investment products money managers offer them.

  • Chief Executive Evan Kodra, from risQ, believes that even if only a small fraction of bonds are impacted by natural disasters, collateral damage could be significant. Today, about $4 trillion of municipal bonds are outstanding in the U.S.

The Wall Street Journal: Stuart Kirk, Climate Investing Activist, Resigns from HSBC

  • Stuart Kirk, who was head of responsible investment and research for HSBC, has announced his resignation from the institution. His action was motivated by comments made during a presentation in May. According to Kirk, investors should not worry about climate change.

  • Kirks’ comments set off a debate across the financial industry. Banks, asset managers, and other financial companies increasingly have touted their ESG credentials and made them a central plank in their own governance and strategies.

  • Critics say it is far from clear what difference the money has made to tackle the climate change problems, and that many “green” investments would have happened anyway.

ESG Today: US Foods To Ask Key Suppliers For Science-Based Emissions Reduction Commitments

  • Food company and food service distributor US Foods announced last week a series of new climate-focused commitments, including near-term goals to reduce operational greenhouse gas emissions and to address its value chain impact by engaging suppliers to set their own emission reductions.

  • US Foods plans to pursue validation from the science-based targets initiative (SBTi) for its new climate targets.

  • Kristen Coleman, Executive Vice President, General Counsel, and Leader of CSR at US Foods, said, “the expansion of our facility and fleet efficiency initiatives are a critical part of US Foods long-range sustainability plans to drive end-to-end change.”

Bloomberg: US Crosses the Electric-Car Tipping Point for Mass Adoption

  • According to a Bloomberg analysis of global adoption the U.S., Europe, and China, the three largest car markets, are moving beyond the tipping point of 5% of new car sales being powered only by electricity.

  • 5% is an important number because it appears to be the point when early adopters are overtaken by mainstream demand. Before 5%, sales tend to be slow and unpredictable and after 5%, rapidly accelerating demand begins.

  • Automotive companies have tipping points, as well. According to Bloomberg, in Europe, once 10% of an automaker’s quarterly sales go electric, the share triples in less than two years.

Government Policy

ESG Today: Germany Enshrines 80% Renewable Electricity Target into Law

  • Germany’s Federal Council has passed a series of laws approving an increase in the development of renewable energy projects over the next several years, as well as a target to meet 80% of electricity demand with renewables by 2030.

  • The laws include plans for onshore and offshore wind power, as well as solar expansions. Also, by 2032, 2% of Germany’s land area will be set aside for onshore wind power.

  • Earlier in 2022, Germany, Belgium, Denmark, and the Netherlands also signed an offshore wind pact to make the North Sea the “Green Power Plant of Europe.”

ESG Today: BP, Thyssenkrupp Launch Hydrogen Focused Steel Decarbonization Collaboration

  • Energy company BP and steel manufacturer ThyssenKrupp have announced a new partnership with the goal of decarbonizing steel by focusing on increasing low-carbon hydrogen and renewable energy for its production.

  • Steel production is one of the biggest emitters of CO2 globally, accounting for about seven to nine percent of emissions from global fossil fuel use.

  • Thyssenkrupp Steel aims to make steel production climate-neutral over the long term and produce 400,000 tons of CO2-reduced steel by 2025. Bp’s long-term strategy includes transforming from an oil company into an integrated energy company and reaching 50 GW of renewable power capacity by 2030.

The New York Times: Oil companies oppose a windfall tax in Britain despite record profits.

  • Oil companies believe that a new 25% tax on their profits could potentially discourage future investment.

  • These future investments include renewable energy investments.

  • The lack of renewable energy investments could harm Britain as current energy prices increase.

  • The tax was announced to help raise money for low-income households with high energy bills.

  • More discussion will come as oil companies and academics disagree on claims made by the oil companies.

ESG Today: EU Invests €1.8 Billion in Clean Tech Decarbonization Projects

  • The EU commission announced they are investing €1.8 billion in 17 clean tech projects.

  • These projects are projected to save 136 million tons of CO2 in the first 10 years.

  • The projects are in Europe and will be funded by grants.

  • The projects are mainly focused on clean energy practices such as the use of green hydrogen, carbon capture and storage, and advanced biofuels.

  • The 17 projects were selected due to their potential to lower GHG emissions compared to current technologies.

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