ESG Weekly News Update: July 22, 2022
General ESG News
Reuters: Can Business Travel Get into a More Sustainable Flight-Path Post-Covid
Business travel is a key issue in sustainability. Corporate travelers make up 12% of customers in Europe but are responsible for 30% of emissions.
Out of 230 of the world’s largest businesses, 193 are failing to adequately address corporate travel emissions, even though they are often the biggest part of companies’ carbon emissions.
The pandemic has shown that video conferencing and other technologies are a sufficient alternative to corporate travel. A study done by Morgan Stanley suggests that a quarter of travel would be replaced by virtual meetings in 2022.
The Green Stay Initiative launched 15 months ago, spanning 72 countries and working to score hotels based on environmental impact. The scoring methodology considers carbon emissions, water usage, and waste production to assist companies in managing their business travel emissions.
Sustainable Brands: How Can We Direct Consumers Toward More Impactful Sustainable Behaviors?
Recent Sustainable Brands (SB) research, in partnership with Ipsos, reveals that 96% of people in the U.S. try to behave in ways that protect the planet, its people, and its resources at least some of the time. This means that people do not need to change their values, but they do need direction on how to actually engage in sustainable behaviors.
69% of respondents said they believe they can change company behavior with their purchasing decisions, and the same percentage also say they try to purchase from brands that act responsibly, even if this means paying more.
The disconnect is the gap between intention and action, the cause of which is most commonly cited, at least in the U.S. at this time, as the obstacle of high prices. People are in ‘survival mode,’ and are often feeling the need to sacrifice their values for necessities.
Additionally, many people said that they simply don’t know where to start and feel paralyzed by the intensifying climate crisis. The third most common obstacle cited is inconvenience.
Brand leaders must focus on making sustainable behaviors as easy and accessible as possible through their products and services. Additionally, there needs to be better education, myth-busting, and narrative building around what actions and choices will actually lead to the most positive impact.
Financial Times: Surging demand for cobalt spurs hunt for mineral in Australia’s mine waste
Geologists at the University of Queensland have discovered shocking amounts of cobalt in copper mine waste, and the Australian government is sending geologist teams out to search mine waste for more of the element. The discovery could be monumental in helping the country shift away from dependence on fossil fuels and become an exporter of clean energy minerals.
In 2021, for the first time ever, EVs became the largest end-use sector for cobalt (above other battery applications); the inclusion of cobalt in lithium-ion batteries makes them much more efficient.
The main sources of cobalt – especially the Democratic Republic of the Congo – are problematic in terms of human rights abuses. The possibility of a reliable stream of cobalt from elsewhere with a strong ESG regime will help make it cost competitive and attract buyers.
Developing new cobalt supply chains will also help to reduce China’s dominance of cobalt processing. The U.S. has already begun seeking out Australian cobalt, with General Motors signing a long-term contract with Glencore in Western Australia.
One main obstacle to Australia becoming a major exporter of cobalt is the speed at which battery and clean energy technology is evolving – investors may be hesitant to make long-term investments, and Australia needs the capital to construct new mines and bring them into production.
Financial Times: Chief sustainability officers prosper as ESG risks mount
In the past decade, chief sustainability officers (CSOs) have gone from being a corporate novelty to commonplace in management teams. In this evolution, the skills needed for the role have also changed – CSOs must be able to manage climate risk and also manage corporate matters at the C-suite level.
CSOs need to have expertise in the issues most material to business strategy, from legal and compliance to supply chains and human resources.
Activist investors are driving change and also driving up the market for CSOs and increasing their scope of influence.
However, the CSO role, itself, comes with risks. Last year, Desiree Fixler was fired from her role as sustainability officer at DWS for warning that the company’s claims about its ESG investing criteria were misleading.
Now, the SEC and whistleblower attorneys are beginning to view CSOs as a good source for tip-offs about greenwashing and other issues.
ESG Today: UK Commits to Net Zero Domestic Aviation and Airports by 2040
The UK announced the start of its “Jet Zero” strategy, a plan to achieve net zero aviation emissions by 2050, which includes net zero domestic commitments as well as for the country’s airports to reach zero emissions by 2040.
These commitments align with the UK’s Net Zero Strategy, a plan to achieve economy-wide net zero by 2050, and with the Transport Decarbonization Plan, an outlined strategy to reach net zero across the rail, road, and aviation sectors.
The UK aviation sector is responsible for 2-3% of global emissions and £22 billion to the UK’s economy. Efforts to address aviation emissions include improved aircraft efficiency, sustainable aviation fuels, and low or zero carbon propulsion systems.
New York Times: Did Nature Heal During the Pandemic ‘Anthropause’?
Despite the pandemic being “a global human tragedy,” the slowdown of human activity has become known as the “anthropause.” This time period was an opportunity to observe and evaluate how the natural world is affected by reduced human activity.
Amanda Bates, an ocean conservation scientist at Canada's University of Victoria, noted that “[h]uman beings are playing this dual role [as] threats to wildlife but also being custodians for our environment.”
Scientists observed that the anthropause improved air and water quality, reduced noise pollution, and recovered some human-disturbed habitats. On the other hand, because the pandemic disrupted local conservation, education, and monitoring programs, there have been reports of wildlife poaching and persecution along with illegal logging and mining.
Bloomberg: This Map Will Make You Optimistic About Fighting Climate Change
The map included in this article depicts estimated new job and public health opportunities based on transitioning from fossil fuels to green energy, in each state of the U.S.
In order to relieve current climate anxiety, Alexander Gard-Murry tries to add a positive spin by pointing out that it's good that a significant number of people are concerned about climate change and looking to make a difference.
The map Gard-Murry created is to showcase immediate opportunities and co-benefits in areas near the viewer that could provide a little optimism for the current situation.
Co-benefits include job opportunities, such as building wind turbines, and health benefits, such as improving air quality in your home by switching to electric appliances.
The New York Times: Plans to Fight Global Warming Face an Obstacle in Paris: Trees
Paris’s urban landscape is being redesigned and the local urban planning authority wants to make Paris a more climate-friendly city by cutting down trees throughout the city.
Climate activists and Parisian residents have begun to host small protests around Paris, they feel that the cutting down of the trees is, ironically, undermining the city’s environmental objectives.
Due to the warming of the planet, heatwaves have become more common globally and trees help to combat this by diverting some of the sun's radiative heat.
The Washington Post: The U.S. plan to avoid extreme climate change is running out of time
The Biden administration made climate policy promises in 2021 to lower U.S. emissions by 50 to 52% by the end of 2030, 101 months from this August 2022, against the 2005 baseline.
An analysis performed by the Rhodium Group, a research firm that closely tracks emissions policies, found that the US is on track to reduce emissions by somewhere between 24 and 35 % below their 2005 baseline by 2030.
A string of failed negotiations with Senator Joe Manchin “makes it harder, and it makes any additional actions by the executive branch that much more critical. The stakes are now that much higher,” said John Larsen, a partner with Rhodium.
Diversity, Equity, and Inclusion
Forbes: Longevity And Aging Should Be Part Of Every Companies’ People Strategy Says Organizational Expert
Ana João Sepulveda, a former researcher for responsible sales and marketing in Portugal, discovered unique business opportunities when looking into the aging market. She then launched 40+ Lab to specialize in the economics of longevity and aging. Sepulveda and her team now work to educate organizations and the government on why longevity matters, and how longevity and aging differ.
As people plan to live longer in current and future generations, they must plan for different circumstances, and organizations should be supporting their people through this and supporting sustainable growth.
Sepulveda has also worked with experts in the U.S. and realized that the problem is global in nature – with the U.S. population of more than 330 million and the Portuguese population of 10 million facing similar demographic challenges.
She argues that work environments need to be age and longevity friendly – they need to prioritize all ages working together and providing opportunities to older workers. There needs to be a perspective shift from focusing only on “culture fit” to also valuing “culture add.”
Forbes: Solving The Global Gender Wealth Equity Gap
The Wealth Equity Index confirms that, although ESG has been pushing equity, on average, women, will have less accumulated wealth for retirement than men.
The primary reasons for this are gender pay gaps, fewer opportunities for career advancement, caregiving responsibilities that create a negative impact on a women's career, and lack of strong financial literacy.
These primary reasons become more compounding the more senior the position is.
Ways to address this gender wealth gap include creating a workplace that values and practices physical and psychological safety, providing fair and sustainable wages, providing equal career advancement opportunities, and providing inclusive benefits and flexible work that allow for success in a variety of home situations.
Forbes: Making A Difference With Your Career Is A Skill - The CDO Of General Motors Says
Telva McGruder, General Motors Chief DE&I Officer, on making a difference with who you are and how you do your job, said, “If we say making a difference is making a difference for the people around you and making a big difference for the business you're in, and, maybe for the communities that you move in, that takes practice and it takes really sitting back and looking at how should I behave every single day, so that I'm making a difference for people.”
To motivate the people around her, McGruder focused on helping people and it took practice, she said: “I started working on making a difference for them…I started practicing and I started figuring out for different people, what do I need to do? For these teams, what needs to happen? And you look at what is the challenge that the team is facing…What’s really going on here?”
She listened to people, noting, “How do I listen with the third ear and really hear why decisions are being made? Let's go work on that. Not necessarily focusing on the superficial thing, the thing that everyone can see is happening. Let's focus on why that's happening and practice getting after that underlying why.”
PR Newswire: Companies See Long Road Ahead to Realize Their ESG Commitments, C-Suite Survey Finds
After the creation of ESG goals, many companies are now struggling to execute and meet those goals.
Leadership within these companies is divided on how to achieve short-term financial and business goals while still achieving their long-term ESG goals. There is also a noticeable lack of knowledge of how to build ESG programs, implement processes, and align strategies and internal culture.
Private companies see great potential in ESG goals and even believe that ESG issues should be addressed regardless if short-term financial performance is reduced.
Some of the biggest issues and challenges being discussed by leadership in regard to ESG goals include the cost of transitioning to greener energy, supply chain commitments, current social media “cancel culture,” and ESG ratings.
The lack of key performance indicators (KPIs) also creates a challenge for companies in that three-quarters of companies don’t have KPIs to track progress.
Investment Trends
ESG Today: Robeco Launches Climate Fund Targeting Net Zero Transition Leaders and Enablers
Robeco, an international asset manager, launched a Net Zero 2050 Climate Equities strategy which will apply a strict criterion for inclusion and target transitioning companies.
Companies will need to have a clear decarbonization pathway to net zero by 2050 or be able to provide materials or services to help others reach this goal.
The fund will follow the MSCI World Climate Change Index as a benchmark and focus on “just transitions” by incorporating social factors. Business models are being radically altered during energy transitions resulting in negative social impacts. This fund encourages companies to identify and minimize these social impacts.
Financial Times: Energy crisis prompts ESG rethink on oil and gas
Governments and companies are currently struggling to balance their emissions reduction commitments with new and pressing demands for energy security.
Some investors note that since many big energy companies are taking the net-zero challenge more seriously, and they play a critical role in the energy transition, it may be worth rethinking their role in sustainable investment. For example, 6% of European ESG-labeled funds now include Shell, in contrast to 0% last year.
There are arguments for the need to consider the social aspect of the clean energy transition – the need for energy security – which can be supplied by existing energy companies. Investors can encourage these companies to continue the use of the cleanest fossil fuels, like natural gas, and to use the least environmentally harmful extraction methods.
Still, restrictions on Russian fossil fuel supplies and rising prices threaten to derail clean energy and net-zero commitments, as governments and companies do not have the capacity to meet energy needs with green alternatives and must shift back to domestic fossil fuel production.
According to the International Energy Agency, the current shift presents an opportunity for big oil and gas companies to deliver on their net-zero pledges.
Reuters: What is the ‘S’ in ESG Investing?
The “S,” or social, in ESG investing became a focus during the COVID-19 pandemic as companies dealt with concerns for employee wellbeing and calls for action on social inequalities.
A survey by French bank BNP Paribas found that more than half of institutional investors worldwide felt that social issues were the most difficult to evaluate and integrate into investment analysis.
Social aspects of ESG include how companies interact both internally and externally. Social could encompass the company’s health and safety record, policies on diversity, equity, and inclusion (DEI), and labor relations between workers and management. Additionally, external issues could include the company’s relationship with community leaders, the ethics of suppliers, and product safety.
Fund managers assess environmental, social, and governance risks through “ESG integration,” this process evaluates ESG issues alongside traditional financial ones. Some investors may exclude stocks that do not have social values in alignment with their own. Others, called impact investors, seek out investments specifically with social benefits.
Wall Street Journal: Clean Hydrogen Projects Attract Big Investors
Over the past few years, investors have focused on new technological developments, such as hydrogen. One explanation for that is the commitment to meet the world’s climate goal.
The capital raised is also increasing. One venture capital group raised over $300 million to develop cheaper technology to turn natural gas, using clean electricity, into hydrogen and carbon black, which is a material that goes into rubber tires.
Such investment still presents risks. It is important to scale a lot and bring costs down. The competition against large energy companies is big, but the future of the energy industry shows a clear presence of government support with new technologies and regulations to make this industry take off.
Bloomberg: BlackRock Tilts the Tables on ESG Toward Value Stocks
A note circulated in May by BlackRock recommended that financial advisors reduce their tech and small-cap positions and lock in gains from commodities and energy stocks after “handsome rallies.”
The world’s largest asset manager refused to comment on specific funds in its model portfolios, which are used by scores of investors to decide how to allocate money in stocks, bonds, and other assets.
Managers of ESG funds have historically preferred to buy shares of companies in growth industries like technology because they tend to have fewer material ESG risks. Currently, the 5 sectors presenting the most ESG risks are energy, utilities, basic materials, consumer staples, and health care.
Top 100 Funds: Why private equity can lead on sustainability
According to a new paper from the Harvard Business Review, private equity has grown so much in recent years that the most urgent societal challenges cannot be addressed without its active participation in the sustainability movement.
Private equity firms have control over their portfolios from an ownership and governance perspective and have a strong influence on the board. The firms also have access to financial and sustainability information. Private equity-owned companies operate on a longer time horizon than publicly traded companies, which also helps facilitate a focus on ESG.
ESG leaders in private equity are becoming more sophisticated in integrating ESG factors in due diligence and onboarding, increasing transparency in reporting, and improving the ESG capabilities of their portfolio companies.
Two main areas where private equity can and should take immediate action are in the areas of carbon neutrality – committing to a net-zero target – and diversity, equity, and inclusion.
Sustainable Brands: Blended Finance Schemes Are Catalysing Real Impacts in Sustainable Development
Blended finance has emerged as an alternative in developing markets, where execution risks may be higher than is acceptable to conventional finance sources alone.
Major critics of blended finance are that it provides subsidies to businesses with little transparency on what has been achieved. In certain cases, blended finance vehicles have simply provided additional protection without any meaningful change.
The Subnational Climate Finance (SCF) initiative maximizes new finance for good by using best practice standards to ensure accountability and transparency about the sustainable impacts of its investments. It is an innovative consortium that brings together Pegasus Capital and its blended finance investors with civil society leaders Gold Standard, R20, and the Internation Union for Conservation of Nature (IUCN).
Companies and Industries
Bloomberg: Chinese Lithium Giant Pulls EVs Further Into Forced Labor Glare
Ganfeng Lithium Co., a lithium producer for BMW and Tesla and China’s top producer of the material, is beginning to assess battery metals projects in Xinjiang, opening new discussions about human rights abuses in the lithium supply chain and new concerns from activists and investors.
The company has stated that it recognizes the importance of “environmental protection, social responsibility and corporate governance,” which includes defending employee rights. It also stated that lithium exploration is still at an early stage in Xinjiang. Representatives for Tesla in China have declined to comment on the matter.
The U.S. and its allies have sanctioned entities with ties to the Xinjiang region and have stalled some imports through the Uyghur Forced Labor Prevention Act. Ganfeng’s plans risk drawing Tesla into the human rights controversy, although the company does perform audits of its suppliers and ends relationships with those that don’t meet its standards. One solution for Tesla would be to request to buy lithium from Ganfeng’s other operations that are not located in Xinjiang.
Bloomberg: Developers Target Absolute Zero Carbon in Green Office Arms Race
Some developers are committing to do away with carbon offsetting in their race to reach net zero, with Dutch developer Edge being the latest to pledge to achieve absolute zero in all new developments by 2050. The company has also pledged that all new developments will be net-zero carbon starting immediately.
The rush toward sustainable developments is also driven by the fact that valuations of “green” buildings have held up much better than older properties in recent years.
While developers previously focused only on operational carbon, the debate is increasingly turning to the carbon intensity of the building materials and construction process – the embodied carbon – which poses a much more difficult challenge for developers.
A partnership between Natixis CIB, a global financial institution, and Natixis Wealth Management will offer a new green debt product offering clients the opportunity to support the environmental transition via financing of renewable energy projects.
According to Mohamed Kallala, Co-head of Natixis Corporate & Investment Banking, “we are proud to have designed this innovative structured product, addressing the challenges raised by the environmental transition and incorporating a charitable dimension.” Natixis has donated 0.2% of the total securities invested to biomedical research.
The newly created product is eligible for life insurance policies, endowment contracts, and securities accounts.
ESG Today: Sustainable Drinking Water Tech Provider SOURCE Global Raises Over $130 Million
At the end of the Q2 of 2022, SOURCE Global, a sustainable drinking water technology announced it raised $130 million in a Series D equity financing round. The company’s largest patent, Hydropanels, uses the sun to draw pure water vapor out of the air and convert it into drinking water.
According to Dr. Cody Friesen, SOURCE Global CEO, “with this new round of funding, we will accelerate our work to make high-quality drinking water an endlessly renewable resource and move closer to our vision of bringing perfect water to every person”.
The company stated that it intends to further scale its commercial, community and consumer offering globally and boost innovation in advanced renewable water technologies.
One of the many participants in the funding round, Microsoft’s Climate Innovation Fund, believes that SOURCE Global has a strong mission of redefining access to clean water and safe drinking water and enhancing social and economic opportunity and resilience in water-stressed regions.
ESG Today: Boeing Unveils Tools to Assess Aviation Decarbonization Pathways
Cascade, a data modeling tool that Boeing recently unveiled, will be used to help the aviation industry reach a net zero emissions goal by 2050.
The tool quantifies the effectiveness of different strategies and fuels that can be used to reduce emissions for the 2050 goal.
This tool has been created in response to recent scrutiny that the aviation industry is responsible for about 2-3% of global greenhouse gas emissions.
Cascade will also be used to assess new energy sources such as hydrogen or electric sources.
The New York Times: This Pioneering Economist Says Our Obsession With Growth Must End
The NYT Interviewed renowned economist Herman Daly to further explore the concept of a steady-state economy as opposed to a growth economy. Daly speaks of the societal pitfalls of a growth economy.
Historically, we’ve linked economic growth to higher standards of living and lower mortality rates, don’t we have a moral obligation to pursue it? Daly responds, “When something grows, it gets bigger physically by accretion or assimilation of material. When something develops, it gets better in a qualitative sense. It doesn’t have to get bigger. An example of that is computers. You can do fantastic computations now with a small material base in the computer.”
How do you envision a successful steady-state economy? Daly says, “How do you envision a successful steady-state Earth? That question is easier because we live in one. Earth is not expanding. We don’t get new materials, and we don’t export stuff to space. So you have a steady-state Earth, and if you don’t recognize that, well, there’s an education problem.”
Government Policy
Bloomberg: Biden Vows Executive Action on Climate If Senate Doesn’t Act
Senator Joe Manchin put a sweeping tax and energy bill on hold and in response, Joe Biden vowed to take executive action on climate change.
The president’s economic package includes measures to address climate change, but its contents have already been shrunk significantly due to Manchin’s demands to hold down government spending.
Senate Democrats will work with the Senate parliamentarian official beginning next week to ensure the bill fully complies with Senate budget rule and then plan to bring the budget to the floor to bypass Republicans via the fast-track budget process.
ESG Today: UK Launches Taskforce to Support Integration of Social Factors in Pension Scheme Investments
Last year, the UK’s Department for Works and Pensions (DWP) sought feedback on how pension schemes approach social risks and opportunities. As a result, the UK government launched a new, minister-led task force to support integrating social factors into the ESG investing practices of the country’s pension schemes.
Guy Opperman, Minister for Pensions, will lead the task force and help address the risks and opportunities relating to issues such as workforce conditions, supply chains, consumer protection, and forced labor.
Wall Street Journal: The West’s Climate Policy Debacle
As rising oil and gas prices are surging and electricity grids may soon fail, “[i]t’s time for political leaders to recognize this manifest debacle and admit that, short of a technological breakthrough, the world will need an ample supply of carbon fuel for decades to remain prosperous and free.”
This article discusses a few key consequences of misguided climate policies:
Countries, including the affluent ones, are realizing they cannot take reliable electric power for granted as electric grids are struggling to meet demands.
The rushed green transition is raising energy prices across the board and affecting manufacturers.
As countries avoid Russian gas, elevated prices are causing supply shortages. Moreover, President Biden requested more oil production from the Saudis, and the Biden Administration may move on to Venezuela and Iran next for oil.
Wall Street Journal: Senate Climate Setback Puts Pressure on Biden
President Biden is pressured to use his executive powers to curb greenhouse gas emissions as congressional climate legislation is in jeopardy.
Progressives in Congress want the Biden administration to tighten regulations on power utilities, prevent new oil and gas drilling on federal land, and increase auto fuel-efficiency standards. Meanwhile, environmental advocates seek to stop offshore oil production or ban U.S. crude-oil exports. All could raise gas prices. On the other hand, Republicans would likely challenge anything that would limit production.
An oil-export ban may reduce America’s prices but would also cause a global heart attack as countries try to wean themselves off Russian oil and gas.
Environmentalists claim Biden could overcome limitations by using his emergency-power authority to implement climate change policies.
ESG Today: UK High Court Orders Government to Provide Details on Plans to Hit Net Zero Targets
Recently, the UK government failed to disclose detailed information on its plans to reach a net zero emissions target.
In October 2021, The Department for Business, Energy and Industrial Strategy (BEIS) released a net zero emissions goal. BEIS was required to include five-year carbon budgets, but environmental and legal campaign groups argued that BEIS failed to include key details and quantifiable contributions that would allow for meeting both the carbon budgets and total net zero targets.
BEIS is now required to publish a new report by the end of March 2023 that will include the key details and quantifiable contributions needed to meet their carbon budgets and net zero emissions goal.