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ESG Weekly News Update: June 17, 2022

General ESG News

Green Sense Radio – Podcast: Derek Young Joins Robert Colangelo to Discuss ESG Reporting

  • This week, Summit’s ESG Managing Director Derek Young spoke with Robert Colangelo on Green Sense Radio Podcast. They discussed the history of corporate social responsibility, the rise of ESG reporting, and its significance for companies and stakeholders.

Sustainable Brands: P&G Unveils New Strategy to Help Address Global Warming Crisis

  • Procter & Gamble announced an expansion of its environmental sustainability efforts that will make more water available in critically water-stressed areas. They have created a global portfolio of water restoration projects that will help to protect ecosystems and improve water quality for communities and wildlife, among other solutions.

  • These actions build on P&G's Ambition 2030 sustainability efforts. The new water-related goals are centered around the making of its products and the use of its products. P&G wants to restore more water than consumed at P&G manufacturing sites in water-stressed countries and in high-water-stress metropolitan areas.

  • P&G is also building on existing efforts such as providing clean drinking water to people in need, accelerating water innovation at scale, enabling people to reduce their water footprints, and continuing to make facilities and manufacturing plants more water efficient.

Forbes: What Is ESG’s Role As A Market

  • There are three major groups that have adopted ESG for their own specific motivations: ESG investing, ESG services, and corporate ESG.

  • Financial services leaders drive ESG with the notion that more responsible businesses attract more capital, and ESG investing has become a fast-growing phenomenon.

  • ESG-as-a-service has grown from the increased attention to ESG in business, and encompasses accounting firms, consultancies, law firms, credit and ratings agencies, technology companies, and data specialists.

  • Corporate ESG encompasses the people, processes, and policies responsible for managing the non-financial aspects of the business, and they mostly work in risk mitigation, investor relations, or another compliance context.

Forbes: Why The Pushback On ESG Is Good For ESG

  • As the landscape of ESG evolves, so does its criticism, and there are several actions leaders can take to learn and grow from the criticism:

  • Listening to the content of the criticism and acknowledging the problems with ESG

  • Not treating all ESG as good or all ESG as bad

  • Avoiding “greenwishing” and fanciful thinking

  • Acknowledging fair-weather investors, customers, and employees

  • Creating specific and data-driven measures

  • Focusing on risk mitigation and value creation

  • Focusing on the long term.

ESG Today: Less Than 10% of Climate Funds are Aligned with Global Decarbonization Goals: S&P

  • According to a new report by S&P Global Sustainable, 12% of green or environmental investment funds and an even smaller proportion of climate-focused funds are on track to meet global climate goals as set by the Paris Agreement.

  • The report investigated 12,0000 funds and ETFs, and only 300 of those funds identified the use of green or environmental language in their names or investment objectives. And less than 10% of funds are being assessed as in alignment with the Paris Agreement.

  • The report notes: “Our analysis points to a systemic issue — few funds, even those that describe themselves using green or climate-specific language, are on track to meet the goal of the Paris Agreement. Understanding the trajectory is an important step toward planning for a low-carbon future.”

ESG News: Context Labs Announces Platform Partnerships to Accelerate Global Energy Transition

  • An enterprise data fabric climate technology company, Context Labs, announced a platform partnership with Encino Environmental Services, LLC and Satlantis, LLC.

  • This partnership offers Decarbonization-as-a-Service™ (DaaS™) platform integration to collect emissions performance testing and monitoring from the ground and microsatellite-based sensor data, to accurately identify emissions.

  • According to Context Labs CEO Dan Harple, “Context Labs aims to solve one of the world’s major challenges, accelerating the energy transition to carbon neutrality. Our DaaS™ platform, powered by our Immutably™ enterprise data fabric, provides an open and inclusive substrate for all forms of data.”

Forbes: Who Benefits From The Fight Against ESG?

  • Recently, state legislatures have been penalizing investment companies that consider ESG data when making investment choices.

  • Most state legislatures who are at the forefront of the fight against ESG are from states where fossil fuels are pivotal to their local economies.

  • Figures like Elon Musk and former Vice President Mike Pence have touted ESG as a scam, as being weaponized by social justice warries as well as a ploy by “woke left”. The reality, according to Peter Krull, is that “ESG metrics that are based on hard data only help the investment manager understand a company or municipality’s risk and operational situation better.”

Forbes: Consumers Love Sustainability, But Balk At Paying For It

  • A leading issue of sustainability is that it’s become a “branding swamp.” Surveyed consumers have expressed confusion about the various marketing statements about sourcing, content, recycling, etc. A Fidelity International survey found that 40% of clothing shoppers felt “poorly informed” about sustainability but “highly interested” in a brand’s labor and environmental practices before purchasing.

  • Consumers want to purchase sustainable goods, but they don’t want to pay the higher prices along with all the other prices rising in the current economy.

  • As ESG and sustainability are top of mind at the corporate level, McKinsey & Company forecasts, “over the next five years, sustainability-driven increases in the annual capital budgets of retailers will be at least 10 percent. In select categories, the authors predict increases in cost of goods sold of up to 8 percent.”

Reuters: Comment: Why climate clauses in contracts are a powerful tool to reach net zero

  • Currently, many organizations have net-zero goals but lack clear strategies for achieving these goals. Many have focused on obvious emissions reduction methods, but to reach global net zero, organizations need systemic change.

  • The Chancery Lane Project (TCLP) is a philanthropically funded global collaboration of lawyers and sustainability professionals working to restructure contracts to combat the climate crisis.

  • Contracts are a powerful tool for delivering on climate targets because they are immediate, flexible, and they have a well-tested framework that can be imposed onto net-zero targets.

Diversity, Equity, and Inclusion

ESG Today: ISS ESG Launches Tool For Investors To Assess Modern Slavery Risk In Portfolios

  • Institutional Shareholder Services' (ISS) responsible investment arm, ISS ESG, announced Monday the launch of its Modern Slavery Scorecard. This tool will help investors assess modern slavery risks in their global portfolios and supply chains.

  • The scorecard will enable investors to assess portfolio exposure to modern slavery and identify controversies and slow-performing companies for engagement.

Forbes: The Great Realization: What Employers Should Realize About Age Diversity

  • The COVID-19 pandemic has caused a disruption in workplace culture, as well as an immediate shift to at-home work for those who did not lose their jobs. The “Great Realization” can be referred to as employees realizing what matters most to them in life and in work, as well as employers realizing what actually contributes to a successful workforce.

  • Recent research compiled by AARP shows that age-diverse workforces provide a competitive advantage, elevate productivity, and increase innovation. Employers should think holistically about the people that make up their workforce. There are three key focus areas companies should consider:

  • Developing a multigenerational workforce strategy to attract and retain top talent;

  • Being a magnet for talent by creating moments of collaboration, connection, and belonging;

  • Unlocking innovation and productivity through empathy.

ESG Disclosures, Standards, Rankings, and Reporting

ESG Today: UN-Backed Net Zero Finance Group Unveils Framework to put Finance Industry’s Climate Commitments into Action

  • The Glasgow Financial Alliance for Net Zero (GFANZ) has announced the launch of its proposed Net-zero Transition Plan (NZTP) framework to guide investors, insurers, and other financial services in putting their net-zero commitments into action. The new framework aims to provide sector-wide guidance for implementing science-aligned transition plans.

  • The framework defines a net-zero transition plan as “a set of goals, actions, and accountability mechanisms to align an organization’s business activities with a pathway to net-zero GHG emissions that delivers real-economy emissions reductions in line with achieving global net zero.” The guidance identifies four key economy emissions reduction approaches financial institutions can pursue.

  • The main components of the framework involve setting objectives and priorities for the plan, including targets and timelines, an implementation strategy, an engagement strategy, and embedding net-zero objectives into decision-making processes. The proposed framework is open for public comment until July 27, 2022.

Reuters: Prepare your teams now for SEC climate disclosure

  • The SEC’s recently released climate-related proposal could require disclosure and audit assurance of Scope 1 and Scope 2 GHG emissions, as well as Scope 3 upstream and downstream emissions along a company’s value chain.

  • According to Steve Soter, senior director at Workvia, “the importance of materiality is a main focus: The materiality assessment for financial reporting is now going to intersect with the materiality assessments for ESG and this is a really big deal for financial reporting teams as materiality is a bedrock principle in audited financial statements and disclosure.”

  • Soter notes that implementing these standards is something that will require a serious investment of time, and if the proposal gets adopted in its entirety, companies will have to start collecting climate and impact data now as well as developing a GHG reporting process that will be ready in 2023.

Investment Trends

ESG Today: Sky Backs New £100 Million Climate Tech Startup Fund

  • Founders Factory has launched its Planet Fund, backed by Sky, to support early-stage climate solutions projects. The Planet Fund aims to raise £100 million to support early-stage climate startups with an “operator first approach;” it will focus on decarbonization, resource preservation, resilience, and circular economy-related projects.

ESG Today: Persefoni Launches Carbon Modeling and Management Solutions for Companies and Investors

  • Persefoni, the creator of the climate management and accounting platform (CMAP), announced the release of a new toolset that includes the Climate Trajectory Modeling (CTM) and Climate Impact Benchmarking (CIB) modules.

  • The CEO of Persefoni, Kentaro Kawamori, says “If we want all businesses and investors to reduce carbon emissions, we must use technology and data to make the process easier. That’s why we are proud to bring our CTM and CIB tools to market to help business and investment leaders more quickly and easily achieve their decarbonization goals.”

ESG Today: Investor Group Commits $650 Million to Finance World’s Largest Green Hydrogen Platform

  • A group of investors committed $650 million to finance the world’s largest green hydrogen platform. Canada-based Manulife, Alberta Investment Management Corporation (AIMCo), the Ontario Teachers’ Pension Plan Board, and Singapore’s GIC will finance through venture capital firm Haddington Ventures' syndication program called Haddington ESP I.

  • Haddington ESP I will provide construction equity for projects developed by the Advanced Clean Energy Storage Joint Venture (ACES Delta). The initial funding fund a project “to use renewable energy resources to power 220 MW of electrolyzers that will split water into hydrogen and oxygen. The resulting green hydrogen will be stored in salt-dome storage caverns and made available to IPA, which plans to use it in its natural gas plant to generate electricity for its project participants.”

  • The hydrogen hub’s construction can begin this month, and the operations is expected to start in 2025.

ESG News: BlackRock Expands Voting Choice to Additional Clients

  • As a response to growing client interest and BlackRock’s dedication to democratize participation in the financial markets, BlackRock announced its expansion of opportunities for eligible clients to participate in proxy voting decisions, where legally and operationally viable. These eligible clients include public and private pension plans, insurance companies, endowments, foundations, and sovereign wealth funds.

  • BlackRock also published a white paper, ‘It’s All About Choice,’ that outlines the firm’s ambition to expand Voting Choice to all investors, including individual investors in funds.

  • Almost half (47%) of the $4.9 trillion index equity assets, including more than 650 pooled investment funds in the U.S. and the U.K., are now eligible to participate in BlackRock Voting Choice. BlackRock is also working with industry partners on a pilot that aims to enable all investors in a U.K. mutual fund to choose how their portions of eligible shareholder votes are cast on the companies in this fund.

Companies and Industries

ESG News: Franklin Templeton Institute Releases Latest Insights on Food Innovation and Related Investment Opportunities

  • The Franklin Templeton Institute released its latest insights paper, “Food innovation: Investing to feed our future,” focusing on the innovation and investments needed to feed the growing population.

  • The highlighted topics include increasing focus on the challenge of feeding a growing population amid a changing climate, the future of food, the banking sector and its role in managing and mitigating the impact of the food supply chain on biodiversity and climate change, rebuilding healthy soils, plant-based foods, COP26 goals of curtailing deforestation and building resilient agriculture, and clean energy infrastructure.

Bloomberg: Startup Kicks Off Sales of $265,000 First Solar Electric Car

  • The Dutch company Lightyear is making 949 models of its solar electric car, the first production-ready model of its kind, with curved solar panels covering the hood and roof. The car promises months of charge-less driving in summer months and an extended daily driving range from solar power.

  • Lightyear’s CEO argues that while electric cars are a step in the right direction, they are still dependent on the grid, which still relies on fossil fuel energy.

  • Following the production run of the Lightyear 0 model, the company plans to develop a more affordable model in 2024-2025 starting at 30,000 euros.

Forbes: How Sustainability May Alter The Food Chain

  • Consumers’ purchasing habits can change as they become more informed and aware of how their food choices are affecting the environment.

  • According to experts at the Food Innovation & Investment Summit in San Francisco, as consumers become more aware, their food choices will change but it will take time.

  • Almost a quarter of consumers 25 and under are vegan or vegetarian. The demand for quality, animal-based protein is not going to waver any time soon. Products being brought to market are going to have to meet those expectations.

New York Times: Microsoft Pledges Neutrality in Union Campaigns at Activision

  • Microsoft is acquiring Activision Blizzard for $70 million, and Microsoft and the Communications Workers of America union agreed to make it easier for employees to unionize at Activision. This agreement is the first of its kind in the technology industry.

  • Microsoft agreed to remain neutral if any of Activision’s eligible U.S. employees want to unionize. The employees will have an expedited unionization process and would no longer have to petition the National Labor Relations Board for an election.

  • The union believes that the neutrality agreement resolved any antitrust concerns stemming from the acquisition, and the union supports the deal, which will close by the end of next June. Brad Smith, Microsoft’s president, stated, “We will respect the fact that our employees are capable of making decisions for themselves and they have a right to do that.”

Reuters: Energy executives at transition conference still lean on fossil fuels

  • At a conference on global transition, energy executives discussed the need for fossil fuels, particularly natural gas, as the world grapples with strained energy supplies and rising prices. Since Russia’s invasion of Ukraine, various governments across the world have been focusing less on sustainability and the energy transition but more on supply concerns and oil and gas demands.

  • Patrick Pouyanne, Chief Executive of TotalEnergies, mentioned that the tight international fuel supplies are partially stemming from oil and gas companies answering the calls of political leaders to invest less in fossil fuels while the world is demanding more energy supplies. Governments have been encouraging renewable fuel investments to achieve carbon emissions reduction goals.

  • Lorenzo Simonelli, chief executive of Baker Hughes, noted the focus must shift more on carbon emission reduction and less on fuel sources. He said, "We must decrease emissions at the same time as increasing supply. Energy is good, emissions are bad." However, governments should have a clear plan for decarbonization. Tokollo Matsabu, ESG analyst at Environmental Defense Fund noted, “People are using the energy security crisis to say we need to expand, expand, expand, but from a climate justice perspective, it's not fair that the U.S. and EU want to expand their natural gas pipelines.”

Wall Street Journal Old Electric-Vehicle Batteries Are Getting a Second Life

  • Automakers are stepping up efforts to repurpose old batteries and tap surging demand for energy storage. Global investment in grid-scale batteries reached $6.8 billion in 2021, up from $4 billion in 2020, according to International Energy Agency estimates.

  • Used EV batteries can be resold for small-scale applications such as storing electricity from rooftop solar panels. Automakers and power-equipment companies have been trialing larger-scale second-life applications for years. One interesting fact is that the soccer stadium in Amsterdam uses nearly 150 new old Nissan EV batteries to power an energy-storage system.

  • Using reused EV batteries could be cheaper than new batteries, depending on the battery’s voltage and other factors. But the low volumes of batteries currently available means it is too early to know whether they will be a large-scale solution for the grid, he said.

Government Policy

Bloomberg: Australia’s New Government Confirms Tougher Action on Climate

  • Australia’s Prime Minister, Anthony Albanese, pledged to lower carbon emissions by 43% on 2005 levels by 2030, which is greater than Australia’s previous goals to achieve cuts of 26% to 28%. Albanese’s government also officially signed the updated climate commitment of the United Nations’ Paris Agreement on Thursday.

  • Albanese believes this stricter policy will set Australia up for “[a] future powered by cleaner, cheaper energy. A future in which we make more things here. A future in which we participate in the global effort to deal with the challenge of climate change, but also seize the opportunity that is there from acting on climate change.” On the other hand, ministers are managing energy supply with outages at coal-fired power plants, lower renewables generation, and the country’s strained electricity network.

Reuters ESG in the credit agreement: a closer look at sustainability-linked loan mechanisms

  • The SEC continues to advance new ESG requirements from companies in order to map current and future emissions. In the last 6 months only, the agency proposed 2 different disclosure rules targeting consistent, comparable, and reliable information for investors concerning ESG factors. In March, the agency proposed rules to improve and standardize climate-related disclosures for investors.

  • The market for debt, loans, and sustainable debt issuance continues to grow exponentially. The largest volume increase comes from sustainability-linked loans. Between 2020 and 2021, the issuance of this debt class more than doubled, reaching $1.689 trillion.

Financial Times Market mispricing of risk will continue

  • An announcement from the Government of UK indicates that in 2030 the retail price index will be abandoned in favor of a link to the consumer price index including housing costs. Experts estimate that over the remaining life of the existing stock of index-linked gifts, these savings could be between £90bn and £120bn at current market prices.

  • Price insensitivity here means that capital inflow into passive funds rewards yesterday’s winners and more specifically the big index constituents. There is a period in which correct strategies ensure prices remain a bad indicator of fundamental value while reinforcing any tendency to market bubbles as fresh money pours in.

New York Times: Goldman Sachs Is Being Investigated Over E.S.G. Funds

  • ESG reporting became a major priority for the Securities and Exchange Commission under the agency’s chair, Gary Gensler. The commission proposed changes that would require more disclosure from companies to investors about the risk that climate change and new government policies on it might pose to their operations.

  • In other countries, authorities are also stepping up their investigation into how firms market ESG criteria. The head of Deutsche Bank’s asset management business resigned when allegations surfaced over overstated claims on E.S.G. In May, HSBC suspended a director who led responsible investing at its asset management unit after he said policymakers had exaggerated risks from climate change.

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