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ESG Weekly News Update: March 24, 2023

General ESG News

GreenBiz: Climate finance must center frontline, underrepresented and underserved communities

  • The climate crisis is a human crisis because humans created it, and its impacts reflect and reinforce existing inequality patterns. 3.6 billion people globally live in areas highly vulnerable to climate change. 80% of climate refugees are women. Frontline communities have been underrepresented and underserved in climate resiliency efforts. Climate investment needs a broader perspective on climate that considers gender, justice, equity, diversity, and inclusion.

Bloomberg: Warming Above 1.5C Likely in Near Term Unless World Acts Now, UN Says

  • According to a report released Monday by United Nations-backed climate scientists, continuing to burn fossil fuels threatens human well-being and the stability of our planet. The final statement from the world's leading climate science body summarizes five years of its own research across more than 10,000 pages. UN Secretary-General Antonio Guterres echoes the call to “massively fast track climate efforts by every country in every sector and on every time frame.”

  • The following are a few of the points the report underscores about climate change and its impacts.

  • The world must cut greenhouse gas emissions to 60% below 2019 levels by 2035.

  • Current levels of climate adaptation are insufficient. Increased warming will make adoption harder.

  • It is likely that the world will exceed 1.5C warming in the near term. Emissions must peak before 2025 for a 50% chance to hit 1.5C with little to no overshoot.

  • Guterres called on developed countries to accelerate their plans, moving their 2050 pledges to end emissions up to 2040. He also stresses eliminating all new coal plants by 2030, and having no coal plants anywhere by 2040.

Greenbiz: Fed Money Starts Flowing for EV Charging

  • Last week the Biden administration opened applications for cities, states, tribes, and other public entities to try to enter the first round of a $700 million grant funding to deploy EV chargers within communities and alongside highways.

  • The bipartisan infrastructure bill aims to deploy $2.5 billion across five years to help install public EV chargers and hydrogen, natural gas, and propane fueling networks.

  • Many consumers with electric vehicles cannot travel more than 300 miles in the U.S. due to the battery range on the car. Currently, there are 80,000 public level two chargers in the U.S.

  • The Union of Concerned Scientists predicts that the U.S. will need between 170,000 to 330,000 public DC fast chargers and around 6.2 million public and workplace level 2 chargers by 2035.

Reuters: Water’s big moments risk getting lost in the woods

  • In New York this week, the United Nations hosted its first major confab on water security since 1977. Delegates are seeking to make their case for $1 trillion per year in water financing – a case that builds itself after record-breaking water scarcity, flooding, and other water-related crises.

  • The issue is that water financing lacks collaborative commitment – there is no Paris Agreement for water, and no multinational commitments to reduce water use or pollution. This puts the burden on the private sector to allocate capital.

  • Another problem many institutions face is that water projects are too small, with many including just a handful of corporations. However, financial institutions are starting to see the opportunities in financing water security and are starting to get on board; for now, the impact is just too small. What is needed are commitments from governments, companies, and investors at the UN conference in New York to spark real action.

KnowESG: FCA Highlights Improvement Areas for ESG Benchmarks

  • In September of 2022, the Financial Conduct Authority (FCA) in the UK sent a letter to benchmark administrators emphasizing the potential risk of inadequate disclosures for ESG benchmarks. Since then, a preliminary review of ESG benchmarks has been completed.

  • The FCA has now sent a follow-up letter to the administrators that outlines the issues identified in the review. These issues include insufficient detail about ESG factors considered in benchmark methodologies, a lack of clarity in the presentation of underlying methodologies for ESG data and rating products, a failure to fully implement ESG disclosure requirements, and improper implementation of ESG benchmark methodologies.

  • It is expected that all benchmark administrators will develop strategies to address the issues highlighted in the letter, and collaborative efforts with the government are underway to support the regulation of ESG ratings.

Companies and Industries

ESG Today: Nestle, Starbucks, Microsoft Back Closed Loop Partners’ Circular Economy Infrastructure Platform

  • Closed Loop Partners, a circular economy investor, announced several global companies have joined its new recycling and reuse infrastructure platform. The platform was launched in November of 2022 with $700 million in backing from global alternative asset investors.

  • Several new investor companies have set circular economy and sustainable packaging goals, including Nestle, “which is committed to making 100% of its packaging recyclable or reusable, and to reduce the use of virgin plastics by a third by 2025. Meanwhile, Starbucks committed to shifting away from single-use packaging and aims to achieve a 50% reduction in waste sent to landfills from stores and manufacturing by 2023.”

ESG Today: Google, LevelTen Pilot Process to Accelerate Clean Energy Purchase Deals by 80%

  • Google is collaborating with LevelTen Energy, a renewable transaction infrastructure provider, to develop a faster and easier RFP process for Power Purchase Agreements (PPA). Their approach will reduce costs, risks, and negotiation timelines.

  • The new and more standardized solution can speed up the time to negotiate and execute clean energy PPAs by around 80%. This will accelerate clean energy deployment and open the market to new buyers. Typically, the process can take over a year, but this new process has already been used to enable clean energy contracting in two months.

Government Policy

Forbes: The Implications Of DeSantis’ 19 State Anti-ESG Alliance

  • 18 Republican Governors joined Florida Governor Ron DeSantis in an alliance against ESG. They announced that they will use their respective state pension funds to undermine ESG efforts in the United States, “ensuring corporations are focused on maximizing shareholder value, rather than the proliferation of woke ideology.”

  • The alliance also calls for legislative action to limit state and local investments, the ability of state agencies and municipalities to issue green bonds, and financial institutions’ ability to use “social credit scores.”

  • The impact of the alliance is mostly symbolic as the announcement document has no legal authority.

Bloomberg: Biden’s Made-in-USA Mandate for Tax Credit Sparks Solar Dispute

  • The Biden administration will soon decide how much American-made equipment must be used in renewable projects in order to get an extra tax credit under the new climate law. This is currently a dispute between energy developers and solar panel manufacturers.

  • The issue is the ‘domestic content bonus’ – worth up to 10% in extra tax credits – that is aimed at bringing clean energy manufacturing (back) to the U.S. with the goal of expanding job creation and investment.

  • Solar manufacturers want the standard applied to both solar panels and their component cells, but developers are arguing for the phasing in of the requirements or to provide partial credit to domestic components, since the country currently “lacks the capacity to produce certain products in adequate volumes to meet domestic demand.”

  • The law already provides certain exemptions, and the bigger fear on both sides of the debate is that the IRS might do something that is too short-sighted to give any real certainty and leaves the real problem to be solved later.

Forbes: Biden’s First Veto: How We Got Here In The ESG Debate

  • President Biden has issued his first veto, reinstating the ERISA rule to allow the use of ESG in pension funds. Under ERISA, the Department of Labor manages what factors fund managers can consider when investing retirement savings.

  • The primary factor has been and continues to be profit; the ESG debate happens when considering what factors go into calculating profit. The process of predicting returns still lacks clarity, ad many conservatives believe that ESG-related factors have either no impact or a negative impact on returns and are little more than a political tool.

  • Biden’s veto likely means that the ERISA rule will stand, and the next wave of debate will happen at the state level, as well as in the development of ESG regulations and reporting standards.

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