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ESG Weekly News Update: March 31, 2023

General ESG News

Bloomberg: Record Heat Waves Push India Closer to Limit of Human Survival

  • India’s national weather office has forecast rising temperatures for the nation after it experienced its hottest February in more than 100 years. There are fears that this year will see another record-breaking heat wave – repeating what happened last year – leading to crop damage, blackouts, and other devastating consequences.

  • Temperatures in the densely packed cities can reach as high as 50 degrees Celsius (122 degrees Fahrenheit), with many lacking access to well-ventilated housing or air conditioning.

  • Climate scientists also note that India is typically more human than equivalently hot places, which makes sweating less efficient and compounds the heat stress for humans.

  • While all nations are experiencing the impacts of global warming, India is an outlier. There are compounding factors like the urban heat island effect, specific weather patterns, and rapid population increase in India that are increasing the effects on people.

  • To mitigate the damage, urban planning guidelines and other policies are crucial for prioritizing green spaces, shade, and improved ventilation in building design. At the corporate level, there needs to be increased investment in research and development for low-energy cooling solutions and energy-efficient building design.

GreenBiz: The good news about climate tipping points

  • A recent report from the Bezos Earth Fund, SystemIQ, and the University of Exeter -- “The Breakthrough Effect” -- pointed out some climate tipping points that could mean the difference between a habitable planet and an uninhabitable one.

  • According to the report, there are “positive socio-economic tipping points” that are key to accelerating decarbonization and the clean energy transition. It notes that high-emitting sectors do not exist in isolation, and zero-emissions solutions can impact multiple sectors at once.

  • For example, one tipping point is the optimization of fertilizer use, which can reduce emissions by 70% with measures like improved crop rotation, matching fertilizer with crop needs, and livestock dietary shifts. Elements like green ammonia (produced through clean energy) and blue carbon-sequestering ammonia are key ingredients in fertilizer. According to the report, green ammonia production is predicted to be both technologically mature (and scalable) and economically viable within a decade.

Forbes: 15 Leadership Tips For Delivering Bad News

  • Forbes Communications Council members provide tips for business leaders on how to deliver unfortunate news in the most sensitive and effective ways.

  • In terms of delivery, members advise being direct, truthful, and respectful without a “veil of ignorance.” Instead, leaders should deliver the news with empathy, solutions, and ownership of any responsibility for the scenario.

  • In preparation for the communication, business leaders should consider what customers will say or think about the action. They should also plan the conversation backward, read a draft of the news from the audience’s perspective, and test the communications’ impact with a smaller audience, such as an internal team, before releasing a wider distribution.

  • Leaders should prepare talking points and responses to anticipated questions and hidden assumptions. Lastly, they should respond openly and with genuine concern.

Investment Trends

ESG Today: Investor Group Urges Companies to Provide “Credible Net Zero Transition Plans”

  • The Institutional Investors Group on Climate Change (IIGCC) announced Monday the launch of the Net Zero Engagement Initiative (NZEI), aimed at scaling and accelerating climate-related corporate engagement.

  • This initiative will help to enable investors to act on their net zero commitments to align their portfolios with the goals of the Paris Agreement. It will also help companies understand how to better respond to investor questions and requests.

Companies and Industries

Sustainable Brands: 1% for the Planet Impact Fund Reaches First Anniversary with 6 Initial Investment Partners

  • 1% for the Planet launched its Impact Fund about a year ago, which is donor-driven and invested into two separate funds: Trillium’s ESG Global Equity Fund and Parnassus Investments’ Core Equity Fund. Donors can either invest in the two funds or set up their own donor-advised fund (DAF) within the Impact Fund.

  • CapShift is an impact investing advisory firm that is helping 1% manage the daily efforts to operate environmental work for the organization.

  • In its first year, the Impact Fund has 125 donors and $350,000 in assets under management. 1% CEO Kate Williams hopes to reach $1.5 million by next year. In May, the Impact Fund will direct funding to six chosen partners engaged in reputable work in the climate space. The partners are internally selected using a process similar to how 1% chooses philanthropic giving. The partners include organizations involved with the protection of Indigenous groups in the Amazon, biodiversity, and regenerative ocean farming.

Bloomberg: EU Moves Towards Zero-Emissions Cars After German Deal On E-Fuels

  • The European Union is set to agree on rules that will require new cars to have zero emissions after 2035. This follows an “agreement between the EU’s executive arm and Germany on provisions that would allow room for cars running solely on e-fuels after 2035.”

  • The commission is said to propose a “Delegated Act specifying how e-fuels-only vehicles would contribute to the CO2 emission reduction target” that the commission has committed to.

  • E-fuels are made using renewable energy and carbon dioxide captured from the air. Many of the carmakers within the region are expected to focus on battery-powered vehicles.

Forbes: ESG Should Be Supported By IT

  • The European Union’s Corporate Sustainability Reporting Directive (CSRD), set to require all companies listed on European exchanges to report on ESG goals by 2026, will make organizational leaders more aware of their day-to-day impact.

  • ESG reporting requires high levels of data collection and calculations. Information technology (IT) can provide many of the solutions companies are looking for in terms of their ESG goals. For example, in the medical and laboratory industry, speech-to-text algorithms are used to write notes and mixed reality is being used to reduce carbon footprints and the number of errors that could potentially be made in experiments.

  • The IT industry has the potential to create solutions to measure, analyze, and implement innovations in the ESG area.

GreenBiz: The controversy around plant-based meat is missing the point

  • Despite recent headlines, consumer appetite for plant-based proteins and sustainably-sourced ingredients is both strong and growing. However, food choices are so personal that it’s often difficult to make dietary changes based on just facts; there need to be elements of convenience and taste that make it worth the change.

  • A recent survey found that seven in 10 meat eaters are at least open to trying alternatives, and 21% of consumers are looking to reduce their meat intake in general.

  • Regardless of the reasoning behind the decision to choose a plant-based meal – whether it’s an ethical choice, related to food sensitivity, or out of a motivation to avoid the upstream and downstream consequences of meat production – the choice has an impact on the future of the plant by significantly reducing the carbon emissions associated with that meal.

ESG Standards and Regulation

ESG Today: IASB Explores Improvements to Climate-Related Disclosure in Financial Statements

  • The International Accounting Standards Board (IASB) has announced the launch of a new project aimed at exploring changes to the corporate disclosure requirements in financial statements. IASB Chair Andreas Barckow highlighted some of the questions received from stakeholders regarding reporting:

  • Why companies that are expected to be affected by climate-related risks do not provide information about these effects in their financial statements;

  • Why companies with net-zero commitments do not recognize liabilities or impair the value of their assets as a result of these commitments; and

  • How companies should factor long-term uncertainties into the measurement of amounts in financial statements.

  • Barckow also stated that the IASB could potentially leverage the work of the International Sustainability Standards Board (ISSB) -- which is currently completing its first two reporting standards – and consider issues like covering both risks and opportunities, as well as scenario analysis to inform financial statements.

Forbes: Who Does Regulating ESG Help?

  • Politicians and people who are traditionally against government regulation of private industry are currently doing everything in their power to regulate investing where ESG is involved. These politicians are even going so far as to try to instruct the insurance industry on how to underwrite policies.

  • These people are the same that lobby against environmental and safety regulations that benefit the public but that they fear could hurt their bottom line.

  • Only seven of the 535 members of the previous Congress have worked in the securities industry, and less than 8% total have any experience in banking, investment, etc.

  • The campaign against responsible/sustainable investing is pandering, and implementing anti-ESG legislation could cost states hundreds of millions in borrowing costs by limiting competition for government services.

  • These measures also assume that ESG metrics and pro-ESG bills will negatively affect financial performance, despite a lack of supporting evidence. In fact, pro-ESG bills still prioritize maximizing financial returns and minimizing risk.

  • Ultimately, adding additional data and metrics into securities selection is a benefit to returns. The more information, the better, and this includes non-financial metrics. While it is true that there are still issues with ESG ratings consistency, the bottom line remains the same, which is that additional data helps inform better investment decisions.

Government Policy

GreenBiz: The White House's 2024 budget proposal prioritizes climate tech

  • The Biden administration’s 2024 budget proposal includes several climate-related initiatives, such as requests of:

  • $1 billion to further explore fusion technology as a clean energy source;

  • $905 million to create clean energy jobs in communities previously dependent on fossil fuels for employment;

  • $52 billion to promote industrial decarbonization;

  • $241 million to improve clean energy infrastructure and environmental permitting;

  • $75 million to expand the capacity of domestic supply chains for clean technologies; and

  • $1.371 billion to accelerate the deployment of clean transportation.

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