ESG Weekly News Update: May 27, 2022
General ESG News
Forbes: Spot The Greenwashing
With the increasing accusations of greenwashing when it comes to corporate climate claims and pledges, it can be tempting to dismiss the pledges altogether, but it is important to remember that some companies are diligently working to make good on their promises. CDP has identified more than 250 companies it believes are ‘leading the way to a greener future.’
Regulators are increasingly turning their attention toward climate pledges, but in the meantime, there are things stakeholders, and the general public can look for to determine the credibility of corporate climate announcements:
How is net-zero defined? Is the company creating actionable plans or relying on carbon offsets?
Are there interim targets before 2050 (or the ultimate net-zero target year)?
What scopes/operations are included in the target? Does it account for a significant portion of the company’s overall footprint?
What is the company doing politically? Are they lobbying for or against climate action and legislation?
Forbes: Mindset Matters: The OKRs Of Mental Health And What Corporate Leaders Need To Know
The model of Objectives and Key Results – OKRs – provides a framework to define what organizations are seeking to achieve and what measurable actions are needed. As mental health becomes a more prominent topic in daily work culture, it can be useful to apply the OKR model.
The objective for business leaders may be to normalize mental health strategies as part of “day-to-day business life that will ultimately enhance performance, motivation, and a healthy culture of motivation.”
The key results – the ‘how’ of this process – involve evaluating employee needs and the mechanics of work, recognizing the importance of concepts like ‘flexibility’ and ‘autonomy,’ and maintaining an ongoing process of reimagining organizational strategies as needs change.
Corporate Knights: ESG Communications Need A Makeover
Reducing global CO2 emissions by 2030 will require a global paradigm shift toward viewing companies as ‘vehicles to enhance and support the greater good.’ While many public companies are setting ESG-related goals, joining coalitions, and crafting sustainability reports, communications about these initiatives are often vague, incomplete, and even misleading.
Greenwashing slows climate action – what is needed is a free exchange of information and ideas, as well as a communications infrastructure that can connect complex systems and industries. Telling only part of the story will no longer be tolerated by consumers, investors, regulators, and employees.
Companies that genuinely prioritize ESG have a lot to win, especially if they transparently share their progress – consumer loyalty, attracting and retaining top talent, improved reputation, green investments, educated stakeholders, etc. However, without a robust regulatory framework, this can be difficult.
The paradigm shift can also help with the inclusion of sustainability and ESG language into regular marketing and corporate strategy discussions.
ESG Today: Citi Launches Solutions to Channel Client Deposits to Sustainable Finance and ESG Investments
Citi has newly launched the Sustainable Time Deposit (TD) and Sustainable Minimum Maturity Time Deposits (MMTD), which are deposit solutions that allow clients to invest excess money in alignment with their sustainability goals.
The money from these two new solutions will be used to finance green energy projects, sustainable transportation, energy efficient buildings, and social projects.
Czeslaw Piasek of Citi said: “Sustainability is no longer an executive level only discussion. Finance and treasury departments can play a strategic role in helping their firms to deliver on Environment, Social and Governance (ESG)-related goals and become more sustainable businesses.”
ESG Clarity: Climate Ministers Discuss 2030 Coal Phase-Out Deadline At G7
The Group of Seven (G7) economic powers are considering a commitment to phase out coal power by 2030. This will build on the progress made at the June 2021 G7 summit in the UK where there was an agreement “to end new direct government support for unabated coal power by the end of last year.” Germany already announced national plans to phase out coal by 2030.
Some countries have opted to burn more coal to avoid relying on Russian gas since its invasion of Ukraine.
The G7 is being called to align climate goals and cooperate on areas such as green tariffs, carbon pricing, and markets for decarbonized products.
ESG Today: Salesforce to Invest $100 Million to Help Scale Carbon Removal Technologies
At the World Economic Forum Annual Meeting in Davos, Switzerland, Salesforce announced its new commitment to invest $100 million, through carbon credits, in technologies that remove carbon from the atmosphere. The initiative is aimed to help scale Carbon Dioxide Removal (CDR) solutions through 2030.
This initiative is part of the First Movers Coalition (FMC), which is “a coalition of companies committed to creating early markets for clean technologies addressing hard-to-abate sectors.” Salesforce is a founding member of the FMC.
Salesforce has been developing a series of sustainability initiatives. Salesforce also has plans to introduce climate obligations in its supplier procurement contracts and to integrate ESG performance in its executive compensation programs.
Forbes: Earth Stands ‘50:50’ Chance Of Passing 1.5 Degrees Warming Within 5 Years
The World Meteorological Organization’s recently reported a 50% chance that global average temperatures will exceed 1.5 degrees Celsius above pre-industrial levels within five years. This is an increased probability compared to the 10% likelihood during the 2017-2021 period.
Leon Hermanson, a researcher from the U.K. Met Office, noted, “A single year of exceedance above 1.5 degrees Celsius does not mean we have breached the iconic threshold of the Paris Agreement, but it does reveal that we are edging ever closer to a situation where 1.5 degrees Celsius could be exceeded for an extended period.”
Other researchers mentioned that the Earth’s long-term average temperature may hit 1.5 degrees Celsius by around 2033 and two degrees Celsius around 2060. Overall, the Earth has warmed about 1.1 degrees Celsius since industrial times due to human activity, and the rising temperatures have been causing widespread global impacts.
Bloomberg: Why Saving the Climate Requires a Tough Taxonomy: QuickTake
Taxonomies are systems to organize information and form codes for sustainable corporate conduct and investing. Most that currently exist focus on environmental risks. The European Union (EU) established a global benchmark with its taxonomy. Other countries such as Colombia, China, Japan, and other Southeast Asian countries have followed the EU.
The EU’s taxonomy focuses on climate change mitigation and adaptation that covers 170 economic activities and approximately 40% of the EU’s listed companies with operations that are responsible for 80% of direct greenhouse gas emissions. The EU is also working on four other environmental objectives and a social taxonomy.
The larger listed companies will be the first to comply with requirements and report their alignment with the taxonomies. Then, investors will likely invest in those with the highest degree of alignment. The EU is developing a central database of information to help calculate a company’s alignment with the EU’s taxonomy.
Moody’s: APAC – Preparing For The Next Chapter
On May 12th, Moody’s held its second annual flagship ESG APAC conference featuring Moody’s experts sharing research and analysis on biodiversity, sustainable finance, and climate-related risk. Here are some takeaways from the event.
Natural capital considerations are intertwined with climate and social risks. Nature related risks are moving up the agenda for policymakers and market practitioners. Moving forward the Task Force for Nature-related Financial Disclosures will be an important lever of action.
A key theme from the panel discussion was a call for policymakers and industry to collaborate on developing transparent, relevant, comparable, and interoperable standards and guidance, for taxonomy development and for wider reporting initiatives.
Data coverage and comparability remain a challenge for the financial industry.
Corporate Knights: Turning Dirty Diapers into Roads and Other Sustainable Innovations
92% of disposable diapers end up in landfills. NappiCycle is finding new ways to use soiled nappies. The Welsh company turns used diapers into carbon fibers that bind with asphalt to create roads twice as durable as conventional surfaces.
Norway is aiming to be the first country to make the shift fully electric vehicles. In 2021, 65% of new cars sold in Norway were electric vehicles. Only 8% of new vehicles ran only on gasoline or diesel, the rest were hybrids.
California startup, Air Protein, has raised more than $30 million to develop what it calls the first “carbon negative, earth positive protein source.” the recipe is a mix of high protein bacteria in a fermentation tank with carbon dioxide, oxygen, water, and minerals.
Scientists are studying “green ammonia,” which is produced using low carbon energy, as a versatile fuel for power plants and motor vehicles.
BBC: Why Is Climate ‘Doomism’ Going Viral – And Who’s Fighting It?
Climate Doomism is the idea that we are past the point of being able to do anything at all about global warming and that mankind is highly likely to become extinct. That is wrong, scientists say, but the argument is picking up steam online.
Alaina Wood, a sustainability scientist based in Tennessee, says, “Doomism ultimately leads to climate in action, which is the opposite of what we want.”
In its most recent report, the IPCC laid out a detailed plan that it believes could help the world avoid the worst impacts of rising temperatures.
Last year, the Pew Research Center ran a poll covering 17 countries, focusing on attitudes towards climate change. A majority of respondents said they were willing to change the way they live to tackle the problem. When asked how confident they were in climate action more than half said they had little to no confidence. Doomism taps into the sense of hopelessness.
Bloomberg: Climate Change Is The Easiest Problem To Solve At Davos
Panelists at Davos are discussing environmental issues with a large emphasis, a clear shift from previous years, when ESG topics were off the table completely. For the scientific community, however, this is still seen as a late commitment, as the pledge to reduce emissions started many decades ago.
The presence of Chinese officials, allowed to leave the country’s strict COVID lockdown, were the country’s climate envoy. The world’s largest emitter promised to do what is needed to meet the goals of the Paris Agreement, despite China increasing the relevance of coal to combat the energy crisis.
Focusing on climate solutions can also help leaders direct their attention away from other uncomfortable issues, such as Russia’s war on Ukraine.
Wall Street Journal: How Oversimplified ESG Scores Can Mislead
Regarding Marlo Oaks’s op-ed “S&P Hits U.S. States With Politicized Credit Scores”: The American Petroleum Institute’s members have been leaders on tracking progress on ESG issues for decades. Oaks writes that "S&P’s ESG metrics are tilted against places that produce natural gas and oil, jeopardizing U.S. energy leadership when it is most desired. “
The metrics undervalue the industry’s progress and infringe on the role of markets to determine the best energy path for the U.S.
Royal Meteorology Society: World Meteorological Organization Release The State Of The Global Climate Report 2021
Four climate change indicators broke records in 2021: greenhouse gas concentrations; sea-level rise; ocean heat; and acidification. According to the World Meteorological Organization (WMO), this is again another clear sign that human activities are causing planetary-scale changes in the land, ocean, and atmosphere.
The WMO State of the Global Climate in 2021 report confirmed that the past several years have been the warmest seven years on record. 2021 was “only” one of the seven warmest because of a La Nina event at the start and end of the year. This had a temporary cooling effect but not reverse the overall trend of rising temperatures.
Diversity, Equity, and Inclusion
Forbes: Looking The Part: Why Inclusive Teaming Is A Must When Working To Diversify The Enterprise
Companies that lack diversity have negative perceptions associated with them, Simone Morris has put together four tips for success in diversifying your team:
Ensure the team has the right members: The team must have competent and effective leaders, as well as clearly outlined roles & responsibilities.
Get the team ready by doing the work: Leaders in this space should ensure that their teams can maneuver critical feedback and uncomfortable topics.
Slow the pace: The issue of DEI in the workplace is not solved or overcome overnight.
Think big: To achieve a diverse, equitable and inclusive workplace you must think holistically and plan strategically.
ESG Book: More Than a Buzzword
The “More Than A Buzzword” report assessed the effects of gender diversity on global public corporations. It examined whether more diverse companies demonstrate greater non-financial transparency. The following are a few of the report’s findings.
There is a significant gap between companies committing to a diversity policy and those setting concrete diversity targets. An analysis of the top indices worldwide shows that almost all companies considered have committed to diversity policies. In 2017, less than half of companies with diversity policies had also set diversity commitments.
Gender diverse companies are substantially more likely to disclose their greenhouse gas emissions data.
Diversity and environmental performance are closely interlinked.
Forbes: ‘Inclusion Illusion’ And The Realities That Leaders Are Not Seeing Are Disturbing
Without strategy, change is merely substitution, not evolution. Change is happening everywhere, but evolution – the kind of transformation that truly moves individuals and organizations forward – is impossible until leaders evolve to meet new realities.
When we practice operational inclusion, there is no one metric for success. There is no single annual evaluation on which you will be judged. It is a process for continuous evaluation and evolution.
ESG Disclosures, Standards, Rankings, and Reporting
IFRS Foundation: Integrated Reporting—Articulating A Future Path
The International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB) are responsible to plan the development of the Value Reporting Foundation’s (VRF) Integrated Reporting Framework and Integrated Thinking Principles.
Both the Integrated Reporting Framework and Integrated Thinking Principles will be materials that belong to the IFRS Foundation as voluntary resources on the Foundation’s website. The Foundation will help market participants to understand the transition process of the Integrated Reporting Framework as a resource for both boards as well as the use of the Integrated Thinking Principles.
After the consolidation of the VRF, the Integrated Reporting Council will be an advisory body to the IFRS Foundation Trustees and both boards for a two-year period.
ESG Clarity: SEC Presses On With Anti-Greenwashing Proposals
The SEC has proposed two new anti-greenwashing proposals focused on investment labeling terminology and fund disclosures. The agency wants to stop fund providers from labeling products as ESG unless their investment process relies on primarily on ESG factors.
The SEC is also proposing to make certain investment criteria subject to the 80% rule of the naming regulation, requiring that at least four out of five investments in a product align with the strategy implied by the product’s name.
The SEC proposed the ESG Disclosure for Investment Advisers and Investment Companies to stop greenwashing in the ESG strategies that these groups implement.
SEC Commissioner Caroline Crenshaw notes: “Clear and standardized disclosures allow investors to compare products and accurately price risk and opportunity with ESG practices, investors have a right to know what they are investing in.”
ESG Today: Broadridge Launches SFDR-Focused ESG Reporting Solution For Asset Managers
The EU Sustainable Finance Disclosure Regulation (SFDR) establishes comprehensive rules for financial institutions including investors and advisers on transparency regarding the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes.
Fintech company Broadridge Financial Solutions enables disclosure through the European ESG Template (EET), a financial industry-developed standardized template aimed at facilitating compliance with SFDR requirements and easing the exchange of ESG data between financial market participants.
Investment Trends
ESG Today: Munich Re Issues its First U.S. Market Green Bond
Munich Re has completed its first $1.25 billion green bond offering in the U.S. market its third green bond overall). The bond proceeds have been fully allocated to projects related to sustainable forestry and agriculture, green buildings, renewable energy development, water management, and circular economy.
Bloomberg: Microsoft, Salesforce Add $300 Million to Carbon Removal’s Growing Cash Pile
First Movers Coalition (FMC) has been gathering money for new tech developments and has partnered with 50 companies and 9 governments pushing sustainable alternatives for major industries.
Microsoft & Salesforce’s $300million contribution is in addition to $2billion in funding announcements for carbon sequestration technologies.
Reducing global emissions to zero will require removing existing GHG from the atmosphere and this influx of cash flow could create industrywide momentum.
FMC’s goal is to get larger companies to buy green alternatives as well as to influence governments to enact policy around carbon sequestration to accelerate the transition to sustainable technologies.
ESG Today: Deutsche Bank Introduces Mandatory ESG Ratings for Suppliers
Deutsche Bank announced that its new policy will require all major suppliers to undergo an ESG assessment. Starting next year, vendors with new contracts will only be approved if they meet a minimum sustainability score.
Deutsche Bank aims to use its purchasing power to develop greater supply chain ESG accountability and transparency, ensuring suppliers satisfy high ESG requirements. This initiative will be carried out in partnership with EcoVadis, a business sustainability ratings provider.
Starting in July, “all suppliers for new or extended contracts worth over €500,000 with the bank will require an external vendor sustainability rating from EcoVadis, or from another eligible rating agency, including MSCI ESG, Sustainalytics, ISS ESG, S&P Global and CDP.“
ESG Today: Austria Earns ‘Greenium’ for Inaugural 4 Billion Euros Green Bond Offering
Austria announced the completion of its inaugural green bond issuance, raising 4 billion euros to finance sustainable investments.
The bond was met with strong demand, nearly seven times oversubscribed, earning the bond a 2.5 bp “greenium.” A 2.5 greenium means a favorable yield spread relative to similar issues lacking green credentials.
Markus Stix, Managing Director of the Austrian Treasury, said, “[this milestone] enables investors to diversify their portfolios towards sustainable assets.”
Companies and Industries
Forbes: A Feud Over Fossil Fuel Money
A recent letter from students, faculty, staff, and alumni at Standford University calls on the school to decline funding from fossil fuel companies. The letter comes partially in response to an interview with the school’s inaugural dean, who states that the school would be willing to work with oil companies wanting to “diversify and be part of the solution.”
The letter argues that these companies want to deflect attention away from their role in the climate crisis. This is an issue that organizations everywhere are currently grappling with. The general idea among experts is that collaboration with these companies on credible plans to make the transition to clean energy is going to be more helpful than excluding these companies entirely.
Bloomberg: America Has a Solar Red-Tape Nightmare. Here’s How to Fix It
Residential solar installations have been traditionally slow in the U.S., and while there are current supply chain constraints, some of the main obstacles to widespread solar deployment are varying permitting/jurisdictional rules in the country that lead to high costs for customers. Post-pandemic, permitting can take up to a month, while the actual installation can take just one day. Delayed systems cost installers hundreds of dollars per day (per system).
Solar Automated Permit Processing Plus (SolarAPP+), created by the National Renewable Energy Laboratory, is a standardized system for U.S. communities, and it is meant to provide a faster pathway for permitting by performing automatic compliance checks against code requirements.
SolarAPP+ will not solve all problems with solar installations, but it may help expand the number of Americans who can afford it and reduce total costs for installers by up to 40%. Reduced costs for installers can hopefully lead to reduced customer-acquisition costs.
ESG Today: Hyundai Investing Over $5 Billion in Bid to Become a Top-3 U.S. EV Company
Hyundai has announced plans to invest more than $5.5 billion to construct full EV and battery manufacturing facilities in the U.S. The new facility, to be located in Georgia, is expected to have a capacity of 300,000 units and will serve the company’s ultimate goal of building a wide range of fully electric vehicles for U.S. customers. Hyundai aims to become one of the top three EV producers in the U.S. by 2026.
The plant will use mainly renewable energy sources to meet RE100 requirements.
Wall Street Journal: HSBC Suspends Executive for Climate Comments
The head of responsible investment at HSBC, Stuart Kirk, allegedly stated that investors needn’t worry about climate change and that the risks being driven by climate change were being exaggerated by policy makers.
This executive has been suspended while HSBC has begun investigating this matter and senior executives at HSBC have criticized the comments made by Kirk.
This bank has made significant strides in the low-carbon transition including pledging as much as $1trillion of financing by 2030 to help cut carbon emissions for borrowers.
McKinsey has outlined three categories of requirements that we must employ to further the net-zero transition: necessary physical building blocks; economic and societal adjustments; and governance, institutions, and commitments, including public support for progress toward cutting greenhouse gases
McKinsey predicts the following three areas are going to be impacted by the war in the near future:
A reduction in the availability of necessary physical building blocks (natural resources) such as land, energy, and minerals necessary for the development of newt-zero technologies.
Economic and societal adjustments such as an increase in the funding and resources allotted to bolster local fossil fuel production in response rising global oil prices.
The weakening of governance, institutions, and commitments at the international level but strengthen in regional and private spheres.
According to McKinsey, private sector leaders should consider three actions to further the net-zero transition:
Strengthen the risk identification and response muscle.
Accelerate decarbonization of core operations.
Support multinational cooperation.
Sustainable Brands: New Guide to Aid US Food Sector’s Climate Transition Plans As Investors Ramp Up Pressure
A report released Wednesday by Ceres, a sustainability nonprofit, revealed that few companies in the US food sector have disclosed their climate transition strategies or actions, despite increasing investor pressures.
The Investor Guide to Climate Transition Plans in the US Food Sector
The report contains things such as:
Comprehensive guidance to help food companies move beyond target setting to creating and implementing sector specific climate transition plans and pathways to greenhouse gas emission reductions
In depth analysis of key food sector sub industries such as packaged foods and meats, food distribution, food retail, and supercenters and restaurants
A framework to help investors assess corporate climate transition plans in this sector including guidance on evaluating corporate emission disclosure, emissions reduction targets, and climate transition strategies and actions
Future research through the Ceres ambition 2030 initiative will provide further guidance on climate transition plans for other priority high-emitting sectors.
Forbes: EV Charging Costs From $0.15 Per Mile Down To Free; How Should They Price It?
Charging costs for EVs can be more complicated than regular gasoline. While the former is seen more as a mix between sales and service, the latter is priced as a commodity. The best and easiest way to recharge your EV is at home; this goes on your electricity bill, and a bit like gasoline, you pay by the kWh.
Just like customers think with gasoline, vehicles will get 2-4 miles/kWh. However, people are beginning to care about how fast the charging is and where it is available. In some places, in particular states that forbid billing by the kWh, there are stations that bill by the minute.
For now, due to the massive subsidies for putting in stations – with more to come – and the varying price by time of electricity, there is not much to expect from the competitive business standpoint for some time.
Government Policy
Ottawa Citizen: Stone: Canada Needs A Serious Strategy To Adapt To Climate Change
After last weekend’s devastating storms, which tore down trees and power lines all over Ottawa and much of Ontario, the consequences of climate change are unavoidable. Catastrophic wildfires, heat waves, and flooding in British Columbia also emphasize the impacts of extreme weather events made more frequent and severe by climate change.
Governments around the world have vowed, to varying degrees, to take action to address the threat, primarily through commitments to reducing their emissions of greenhouse gases. However, past emissions have altered the composition of the atmosphere and left us with a legacy.
To simply replace one source of fossil fuels by another would seem to make no sense at all; on the contrary, Canada can use the climate crisis as a time to look for innovative technologies and policies.