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ESG Weekly News Update: November 25, 2022

General ESG News

GreenBiz: A green wave of climate activism is cresting — companies must be 'all in'

  • For the first time, the climate was a top voter concern in the midterm election and a major driver for Gen Z’s voting participation. Furthermore, as pol and federal executive action focus more on climate, companies should also become pro-climate.

  • Companies need to clean up their supply chains and influence policymaking. Employees observe their companies’ actions on climate. If companies ignore the young people’s passion for climate, they may compromise stability and success.

Forbes: How To Become The ESG Company You Want To Be

  • Recent research shows that investments prioritizing ESG are growing and becoming more profitable as investors realize that sustainability-related funds can also maximize shareholder value.

  • The author provides “Four Steps to Becoming an ESG-Friendly Firm”

  • Start in the boardroom; leaders must prioritize ESG.

  • Choose a set of monitoring frameworks that fit your company.

  • Use tools to better manage compliance risks by automating ESG regulation management.

  • Find an ESG program structure that works for your firm and integrates ESG into all aspects of the business.

ESG Today: COP27: Breakthrough on Funding Repair of Climate Damage, Frustration on Fighting Climate Change

  • At the COP27 climate conference last week, developed nations committed to the creation of a fund that would pay vulnerable countries for climate-change-related damage.

  • This has become a controversial issue as poorer, vulnerable nations have contributed less to greenhouse gas emissions and climate change than more developed countries.

  • A committee was created to get the “loss and damage” agreement fund started.

  • While this fund is an important step in the right direction many were frustrated by the lack of progress in mitigation at the conference.

Bloomberg: A Breakthrough on Climate Compensation and 7 Other Takeaways From COP27

  • Key Takeaways from COP27 include:

  • A loss and damage fund was created to pay poorer, vulnerable nations for climate-related damages. Specifics are still being ironed out and will be decided at next year’s COP28.

  • To increase financing to energy-transition projects and climate goals it was suggested that multilateral development banks like the World Bank adjust their mandates. This included an overall call to reform global financial architecture.

  • The “mitigation work program” which presses for more uniform and specific emission reduction targets, plans, and metrics will continue until 2026.

  • Negotiators established a detailed framework for the carbon market which was agreed upon at COP26. This will allow carbon credit trade among nations.

  • The 1.5-degree Celsius warming target created in the 2015 Paris Agreement will likely not be reached. This led to calls for phasing out all fossil fuels and to “peak global emissions by 2025.”

  • The U.S. and China resumed “formal cooperation” on climate which had been paused after House Speaker Nancy Pelosi’s Taiwan visit last year.

  • Additional countries joined the methane pledge, bringing the total up to 150 nations.

  • Two new Just Energy Transition Partnership funding deals involving Vietnam and Indonesia were signed.

Bloomberg: How A Flawed But Historic Climate Deal Emerged From COP Chaos

  • The COP27 summit adopted an accord that doesn't increase ambitions on lowering emissions or take new steps to preserve the 1.5 degrees Celsius limit for warming temperatures. It commits to creating a loss and damage fund that will send aid to vulnerable countries wrecked by the irreversible harms of global warming.

  • COP27 summit failed to find agreement on phasing down on fossil fuels and building other emission-cutting commitments. At this moment in time, cooperation is meant to tackle inequities between developed and developing nations.

GreenBiz: How COP27 Became the Food Systems COP

  • The topic of food made its grand debut with the United Nations at last year's Food System Summit. For the first time in history, one negotiation day between the high-level attendees focused entirely on agriculture.

  • Deborah Bossio, Lead scientist for food systems at The Nature Conservancy, stated “This is huge. [It] acknowledges that without transformations of food systems, which account for approximately one-third of global greenhouse gas emissions and the vast majority of biodiversity loss, we will be unable to achieve a stable climate, feed people, and save biodiversity.”

  • The Food and Agriculture for Sustainable Transformation (FAST) initiative aims to unlock climate finance to decarbonize and increase the resilience of food and agriculture sectors, especially in the world's most vulnerable communities. The Initiative on Climate Action and Nutrition (I-CAN) recognizes the relationship between nutrition and the climate crisis, representing a significant breakdown of silos between food, agriculture, climate, and nutrition groups.

Forbes: ESG – Good For The Goose And Gander

  • There is a certain level of distrust between the activist community and policymakers. Many policymakers compromise long-term goals with conflicting short-term priorities.

  • In the United States, polling has shown high levels of support in avoiding doing business with socially irresponsible companies but “only 21% even know what the acronym ESG even means.” There is more to be done to hold policymakers accountable to Follow through with their long-term commitments and their word.

GreenBiz: ‘Lawyer Up’: Republican Rhetoric Over ESG Escalates

  • Some Republican Party leaders have increased their correspondence with ESG rating firms and asset managers by sending letters to major American law firms warning of punishment for their role in perceived ESG misconduct.

  • An example of this includes when a letter was sent to Black Rock last summer by a republican state attorney general which asserted that the world's largest asset manager is boycotting the fossil fuel industry via its ESG practices. They claimed that “Congress will increasingly use its oversight powers to scrutinize the institutionalized antitrust violations being committed in the name of ESG.”

GreenBiz: The ins and outs of honing ESG training sessions

  • As demands for ESG training to meet customer, investor, and stakeholder requests for responsible practices grows is essential to tailor them to each audience. By tailoring them, it's possible to reach every level of employee.

  • Creating interviews and critically listening allows the gathering of information that will help focus the company’s initiatives on facing the challenges that ESG strategies can solve.

  • System thinking, organizational experience, and storytelling are some of the tools to customize ESG training sessions.

GreenBiz: The Hidden Emissions in the Global Food Supply Chain

  • Global food supply chains have contributed to the current climate crisis. According to Market Institute, "80% of current food emissions need to be cut by 2050 while simultaneously producing more food to support a growing global population.”

Bloomberg: Junk Carbon Offsets Are What Make These Big Companies 'Carbon Neutral'

  • Many companies boast these great claims about being carbon neutral when in reality these claims are based on purchases of low-quality carbon offsets that many experts rate as useless. Carbon offsets allow companies to pay a small sum in exchange for removing carbon from their balance sheets. Offsets remain widespread, despite deep doubts about their efficacy.

  • Delta Air Lines has claimed itself as being carbon neutral for the last two years. But, when looking more closely, the more stringent category of removal offsets comprises just 6% of its 27 million tons of carbon credit purchases last year.

  • The global market for carbon offsets is entirely unregulated and abiding by standards for quality remains voluntary on the part of the companies who purchased the offsets. The U.S. government is attempting to find stricter criteria to create a new renewable energy offset that would allow corporations to channel money to developing countries that need to move away from coal. There is still no clear evidence that shows buyers would be willing to turn away from low-quality offsets they have available now.

Diversity, Equity, and Inclusion

Forbes: The Importance Of DEI Initiatives In Tech

  • Women and people of color are underrepresented in the tech industry. Companies spend nearly $8 billion annually on DEI training, yet 68% of business leaders recognize that their tech workforce lacks diversity.

  • Advice for DEI goals includes:

  • Recruit diverse candidates.

  • Lead with compassion to establish and maintain a healthy, inclusive workplace environment.

  • Connect through shared values and passions.

  • Measure data to expand diversity initiatives thoughtfully.

Sustainable Brands: Takeda And Discovery Education Partner On New Initiatives Centering On Health Equity

  • Takeda, a global biopharmaceutical leader, and Discovery Education, the worldwide ed-tech leader, announced a partnership focused on transformative health equity education titled Better Health in Action: From Classroom to Community.

  • The initiative will cover topics of health equity and their connection to science, technology, engineering, and mathematics (STEM). It will provide students, educators, and families in grades six through eight with a suite of engaging digital resources at no cost. The Better Health in Action website will be available globally, offering students of diverse backgrounds the opportunity to imagine a future where there is health equity.

ESG Disclosures, Standards, Rankings, and Reporting

ESG Today: EU Markets Regulator Proposes ESG Labelling Rules for Funds

  • The European Securities and Markets Authority (ESMA) regulates EU markets and announced the launch of a consultation for proposed rules about the use of ESG or sustainability-related terms in the names of investment funds. The purpose of the consultation is to protect investors from greenwashing risks.

ESG Today: ICE Launches TCFD Reporting Solution for Asset Managers

  • The Intercontinental Exchange (ICE) announced Thursday the launch of a new solution aimed at helping asset managers and financial institutions meet the requirements of the Task Force for Climate-Related Financial Disclosures (TCFD). as the TCFD has become the industry standard for climate-related disclosure.

  • 60% of asset managers report information aligned with at least one of the TCFD's recommended disclosures. Only 10% of managers indicate that they report on all 11 recommend disclosures.

  • ICE stated its new service leverages its “climate transition data and analytics, corporate entity data, and green bond data, to provide require data and information for the metrics and targets reporting required in the TCFD framework.”

Investment Trends

Forbes: ESG Investing Is ‘Soaring.’ What Does It Mean?

  • PwC reports expecting ESG investments to soar 84% to $33.9 trillion by 2026. Investors and the public are demanding from companies more transparency, disclosures, and socially responsible leadership, and regulators globally are creating regulations and disclosure requirements.

  • The climate emergency is an urgent climate and financial risk. ESG tracking, reporting, and strategies are in high demand and are being implemented in all industries. All these actions are creating ripple effects in the growth of ESG investments and shifting “business as usual.”

Reuters: Bankers bet billions on new wave of debt-for-nature deals

  • As part of COP27’s efforts to fight climate change and global biodiversity loss “debt-for-nature" swap deals are becoming more widely used.

  • In exchange for protecting ecosystems, these deals cut nations’ debts thus providing more incentives and answering the question of who will pay for these efforts. An example is Ecuador’s proposed $800 million debt refinance to reduce its overall debt in exchange for protecting the Galapagos Islands.

  • For these debt-nature swaps to be more effective more standardized support is needed from major development banks; additionally, an improved commitment monitoring and verification process is needed.

ESG Today: Schneider Electric Backs New $500 Million Climate And Industrial Tech Venture Fund

  • Schneider Electric-affiliated venture investor SE Ventures announced the launch of a $500 million fund aimed at accelerating funding for climate and industrial tech startups and will begin deployment in January of 2023.

Companies and Industries

Sustainable Brands: COP27 Yields More Impressive Forest-Conservation Commitments; But Will Our Efforts Go Up in Smoke?

  • At COP27, a group of leading companies collectively committed to purchasing over a half-million tons of low-carbon, low-footprint alternative fibers for fashion textiles and paper packaging to help protect the world’s vital forests and ecosystems. They also aim to reduce the pressures of forest degradation from fashion and packaging supply chains. Canopy, an environmental nonprofit, will lead the commitment.

  • Forest 500’s research found that a third of the world’s most influential companies have not made commitments to forest conservation while at least 50% of the world’s forests need to be conserved or restored by 2030 to ensure global temperature rise stay under 1.5°C.

  • The removal of 50% of the forest fiber from pulp manufacturing with replacements of next-generation alternative fibers would help avert catastrophic climate change. When compared to forest fibers, Canopy estimates next-generation solutions have:

  • 95% to 130% less CO2 emissions

  • 18%to 70% less fossil energy resource depletion

  • 88 percent to 100% fewer land-use impacts

  • At least 5x lower impact on biodiversity/threatened species.

Sustainable Brands: Supply Chain Waste, Consumer Demand Highlight Business Case for Transparency

  • A report titled “The Missing Billions: The Real Cost of Supply Chain Waste” by Avery Dennison assessed global supply chains and their waste across the US, UK, France, China, and Japan. The report analyzed five sectors: automotive, beauty and personal care, apparel, food, and pharmaceutical.

  • The average supply chain waste across sectors was eight percent with the highest level in the food sector at ten percent.

  • While these companies are under pressure to become more sustainable, many struggle to meet this priority due to logistical challenges.

  • The report also analyzed consumer spending trends. They found that cost and durability rank the highest with sustainability and ethical sourcing of products lagging.

  • Additionally, in certain sectors such as apparel and food, transparency regarding ingredients and materials was found to be a top driver in sustainable decisions.

Forbes: FTX and ESG: A Panorama Of Failed Governance (Pt 1 – The Internal Failures)

  • As the FTX bankruptcy process unfolds, new revelations about its comprehensive failure of corporate governance have emerged.

  • The FTX “cryptocalypse” has been impacting the credibility of the ESG concept in the field of crypto. Assessing crypto in terms of ESG frameworks is quite challenging and one of the main problems is the conceptual diversity underlying the new indices.

  • Some of the main FTX governance fails include:

  • The board of directors -- as the main steward of shareholder interests, the board should be independent and functionally competent. FTX had no board of directors.

  • Conflicts of interest -- to eliminate self-dealing by executives and other violations of the companies’ fiduciary responsibilities to its investors and customers. FTX was rife with self-dealing and had transfers that were personal loans being lent to insiders.

  • Capital structure and ownership -- to provide a clear and traceable line of authority and fiduciary duty for all parts of the corporate structure. FTX had over 100 interlocking companies, subsidiaries, investment vehicles, and partnerships.

Sustainable Brands: Update Your Approach to Recycled Fiber and Sustainable Packaging Through Leadership

  • The following are important aspects of what companies that want to make more sustainable decisions along their supply chain should be doing while simultaneously meeting the needs of stakeholders.

  • Rethink packaging to support a circular economy.

  • Seek out opportunities for recycled fiber post-pandemic.

  • Consider and then formulate a plan for recycling fiber packaging.

  • Formulate partnerships with other organizations to help further recycling systems and increase sustainable solutions.

ESG Today: Maersk Sources 100,000 Tonnes of Green Methanol to Support Fleet Decarbonization Goals

  • A.P. Moller - Maersk announced a strategic partnership with U.S.-based Carbon Sink LLC to start developing 100,000 tonnes of green methanol per year facility to achieve their company’s fleet decarbonization to achieve clean fuel-powered container shipping. Their goals:

  • 2040: Net zero gas across all Maersk’s business and scopes and 50% reduction in emissions transported containers in its ocean fleet.

  • 2030: 70% reduction in absolute emissions from fully controlled terminals.

  • 2025: source 730,000 tones of green methanol.

Sustainable Brands: Purpose-Driven Brands Continue to Encourage More Conscious Consumption Habits in Antidote to Black Friday.

  • Since 2020, the downshifting in consumerism has been growing leaving consumers putting their money into savings, bills, or day-to-day expenses as inflation rises.

  • Not only are consumers opting to spend less, but many brands are opting for any holiday to make a statement about over-consumerism.

  • REI and Patagonia are encouraging consumers to understand how Black Friday impacts the environment. They want consumers and employees to spend this day outdoors.

  • Teemill is opting to promote circular economy principles by promoting their products that are designed to be remade as they use natural materials and renewable energy to make clothing on demand.

  • Poshmark is introducing Secondhand Sunday as they describe that “the future is of fashion is your closet” to promote second-hand shopping as an alternative to over-consumerism for an affordable and sustainable option instead.

Government Policy

Reuters: Analysis: US Regulators Could Be Pressured By Slim Republican House Control

  • The win of The House might inspire Republicans who have alleged the SEC and Consumer Financial Protection Bureau (CFPB) have overstepped their authority under democratic leadership. Some Republicans argue that the agencies have written rules outside of the legal process, such as rules on climate change, and our expected to interrogate regulators like the SEC Chair and financial executives at public hearings in the near future.

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