ESG Weekly News Update: November 4, 2022
General ESG News
GreenBiz: How a Washington initiative is creating a just circular economy
NextCycle Washington is currently recruiting for its inaugural Renew Seed Grant, which will grant up to $10,000 to early-stage projects for technical support, growth planning, and facilitating networking.
The initiative’s mission is to help develop local economies that reduce waste, keep materials in use longer, and regenerate natural systems through collaboration between private companies, public government agencies, and community-based organizations.
There are different versions of the NextCycle program in other states, such as Colorado and Michigan. However, the Washington version has a particular focus on community-based organizations.
The Wall Street Journal: Infighting Hampers U.N. Green Finance Group
The Glasgow Financial Alliance for Net Zero (GFANZ) was formed last year to direct funding into the green energy transition, but due to recent infighting, some banks are regretting their choice to join the alliance.
Most banks joined the alliance late in 2021, right before the Russian invasion of Ukraine that threw the global energy economy into chaos. This summer, the UN put out language about banks and others needing to restrict fossil fuel financing, despite ongoing reliance on fossil fuels. At the same time, criticism has been increasing about climate investing and ESG practices. This has led to disagreement within the alliance, and many major banks have threatened to leave.
In response, the co-chair of the alliance, Mark Carney, has stated that the alliance is still meaningful and can continue to make progress toward reducing financed emissions.
ESG Today: Mark Carney-led GFANZ Drops Requirement for Race to Zero Commitment Members
The Glasgow Financial Alliance for Net Zero (GFANZ) has announced that it will no longer require its signatories to commit to Race to Zero, the UN’s climate action campaign.
Race to Zero includes a set of strict requirements, including a pledge to reach net zero emissions by 2050 with an interim 2030 target, as well as a requirement to publish a transition plan within 12 months of joining the campaign.
The strict requirements challenged many of the GFANZ’s members’ ability to remain in the group, so GFANZ members will now be “encouraged” but not required to partner with Race to Zero.
Forbes: Unlock Growth With These Three Pillars Of Digital ESG Strategy
ESG is becoming widely adopted across businesses, but there is no universal protocol for adopting ESG. This article provides three guiding pillars:
“Pillar 1: Enhance ESG Using Technology”
Automate both ESG data collection and reporting.
Leverage ESG-based marketing to gain new opportunities.
“Pillar 2: Enhance Technology Using ESG”
Cultivate a diverse workforce to increase profits and prevent AI bias as well as unjust cybersecurity.
Increase innovation and support for diverse businesses by focusing on supplier diversity.
Lower emissions by using existing technology such as cloud services.
Create data privacy and access policies to increase data security and efficient workflows.
“Pillar 3: ESG Beyond Technology”
Start with aligning ESG plans with the United Nations Sustainable Development Goals.
Train company leaders in ESG so they are prepared to guide the company through ESG adoption.
Collaborate within industries and join alliances to share best practices and insights.
Go beyond company boundaries to co-create with partners.
Bloomberg: Construction Begins on the World’s Largest Carbon Removal Plant
Occidental Petroleum (Oxy) and Carbon Engineering Ltd are partnering to build a plant in the Permian basin that will capture 500,000 tons of CO2. Oxy states that it plans to focus more over time on carbon capture and sequestration versus fossil fuel extraction.
To fund this transition, Oxy is planning to use revenue from offsets. However, there is currently a limited supply of carbon-removal offsets – more limited than the supply of offsets for avoided emissions (such as forest protection).
Sustainable Brands: Generating Win-Wins: 4 Key Ingredients of Successful Social-Purpose Marketing
In a recent webinar, BCLC, PepsiCo, and CLMBR discussed how there are shifting their marketing strategies to accelerate social purpose.
According to Peter ter Weeme of BCLC, “it’s marketing’s job to influence the behavior, not the values, that people have.” Individual consumers and households can have very different value sets but still engage in the same behaviors. Focusing on values can isolate and shut down the message instead of driving change.
A study from BCLC and Forrester identifies some key themes for how a social purpose company’s marketing is different from traditional marketing:
Executives must lead and not pull
Ethics must be systematically embedded into the marketing process
The importance of listening and responding to the dialogue that marketing is generating cannot be overlooked.
Bringing in third-party analysis is helpful in building a social purpose framework, as it can separate product intention from decision-making and prioritize and align actions throughout the entire company.
Purpose-driven marketing is ultimately meant to inspire stakeholders to deeper engagement with an organization’s stated social purpose. This means looking at what consumers want and what the world needs, deciding what a brand can do to contribute to both, then telling the story in an authentic way.
GreenBiz: Where climate risk and fiduciary duty intersect
Fiduciary duty is established when someone places trust in another person or institution for advice, protection, or aid. For example, lawyers owe clients advocacy with the client's best interests in mind, and investment firms owe duties of care and loyalty to the accountholders.
Over the summer, many Republican state attorneys general wrote to BlackRock asserting that using ESG information in asset management strategies is a breach of the fiduciary duties of loyalty, care, and maximizing financial returns. However, under the “modern prudent investor rule... there is no duty to maximize the return of individual investments but instead a duty to ‘implement an overall investment strategy that is rational and appropriate to the fund.’” Therefore, if climate risk is an investment risk, then ESG concerns should be considered.
GreenBiz: 3 truths and a myth about the CSO’s role in an era of ESG and economic turmoil
Weinreb Group has looked into the role of the Chief Sustainability Officer in terms of how the role works in a corporate capacity and in terms of who is best suited for this type of role.
The report found a few aspects that are most important in terms of ESG implementation. The first is that sustainability can't be everyone’s job, there needs to be a leader and with that, a CSO is a sustainability leader in addition to the board duties or role.
Even during a recession, ESG and CSOs are essential to business.
ESG Today: Global $100 Billion Climate Finance Goal Expected to be Met in 2023: Report
Initially, this goal was announced in 2009 and the goal was to be met in 2020, yet in 2020 the annual climate finance mobilization was only at $83 billion.
The Glasgow Climate Pact urged for the goal to be met in 2025 with transparent progress along the way.
Several countries increased pledges at the COP26 conference.
Germany and Canada provided a progress report and Delivery Plan. The progress report specified how to get climate finance back on track with the set goal. The Delivery Plan included guidance for developed countries on private finance mobilization among other principles.
Sustainable Brands: COP27: Focus on Policy and Process, Not Promises
In order to see true change and increased sustainability practices, promises need to become policy.
Brands and companies cannot afford to wait for possible policy changes, they must address them directly and move beyond making their own promises. This is especially true in today's political climate with frequent cases of legislation being delayed.
Brands must also address their entire supply chain. Frequently, companies will look at the top percentage of their supply chain without considering how long it will take for the rest of their supply chain to catch up.
Marginal gains are more widespread when looking at a brand's supply chain in its entirety, which in turn can make it easier to achieve long-term goals.
Forbes: Why Companies Should Prioritize The ‘G’ In ESG
The environmental component of ESG has been measurable and the most straightforward aspect of ESG. Social is becoming more understood in terms of measurement but in general, stakeholders understand its importance. The same cannot always be said for governance.
Governance is made up of a company's rules, regulations, and processes, and in general, revolves around how a company runs. Companies benefit from established governance practices because they encourage efficient and effective decision-making and performance.
Governance addresses the triple bottom line through improved performance. A company’s focus is to be profitable and in turn, better performance can lead to higher profits.
Governance policies and practices need to be given the same attention as environmental, meaning there needs to be consistent monitoring.
Another important aspect is creating governance policies based on diverse viewpoints. If a board is made up of members with diverse backgrounds, the company is able to get a wider range of perspectives.
Forbes: Is It Time To Put Biodiversity On Your ESG To-Do List?
Companies that have implemented ESG practices usually focus on the reduction of emissions or transitioning to a circular economy, yet biodiversity tends to be left out of the conversation.
RepRisk, a data science firm, found that 81% of pipelines in the world are within 6.2 miles or 10km of an environmentally sensitive location and 52% are within the same distance from locations that are home to some of the most threatened species. Furthermore, 32% are located within less than a mile (or kilometer) of World Heritage sites.
Climate and biodiversity are connected and should be addressed together, yet biodiversity hasn’t been a main topic as emission reductions are more tangible and easier to track. Biodiversity is also location-specific, meaning companies will need to invest time and energy into determining what they are closest to in terms of biodiversity.
GreenBiz: How science, technology and behavior change can confront the climate crisis
Human behavior is a large component and one of the biggest barriers in the fight against climate change as many of the technologies needed already exist.
Humans evolved to detect and react to immediate risks; therefore, we need to overcome this challenge in order to face a more ambiguous and slow-paced risk – climate change.
Behavioral scientist Sweta Chakraborty reasons that we can use this human quirk as leverage in order to better communicate climate change risks.
Individuals can compare their perception of risk to baseline statistics to gap the bridge in reality; this collective effort could lead policymakers to adopt climate solutions once they have the support of their constituents.
Diversity, Equity, and Inclusion
Forbes: Do DEI Initiatives Lead To Reverse Discrimination?
DEI leaders and practitioners may face more questions about being disadvantaged as a result of increasing DEI initiatives. Responses to such questions should be thoughtful and constructive with a delicate balance of avoiding a dismissive or confrontational response and supporting groups who may be upset by the questions.
DEI-focused individuals can transform these controversial situations into learning opportunities by:
Showing empathy and understanding towards the inquirer;
Encouraging empathy towards others on the other end;
Extend empathy to people of the same group as the questioner;
Broaden the context of and reframe the experience without invalidating it; and
Explain why DEI can be a win-win situation.
Forbes: How To Truly Live Your Company’s ESG Values
Companies should implement ESG initiatives with an internal shift in alignment with ESG factors in order to effectively act towards ESG goals. Some strategies for an authentic, ESG-aligned commitment are:
Focusing on internal sustainability to set clear benchmarks to hit broader goals;
Promoting meaningful acts of social impact towards the offices and local communities and beyond investors; and
Making DEI part of the company’s DNA with more sophistication than hiring a certain number of ethnic or cultural minorities.
Sustainable Brands: Women in the Sustainability Trenches Impart Wisdom to Next Generation of Change Champions
Sustainable Brands recently hosted the second annual Women’s Leadership Lunch, where women leading the sustainability efforts at three very different organizations discussed their journey and how modern leaders can empower the next generation of sustainability professionals.
Women, in particular, are asking the tough questions not only about DEI efforts but about climate change and other issues that impact their broader community. Sustainability is increasing in strategic importance but is still not well understood in all organizations, and education and engagement are critical for bridging the gap.
For emerging sustainability leaders, the discussion members offered the following advice:
Recognize what role each young professional can play
Reject the notion of “imposter syndrome” and instead embrace a collaborative mindset
Learn from emerging leaders and encourage them to remain committed to their values.
ESG Disclosures, Standards, Rankings, and Reporting
Reuters: Corporate climate disclosures jump again in 2022 – CDP data
Companies worth half of the total global market cap (more than 18,700 companies) are now disclosing environmental data, according to newly published CDP findings. However, about three in five firms failed to respond to requests for disclosure in 2022.
According to CDP’s Chief Stakeholder Officer, “there is unprecedented agreement among stakeholders that environmental disclosure is a necessity to measure and drive progress to show impact, and it clearly now sits at the top of boardroom agendas and government policy.”
In 2022, the top disclosing industry was manufacturing, followed by services and materials. The top disclosing countries were the U.S., China, Japan, Britain, and Brazil.
SustMeme: Companies struggle on sustainability reporting data
While countless organizations are aware of the importance of sustainability reporting, many (about two-thirds) still struggle to produce complex, data-driven disclosures, according to new insights from Bureau Veritas.
The reasons cited for wanting to publish sustainability reporting include fostering customer trust, enhancing shareholder value, and ensuring regulatory compliance.
Currently, the majority of ESG reporting is handled in-house, but the majority of companies surveyed admitted they could benefit from more education on ESG standards and reporting practices, especially as certain disclosure elements become mandatory.
As with other similar surveys, it was found that data collection issues and the complexity of the ESG disclosure framework landscape were the main barriers to reporting, as well as insufficient internal resources.
Investment Trends
Forbes: How Investors Can Produce Excess Returns With ESG Investing
A recent analysis from Deloitte shows that insufficient action on climate change could cost the U.S. economy $14.5 trillion over the next 50 years; the total global cost could be much higher.
Investors can factor ESG-related headwinds into their calculations to maximize returns, and asset managers are working to build ESG databases with rating data, voting tracking, and other multi-dimensional ESG information.
While climate issues and environmental risks are particularly salient, it is important to remember ESG also includes social and governance issues, which are interrelated with environmental topics and should not be overlooked in ESG investing.
Some asset managers have jumped on the ESG bandwagon and are not doing the due diligence required to select companies with legitimate ESG credentials.
Bloomberg: China Is Doubling Down on Coal Despite Its Green Ambitions
China is the world’s leading installer of clean energy yet investing in fossil fuel and building new coal-fired power plants. Forecasts show China could add 270 gigawatts by 2025, which is much higher than the 101 gigawatts that exist globally today.
China’s strategy is to avoid issues the U.S. and Europe faced when they stopped fossil fuel production and infrastructure before establishing enough renewables. China needs more power as its economy grows, and China intends to use the plants less as clean energy increases.
Bloomberg: Green Venture Zhero Closes Funding Round With Climate Investors
Zhero is a green energy venture that completed a closed round of funding with climate-based investors such as Three Cairns Group, Galvanize Climate Solutions, and Fortescue Future Industries. By 2026, Zhero plans to have development projects with 5GW generation capacity in the U.S., Europe, Africa, the Middle East, and Australia.
Zhero is also focusing on technologies to manage the potential volume increases of hydrogen. The company has invested in Tree Energy Solutions, which focuses on accelerating the energy transition in markets like Germany with large-scale hydrogen projects.
ESG Today: Robeco Targets “Massive Opportunity” for Biodiversity Investments with New Equities Strategy
On October 31st, Robeco planned to launch RobecoSAM Biodiversity Equities as a new equity strategy for companies to benefit from the transition to a nature-positive world. The strategy will focus on companies protecting and promoting biodiversity through the sustainable use of natural resources, ecosystem services, and technologies to reduce biodiversity threats and restore natural habitats.
ESG Today: Guest Post: Gaining Specialist Clarity on ESG in Fixed Income
According to Sustainable Fitch, investor thirst for sustainable investments across all asset classes has led to a dramatic increase in fixed-income issuance in recent years. Labeled issuance grew 69% from 2020 to 2021. ESG investing is no longer a ‘niche pursuit.’
With the rise of sustainability-linked bonds, a more comprehensive view of the interrelation between E, S, and G factors is becoming more important. A key question ESG leaders and analysts are asking is, “how does this particular asset in my portfolio stack up against similar instruments in this sector, industry, or geography?”
Current data offerings are not quite clear enough about the interaction and weightings of business activities, transition strategies, KPI definitions, etc. To make the necessary comparisons and evaluations.
A more detailed understanding of ESG is required to balance existing activities with future objectives, as well as to identify and avoid greenwashing in investment strategies.
Reuters: BlackRock raises $4.5 bln for climate-focused infrastructure fund
BlackRock has a fund called Global Infrastructure Fund IV that is focused on climate-focused infrastructure projects. $4.5 billion has been raised out of an overall $7.5 billion target. The fund will invest in five sectors to capitalize on the decarbonization and digitalization trends: energy, low-carbon power, transport and logistics, regulated utilities, and digital infrastructure.
The Wall Street Journal: Activist Investor Calls for Overhaul of Korean Tobacco Giant KT&G
The activist-investment firm, with offices located in Singapore, has acquired a 1% minority stake in the tobacco company KT&G Corp.
KT&G is one of the largest tobacco companies in South Korea that owns the brands Esse and Raison. The company also sells ginseng and produces pharmaceutical raw materials.
In 2006, Carl Icahn encouraged KT&G to increase its ginseng business and profited once KT&G implemented his ideas.
Flashlight Capital, an investment firm, is pushing KT&G to separate its ginseng business as part of the investment firm's push for heat-not-burn products.
Reuters: OPEC raises long-term oil demand view, calls for investment
The Organization of the Petroleum Exporting Countries (OPEC) forecasted that world oil demand will not plateau until after 2035, in contrast to a pre-2030 plateau predicted by other forecasters.
OPEC stated that despite the transition to renewables, a $12.1 trillion oil investment is needed to meet demand out to 2045.
Companies and Industries
Sustainable Brands: Consortium of Venue Groups Launches Sustainability Platform for Large Arenas, Halls, Convention Centers
The Green Operations & Advanced Leadership (GOAL) platform was created to standardize sustainability reporting and processes across some of the largest public gathering spaces in the U.S.
The platform was launched as a partnership between OVG, Fenway Sports Group, the Atlanta Hawks, and State Farm Arena, and it aims to shed light on each venue’s own carbon emissions and provide the inputs for measuring Scope 1, 2, and 3 emissions.
According to Chris Granger of OVG, the hope of the platform is to “meet venues where they are” and to help operators become more efficient in areas like the management of energy, refrigerants, food waste, single-use plastics, and more.
Beyond cost savings from more efficient operation, sustainability standards for venues are increasing as more and more sponsors want to attach themselves to artists that will only play in responsibly-run venues.
Reuters: ESG Watch: Insurers flex muscles ahead of COP27 by refusing to finance oil and gas
“Insurance is the Achilles heel of the fossil fuel industry. Without it, no new fossil fuel projects will go forward, and many existing operations will have to cease,” says Peter Bosshard, global coordinator of the Insure Our Future campaign.
There is a steadily growing number of insurers refusing to cover coal and fossil fuel projects, particularly in the reinsurance sector. Swiss Re, Hannover Re, Alliance, and Munich Re, the world’s largest reinsurance, announced they will stop insuring oil and gas projects. UK banks will likely follow.
In North America, Axis Capital was the first reinsurer to stop underwriting energy, mining and other projects that lack support from local indigenous communities and failed to secure free, prior, and informed consent (FPIC).
Emerson, a global technology, engineering, and industrial software company, announced a $14 billion agreement to sell a majority stake to Blackstone in Climate Technologies, its heating, air conditioning, and refrigeration business segment. Emerson will retain a 45% common equity stake.
As buildings significantly contribute to global greenhouse gas (GHG) emissions, HVAC and cold chain technologies are critical in the world’s efforts to reduce GHG emissions. The EU proposed a rule that would require all new buildings to be net zero by 2030. The Biden administration launched a multi-billion-dollar initiative to reduce emissions from 300,000 government buildings.
ESG Today: Amazon Facility on Track to be First Ever Zero Carbon Certified Fulfillment Center
Amazon’s recently built fulfillment center in Sacramento, CA is slotted to become “the first logistics facility in the world to achieve Zero Carbon Certification by the Internation Living Future Institute (ILFI).”
This certification requires the facility to run on 100% renewable energy and offset 100% of construction-associated emissions.
Additionally, the facility, “SCA5,” was constructed with sustainable materials.
After a 12-month performance period, a third party will verify that the facility meets the standards; certification is expected to be received by 2023.
Bloomberg: Why Climate Tech Is Getting Broader and Narrower at the Same Time
Not only start-ups but also investors are increasingly more focused on climate-related technology, businesses, or projects. Any technology that improves the efficiency of economic activity can be considered climate tech because less consumption and lower emissions result. However, climate entrepreneurs should consider climate impact in detail while investors prioritize emissions reduction and climate improvement. More rigorous specification is needed to qualify as climate tech.
Reuters: Apple announces new clean energy investments, asks suppliers to decarbonize
Apple will be investing in solar and wind projects in Europe and is encouraging their operations and iPhone producers to decarbonize. This investment will address the current carbon footprint as a result of charging Apple products.
Currently, Apple has a goal to reach net zero emissions by 2030 in its entire business, including its supply chain.
Beyond encouraging their operations to decarbonize, Apple is requiring their supply chain partners to report their Scope 1 and Scope 2 reductions annually.
Over 200 of Apple’s suppliers have committed to using solar or wind power for Apple product production.
Bloomberg: Houston’s Solugen Wants to Make Greener Chemicals – and Profits
Solugen is a startup company that is working to replace harmful industrial materials with cleaner materials. The current industrial materials they are focusing on include fertilizer and cement.
Through their transition to finding greener alternatives, Solugen has been very profitable.
After analyzation of Solugens process, it was found that they were able to achieve a carbon-negative operation in some instances.
Many large firms have looked to also join the synthetic biology sector without success yet synthetic biology has a huge potential market.
The New York Times: ‘Fast Furniture’ Is Cheap. And Americans Are Throwing It in the Trash
During the COVID-19 pandemic, the purchasing of furniture increased as the cost of the furniture decreased. Specifically, there was an increase in work-from-home furniture and patio furniture, but it was purchased from companies such as Zara and Shein.
Zara and Shein are known to be fast fashion companies that create products that cannot last long periods of time and in turn, the furniture produced also did not last, resulting in Americans throwing out the cheap furniture as the country opened up and the threat of COVID decreased.
Ikea and Wayfair are examples of companies that have a range of durability listed with their products, but Ikea has been encouraging customers to get repairs done to damaged products.
Fast furniture is an issue because of how the products are made. They are made using cheap materials that, when thrown out, sit in landfills for years.
Kaiyo is an example of a company that has entered the market to help reduce the amount of fast furniture and offer sustainable solutions such as pre-owned furniture. Fernish is a furniture rental service that will help reduce the amount of waste due to short apartment or town-home stays.
Sustainable Brands: We Must Be Able to Read the Label: The Imperative of Ingredient Transparency
As consumers become more sustainability conscious, the demand for ingredient transparency in cleaning products has increased.
84% of consumers, despite inflation, are willing to pay higher prices for sustainable goods according to a recent Capterra survey.
To make this a reality, policies such as the California Cleaning Product Right to Know Act (2017) which requires a full ingredient list, should be extended nationwide with the goal of creating a national standard.
The American Cleaning Institute is aiming to not only make ingredient lists available but is also ensuring that they are readable and accessible so that consumers can make informed decisions.
While evaluating ingredient transparency, it is also important to focus on the human health and environmental impacts of these chemicals.
Government Policy
ESG Today: EU to Require All New Cars to be Zero Emissions by 2035
On October 28, 2022, it was announced that all new cars and vans in the EU must be zero-emissions by 2035.
This announcement is a big step towards the 2030 EU goal of cutting greenhouse gas emissions by 55%.
Along with this 2030 overall GHG reduction goal, there are interim targets that include a 55% carbon dioxide reduction for new cars by 2030.
Bloomberg: A Methane Cloud Highlights Cracks in Canada’s Climate Ambitions
On September 28, 2022 Kayrros SAS, a geoanalytics firm, identified a methane cloud near gas pipelines along the Saskatchewan-Alberta border while analyzing data from the European Space Agency’s Sentinel-5P satellite.
Methane is a very potent greenhouse gas, about 80 times as strong as carbon dioxide in the short term. It is the main component of natural gas.
Canada is a member of the Global Methane Pledge, and the country is aiming for more than a 35% reduction in methane emissions from 2020 levels by 2030.
This finding puts Canada’s climate goals and emissions under the spotlight, as the country’s methane and carbon dioxide emissions have increased from the 1990 baseline more than any other G-7 country.
ESG Today: Singapore to Ramp Climate Goals at COP27, Launches National Hydrogen Strategy
As the COP27 climate conference in November approaches, countries are re-evaluating and ramping up their emissions targets as encouraged at the COP26 conference in Glasgow last year.
This year Singapore plans to pledge a more ambitious emissions reduction goal in addition to announcing a National Hydrogen Strategy.
Singapore’s Deputy Prime Minister Lawrence Wong states that Singapore is planning to reach peak emissions earlier than expected and has set a more defined target of net zero emissions by 2050 instead of “mid-century.”
The country is also rolling out a plan to research, finance, scale up, and prepare for the transition to low-carbon hydrogen, a renewable technology potentially more feasible for the small country with little land for other types of renewables.
The 35 billion dollars in funding for this transition will likely come from a raise in Singapore’s carbon tax as well as newly issued green bonds.