ESG Weekly News Update: October 7, 2022
General ESG News
Forbes: ESG Investors Should Support Big Oil
In the last decade, many oil and gas companies have gone from having poor corporate governance and long-term strategy to operating responsibly and exploring renewables, with realistic expectations for the future.
Now, most big oil and gas companies recognize and are on board with the eventual energy transition, though they may support different timelines. In the transitional period, the world still needs the reliable power that fossil fuels can provide until there are scalable alternatives.
One of the most sustainable solutions, even for those who are environmentalists/conservationists, is to support these companies as they navigate the changing energy landscape. This support and attention will also ensure better oversight and regulation.
Additionally, since there is currently no absolute escape from fossil fuels, supporting the large U.S. energy companies that can help fill the gaps in fossil fuel demand will ensure that the jobs, tax distributions, and profit reinvestments remain in the U.S.
The widespread underinvestment in nonrenewable energy over the past several years has also led to structural problems for the companies. The essential nature of fossil fuels during the ongoing energy transition means they need the capital to ensure they can operate safely and efficiently, and minimize their environmental impacts.
GreenBiz: Converting Captured Carbon into Rock Really Is That Easy
Carbfix, an Icelandic company, is converting CO2 into rock, leading the way in carbon capture practices. They have been capturing carbon this way for over a decade.
In 2022, carbon capture became a top emerging segment in climate tech funding. The Inflation Reduction Act also increased financial compensation for carbon captured in the US.
Carbfix specifically dissolves CO2 into sparkling water and injects the mixture into a carefully chosen subsurface, a layer beneath the earth's surface. Basalt is the most common rock on earth, which makes it easy to use to host this process. The company has already injected 83,957 metric tons of CO2 into the earth since 2014. This is equivalent to 208 million miles driven by an average combustion vehicle.
Sustainable Brands: Seeking Better Progress Toward Sustainability? Consider a Business Collaboration
Companies have struggled to implement successful ESG strategies on their own. To advise otherwise, Canada’s MaRS Discovery District has published a new guide to help companies recognize the need for collaboration in order to be successful in achieving ESG goals.
The guide also includes a list of ESG collaborations that businesses can use to find potential collaborators.
ESG collaboration, according to MaRS Discovery District, is when companies in the same or similar industries come together to address social and environmental risks that they all face directly and indirectly.
The guide outlines different topics such as what ESG means and the steps to implement an ESG collaboration.
Forbes: Why Web3.0 Is More Sustainable Thank You Think
Web3.0 (or Web3) is bringing about a more decentralized internet infrastructure and more data privacy and online security for users.
The energy expenditures and carbon emissions from the billions of digital attachments around the world are a major problem, but they are often overlooked. Much of this comes from things like sending attachments and other inefficient online activities.
However, blockchain platforms and immutable ledgers already have built-in solutions – they allow users to access files from a single access point that cannot be tampered with instead of sending attachments that can then be further shared with others. This so-called “single source of truth” improves security and privacy while also slashing carbon emissions.
Beyond Web3, greener blockchain cryptocurrency is also emerging, which is of timely importance as the crypto mining industry currently consumes about 0.55% of the world’s electricity.
Bloomberg: Manhattan’s EV Charging Sites Now Outnumber Gas Stations 10 to 1
According to the U.S. Department of Energy, the borough currently has 320 publicly accessible charging locations.
Many of Manhattan’s public charging stations can be found in parking garages with many chargers at each site. Although, fully electric cars and plug-in hybrids account for 8.9% of new passenger vehicles in the city this year.
Bloomberg: Jobs In Clean Energy in Nigeria to Double by 2023, Report Says
The clean energy sector could create more than 76,000 new jobs in solar services by 2023. Africa’s most populous nation pledged to cut its greenhouse gas emissions by a fifth over the next decade under the Paris Climate Agreement. It also launched a transition plan this year which is meant to “attract private and public sector investments to expand solar infrastructure.”
Reuters: Climate Pay Links for CEOs Do Little to Cut Emissions, Study Finds
Many large companies have begun to tie their CEO pay to climate goals but these companies are lacking in incentives.
Activist group As You Sow examined the pay disclosures from 47 of the largest emitters and found “only one, electrical utility Xcel Energy Inc., gave its CEO a goal tied to measurable cuts in greenhouse gas emissions.
Four other companies tied their executive pay to climate metrics while more than half of the companies studied did not tie their pay to climate actions.
GreenBiz: How SBTi could unlock billions of corporate dollars to protect forests
SBTi has strong advocacy of deep value chain emissions reductions, but there has been confusion about the role of protecting forests in the net-zero transition. This is changing, as the organization has recently released publications arguing for companies to take urgent actions beyond their value chains – this is known as beyond value chain mitigation (BVCM).
SBTi argues that the protection of tropical forests is a top priority, stating that there are “no current trajectories for staying below 1.5 degrees Celsius without protecting the world’s remaining tropical forests.”
Joining efforts like the LEAD Coalition, the world’s largest public-private coalition to preserve tropical forests, is one way for companies to begin working to invest and take action on forest protection.
One main obstacle in previous SBTi guidance has been that BVCM was noted as recommended, rather than essential, which made the spending difficult to justify to boards. The new clarifications and communications about the essential nature of BVCM for the reduction, removal, and storage of greenhouse gases are expected to help mobilize the necessary capital.
Bloomberg: Climate Change Infused Hurricane Ian With 10% More Rain, Scientists Say
According to two climate researchers, Hurricane Ian’s rainfall was 10% worse due to the last two centuries of greenhouse gas pollution.
Hurricane Ian caused anywhere from $68 billion to $100 billion in damages.
The two climate researchers used publicly available information and models of the storm to rerun simulations to determine what might not have happened if climate change didn’t exist.
From the simulations, they determined that the air held about 7% more water vapor with an increase in temperature.
Their studies went beyond Hurricane Ian and determined that other storms were worse as a result of climate change as well.
Bloomberg: Chief Heat Officers Face Rising Temperatures – and Expectations
During the last week of September, the chief heat officers gathered for the first time and released a report called “Hot Cities, Chilled Economies: Impacts of Extreme Heat on Global Cities.”.
This report was an analysis of the effects of global warming on 12 major urban areas.
The chief heat officer (CHO) is a new title that currently is focused on the record-setting heat waves that most of the northern hemisphere has been experiencing.
Eugenia Kargbo is a chief heat officer of Sierra Leone and is currently focusing on a tree-planting campaign.
The CHO in Los Angeles is focused on design guidelines that help cool roofs in the city and is making sure policymakers are aware of these guidelines.
ESG Today: EY Survey: Lack of Visibility Holding Back Supply Chain Sustainability Efforts
EY released a report after surveying senior supply chain executives from 525 large corporations in North, Central, and South America, across many sectors. The study found that sustainability issues are high on supply chain executives’ priority lists, and 80% report that they are increasing their emphasis on ESG initiatives.
Supply chain executives have been pressured by partners, suppliers, and regulatory compliance, but financial factors, particularly cost savings, are the top reason to improve supply chain sustainability.
99% of executives observe increased revenue as a benefit of their supply chain sustainability efforts, and 70% report that they have already seen or expect to see this benefit within the next one to three years. Other benefits include increased customer loyalty (100%), better operational risk management (100%), improved employee quality of life (98%), and enhanced efficiency and productivity (100%).
GreenBiz: Accelerating ESG impact with Fair Trade Certified
Fair Trade USA has reached $1 billion in financial impacts to farmers and workers across the globe. This is just one example of the work done towards their mission which is to improve workers' livelihoods.
Brands are making long-term sustainability commitments with Fair Trade Certified and looking further into their supply chains as they work towards bigger change.
The Fair Trade certification program includes three important aspects: Community Development Fund premium, a wide range of influence and connections, and consumer engagement.
Consumers are looking to purchase products that align with their own values and this certification will help big brands make the change needed.
Sustainable Brands: Why Partnerships with Nonprofits Are Key To A More Sustainable Future
Jennifer Ronk, Senior Sustainability Manager of Packaging and Specialty Plastics, North America at Dow, has a strong desire to get closer to a solution that creates a more circular economy. In her role, Jennifer focuses on building bridges with nonprofits, talking with and listening to people on the ground to further understand how Dow can help them.
Jennifer also mentions how thoughtful collaboration is imperative to real impact, and the power of conversations cannot be overstated. “Nonprofits must have conversations with community members to understand their sustainability needs and discover which solutions will be truly viable,” further stressing the need for relationships between companies and nonprofits, working toward a common goal for communities.
In most scenarios, for-profit organizations have the ability to get funding along with technical and other resources to help drive change while nonprofits can inspire trust, development, and understanding in communities in a way that for-profit organizations cannot do. Hence why the relationship between for-profit organizations and nonprofit organizations is so important.
ESG Today: RWE Emerges As A Top U.S. Clean Energy Player In $6.8B Acquisition Of Con Ed CEB
RWE, a German renewable energy-focused power provider, announced the acquisition of Con Edison Clean Energy Businesses. This deal pushed RWE to the near top of the list for the largest renewable energy players in the US, doubling RWEs renewables portfolio.
Diversity, Equity, and Inclusion
Bloomberg: If Companies Really Want to Do Some Good, They Should Unbundle ‘ESG’ and ‘DEI’
Both ESG and DEI have generated massive industries, and investment giants claim that more than one-third of their assets are monitored through some type of ESG lens. Every Fortune 100 company has adopted a DEI program. However, bundling ESG and DEI together can potentially make objectives ‘fuzzy’ and cause companies to set conflicting goals.
The world is increasingly finding that solving one E, S, or G problem can have cascading impacts. For example, closing goal mines is good for the planet but can leave towns out of work. Corporate social responsibility can mean different things for startups than for large and established companies in mature markets since the company goals and values are different and they are operating on different time-horizon priorities.
Bundling all issues into a single acronym can seem convenient, but it can also cause things to be overlooked. This can be seen in things like ESG ratings where companies can score high in some categories but alarmingly low in others, and the resulting average-to-good bundles rating can paint an inaccurate picture.
DEI bundles together three concepts that have an obvious link, but the movement can still be guilty of overselling its products by proclaiming the value of diversity – higher levels of creativity, innovation, and morale – while sometimes overlooking the need for good management, and without noting the fact that sometimes, increased creativity and innovation can mean a higher variance in performance.
Both ESG and DEI have been protected from backlash with their ‘aura of righteousness,’ but criticism may be needed to create impactful and sustainable progress.
Forbes: How to Build An Effective Diversity, Equity, and Inclusion Program
In a 2019 study performed by McKinsey & Co., it was found that businesses with high gender diversity on their executive teams were 25% more likely to have above-average profitability.
A solid DEI program is about prioritization and determination. Companies need to prioritize DEI and integrate it into all facets of the business, “it must be embedded.”
The following are three ways to start building an effective DEI program:
Model DEI at the top.
Foster an inclusive culture.
Give employees a voice.
Forbes: 3 Ways To Bolster Diversely Owned Or Operated Businesses
In 2018, 18% of the country’s businesses were owned or led by diverse entrepreneurs. However, their efforts and impact are often minimized and mischaracterized because Black or Latino business leaders are referred to as “small-business owners.”
Companies can diversify their supply chains by setting diversity supplier goals and simplifying supplier certification processes to make them more equitable to Black- and Latino-owned businesses.
Networking and mentorship support underserved entrepreneurs to overcome sociocultural barriers, increase capital and develop long-term success.
Investors and venture capitalists can support Black and Latino businesses by expanding their lending criteria and investing in diverse businesses.
ESG Disclosures, Standards, Rankings, and Reporting
ESG Today: European Regulators Propose New SFDR Disclosures for Nuclear and Gas Investments
The joint committee of Europe’s three primary financial regulatory agencies has announced new disclosures to add to the EU Sustainable Finance Disclosure Regulation (SFDR).
These proposed disclosures would require Article 8 and 9 investment providers to issue a yes/no disclosure regarding the product’s intention to invest in nuclear or gas and, if yes, to provide a breakdown of the proportion of investment in these activities.
Bloomberg: First African Emissions Reduction Platform to Begin Trading
The new African emissions reduction platform CYNK will use the Hedera Hashgraph ledger and trade tokens generated by Tamuwa (Kenya’s largest biomass company) to track and trade emissions reductions.
Additionally, the platform is also in talks to trade emissions reduction credits from a company that plans to practice regenerative agriculture in East Africa.
Forbes: Governance As The Force For Real Change In The ESG World
Consumers are expecting companies to follow through with goals and commitments, now more than ever. This includes ESG goals and commitments.
The governance aspect of ESG is a great way for consumers to monitor a company's progress. Companies, specifically those in leadership, should use governance as a way to be transparent with consumers.
Governance models help maintain sustainable and consistent practices that allow for successful and obtainable ESG outcomes that both the company itself and customers can track in terms of progress.
Investment Trends
The Wall Street Journal: ESG Threat Goes Beyond BlackRock
BlackRock is under fire from both republican representatives and ESG advocacy groups.
Republican representatives claim Larry Fink, the CEO of BlackRock, is harming the economy by reducing investments in the energy industry while ESG advocates want him to completely renounce oil and gas companies in the funds BlackRock manages.
Larry Fink has personal ties to ESG efforts through his work with the World Economic Forum and his foundation’s funding of the Center for Sustainable Business at NYU.
In Europe and the UK, there are already efforts to require climate and sustainability disclosures that, if adopted by the US, could cut off capital to energy companies.
Reuters: Nearly half of asset managers don’t base any sell orders on ESG, survey shows
A survey carried out during the summer of 2022 showed that 43% of asset managers did not sell any orders driven by ESG while 35% were not able to show that they made a buy decision driven by ESG.
This has increased from last year with 39% of asset managers who did not sell any orders driven by ESG. Accusations of greenwashing have followed the survey's findings.
GreenBiz: How Japan is becoming a responsible investment success story
Japan's sustainable investments have increased to $2,874 billion in 2020, which accounts for 8% of the five major markets that include the US, Europe, Canada, Australasia, and Japan.
The Japanese government and asset management firms are major advocates for ESG.
70% of asset management firms believe that ESG will have an effect on corporate and company value.
The Japanese government is working towards a net zero emissions goal by 2050.
The Japanese investment industry will need to move away from subjective or personal insights and focus on concrete ESG evidence or ratings in the future.
Companies and Industries
Bloomberg: Inside the Global Fight to Save Coffee
Every year, humanity consumes half a trillion cups of coffee, which is about double what was consumed a decade ago. However, the coffee industry still involves some of the most antiquated forms of agriculture. These processes are also being affected by climate impacts like drought and heat waves and the associated ecological impacts.
Hundreds of thousands of acres of coffee plantations have been wiped out in recent years, and the livelihoods of 125 million people working in the industry are at stake, as 90% of coffee production takes place in developing countries, which are those least responsible for climate change but most vulnerable to its effects.
Coffee farmers are working to improve their agricultural practices and to make their plantations more resilient, but these changes are not immediate. Those involved in the industry argue that the lack of investment is the most critical issue.
An additional obstacle is that the coffee industry currently relies on just two species of coffee plants – this lack of diversity makes it harder to grow the crop in different regions and under different environmental conditions.
To save coffee, the world will need to develop the next generation of coffees that can withstand higher temperatures and lower rainfalls. To do this, botanists are looking at some little-known African coffee species that are on the verge of extinction but that can grow in higher temperatures.
Forbes: Composability Is the Key to A Sustainable Future for Manufacturing
Manufacturing is a complex, dynamic, and fragile system. Manufacturing systems must have high levels of adaptability. Many companies use automation to try to minimize the variability on the factory floor.
Composability is a system design principle that lets individuals satisfy specific user requirements at specific times. Vendors must commit to designing tools for the people that would be closest to the problem. Composability brings people closer to the solutions and information required to get jobs done.
Enabling horizontal information sharing allows for manufacturing systems that fuel continuous improvement within each employee's operational tasks.
The Wall Street Journal: Six U.S. Banks Will Assess Their Climate Resilience in Fed Pilot Program
Six of the largest banks in the U.S. - including Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, and Wells Fargo & Co. – are participating in climate scenario-analysis exercise meant to provide insight on management of climate risks, all led by the Federal Reserve.
The Fed will publish variables – economic, climate, and financial – that will be used in each of the scenarios.
Reuters: World Bank approves Egypt $400 mln to improve and decarbonize logistics and transportation sectors
World Bank has recently agreed to provide Egypt with $400 million to develop its logistics and transportation sectors in support of the shift toward lowering carbon emissions, and the project will focus on developing a railway bypass in Alexandra.
The railway project is expected to reduce emissions by 965,000 tons over 30 years.
World Bank also supports Egypt’s efforts to promote private sector participation in improving its railways by creating a system similar to road tolls.
ESG Today: EV Charging Startup Loop Raises $40 Million to Fuel Expansion
Loop Global, an EV charging and infrastructure startup that launched in 2019, has announced that it raised $40 million in Series A funding to support the growth of its U.S. operations and its expansion into new countries.
Loop provides EV charging solutions like turnkey hardware, software, and service-based solutions that make EV charging more accessible and easily deployable.
The Wall Street Journal: GM Sustainability Chief Discusses Auto Maker’s Push to an All-Electric Lineup
General Motors has a current plan to only sell electric vehicles by 2035.
The transition to electric vehicles has many benefits that include lower greenhouse gas emissions and a healthier population.
In order to ensure the electric vehicles’ electricity is coming from a clean energy source, GM has committed to sourcing 100% renewable energy globally by 2035.
Along with clean energy efforts, GM is working to solve responsibly sourced materials issues, recycling issues, and supply issues.
Forbes: Implementing Sustainability Into The Hospitality Industry
Travelers prefer hospitality companies with environmentally conscious practices. Booking.com’s Sustainable Travel Report 2022 shared that 81% of global travelers identified traveling sustainably as important to them.
Japan is known for its hospitality, quality service, and eco-friendly efforts. Japan’s culture is mindful of reusing and conserving resources.
The hospitality industry can contribute to climate change mitigation by focusing on water conservation, sustainable packaging, and energy efficiency, particularly related to laundry, operations, and consumable supplies like shampoo.
Bloomberg: Food Waste Startup Too Good To Go Launches in California
Too Good To Go (TGTG) is a mobile app founded in Denmark that provides a reasonable alternative to throwing away food by connecting users with restaurants and stores with surplus unsold food. The app currently has 61 million users, three million from the U.S., and partnerships with 154,000 restaurants and stores around the world.
The restaurants, bakeries, and stores prepare uneaten food in “surprise bags” and offer them on the app for typically one-third of the original price.
The UN claims that 17% of food grown is never eaten, and in the US, about 40% of food goes to waste. Most food waste goes to landfills, and it is estimated to cause 8-10% of greenhouse gas emissions such as methane.
Sustainable Brands: Can Regenerative Agriculture Regenerate the US Food System?
Indigenous people have been using regenerative farming practices for generations, and the agricultural community has been investigating these principles to help mitigate climate change and sustainably feed a growing population.
Regenerative agriculture is known to remove large amounts of carbon from the atmosphere, regenerate soils, and restore water cycles all while diversifying farm production and relying less on fertilizers.
Farmers struggle to transition to regenerative agriculture practices because small-scale farmers are limited in diversifying operations. Without local processing or infrastructure, regenerative agriculture is not economically feasible. Farmers are burdened economically and by regulatory red tape as they try to adopt conservation and regenerative practices.
Government Policy
The Wall Street Journal: SEC Fines ESG Investment Firm Wave Equity Partners Over Fee Issues
Wave Equity Partners is a Boston-based firm that invests in clean energy and environmentally focused businesses. Between 2018 and 2020, Wave Equity used $1.1 million from a fund to pay fees to an outside vendor but did not repay the fund, which is required and done by reducing management fees charged to its investors.
The investors were not aware of this issue over the two years, and the SEC pursued the action as the SEC seeks to punish private-equity firms that overcharge investors and layer undisclosed costs.
Wave Equity agreed to pay a $325,000 penalty and refunded the money to the affected fund. Wave Equity also hired a new chief compliance officer and an outside compliance consultant.
Bloomberg: Will the Supreme Court Restrict the Scope of the Clean Water Act?
The Clean Water Act is significant environmental legislation in the United States that provides the federal government with the right to regulate the Waters of the United States (WOTUS) to prevent pollution and destruction.
Next Monday, the Supreme Court will be hearing the Sackett v. Environmental Protection Agency case. In 2007, the Sacketts purchased land in Idaho and started filling it with dirt and rock in preparation to build a house. The EPA ordered the Sacketts to restore the land and stop their actions as such requires a permit since the land is subject to the Clean Water Act. The couple sued the EPA.
Environmental groups are concerned that the conservative supermajority on the court may narrow the scope of the Clean Water Act, especially with regard to the definition of WOTUS. Conversely, conservatives think this case triggers property rights issues as a form of regulatory overreach on landowners.
Reuters: Texas AG Paxton joins probe into S&P Global's use of ESG in credit ratings
Texas Attorney General Ken Paxton joined a multi-state investigation into whether S&P Global violated consumer protection laws with its use of ESG factors in credit ratings because he thinks they "appear to politicize what should be a purely financial decision."
Rating agencies have been developing ESG factors and assessments as the interest in ESG investing has grown recently although conservative states have opposing interests.
In August, a group of nineteen states launched a similar investigation on Morningstar.