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ESG Weekly News Update: September 2, 2022

General ESG News

Forbes: The Next Frontier of Digital: Technology as a Sustainable Business Asset

  • The lasting impact of the COVID-19 emergency has shown businesses how digitization can build resiliency. It is vital for companies to understand the balance between opportunities presented by digital transformation with the risks inherent to digital technology.

  • If used effectively, technology offers a unique platform to support the transition to a more sustainable and inclusive society. This will require considering technology’s entire life cycle impact to maximize value and reduce environmental impact.

  • General Data Protection Regulation requirements and reputational risks increase as the number of devices across the organization increases. High-powered asset management platforms are used by leading businesses to ensure the resiliency of their digital transformation.

  • E-waste is the fastest growing waste stream in the world, and consumers and governments are increasing the pressure on companies to address the issue. Circular technology service models are supporting businesses to allow for repairs and reuse to be integrated into procurement processes.

Forbes: The Important Role HR Plays in ESG Strategy

  • In the last few years, social issues have become more important to employees and in turn, HR departments have needed to change their responsibilities and strategies to reflect that.

  • ESG has become a more influential factor when looking to retain current employees and attract new talent.

  • Berenberg, a UK firm, found that 47% of investors were more concerned about the social performance of a company than the environmental performance.

  • There is a natural connection between HR and the social component of ESG. Transparency and DE&I are key factors HR can focus on to support ESG efforts.

  • Some steps a company and HR can take to incorporate the social component into their business include analyzing workforce data and properly portraying their social efforts in ESG reports.

Forbes: ESG – A Defense, A Critique (part 2 now), And A Way Forward: An Evidence-Driven Pragmatic Perspective

  • The author presents evidence related to claims that ESG is a “savior” of global ecosystems and how profit and maximizing shareholder value still contribute to many societal evils.

  • The claims examined include: “ESG can save the world,” “activist hedge funds promote short-termism and affect sustainability goals,” “boards with employee representation have long-term focus,” and more.

The New York Times: My Job Is to Police Energy Use in My Office. Here’s How We Got to Net Zero

  • Motivating office workers to reach an office net zero energy goal may sound difficult, but if one is able to pay close attention to all aspects of office energy use, the smallest actions could have an impact on climate change.

  • Buildings, construction, and commercial buildings account for 20% of energy use in the US. The Environmental Protection Agency (EPA) reports that 30% of the energy used in commercial buildings is wasted on average.

  • While humans are creatures of habit and there is often internal resistance to improving energy efficiency, it is important to be friendly and respectful and maintain good communication throughout the process.

Forbes: 2022 Mid-Year Check In: Tracking Changes On Risk, COVID, The Great Resignation, Hybrid Work, ESG And More

  • Predictions on trends for the rest of 2022:

  • The frequency and occurrence of high-impact risks – such as climate, geopolitics, health, economics, supply chain, human capital, and war – will continue to increase and require management.

  • Remote and hybrid work models will balance and normalize amongst employers.

  • The “Great Resignation” will yield permanent talent shortages.

  • ESG and sustainability will continue to be debated and evolve.

  • Employee well-being and organizational resilience create a competitive advantage.

GreenBiz: Three ways agri-businesses can feed the world sustainably through circular food systems

  • As food systems make up about a third of total greenhouse gases, food systems greatly impact nature, biodiversity loss, and poverty. A circular food system is a solution to these global crises.

  • Businesses can help generate circular food systems by:

  • Paying the premium for food produced with methods that protect and regenerate nature

  • Investing in innovations that address food loss

  • Investing in food waste circularity.

ESG Today: Germany, Denmark to Build Offshore Wind “Island” to Bolster Climate, Energy Independence Goals

  • The Bornholm Energy Island is an offshore wind project located in the Baltic Sea, that has the capability to provide enough electricity to power 3 million or more homes.

  • This is part of Europe's goal to become independent from Russian and follows the signing of the North Sea-focused offshore wind pact.

  • Germany, Netherlands, Belgium, and Denmark strive to reach a target of 65 GW of offshore wind by 2030.

Forbes: Four Best Practices To Implement A Successful Social Sustainability Strategy

  • According to Henning Ohlsson, director of sustainability from Epson Europe, there are 4 actions that can help ensure that businesses deliver sustainability objectives. They are: Focus on your workforce; ensure total control over the business supply chain; demonstrate why best quality is always a worthwhile investment and find meaningful ways to rate and audit your company.

  • Over the past few years, companies have come under scrutiny for unfair practices in their operations. For any business, the workforce is a valuable asset and ensures all operations meet the requirement of core labor standards.

  • An important first step is to take ownership of the supply chain process. This ensures total security and minimizes the risks of goods procurement from unsafe or unethical manufacturers.

Diversity, Equity, and Inclusion

Reuters: Showdown over Nasdaq board diversity rule heads to 5th Circuit

  • Two conservative groups are seeking to invalidate Nasdaq’s board diversity rule, and they will argue their case in the 5th U.S. Circuit Court of Appeals next week. The rule requires companies listed on Nasdaq to publicly disclose their board diversity and have two diverse directors by 2025 or 2026 (depending on their listing tier) or explain why they do not have such representation.

  • The National Center for Public Policy Research and the Alliance for Fair Board Recruitment are challenging the rule, arguing that it violates the equal protection clause of the Fifth Amendment by encouraging discrimination on the basis of race and sex. They also argue that it is requiring companies who do not have diverse boards to engage in “self-condemnation,” thereby flouting free speech.

  • Nasdaq, in response, noted that the rule should not be mistaken as government action and that to do so would be starting down a dangerous path.

ESG News: Toyota Promotes Diversity & Inclusion Through $750 Million Bond Offering

  • Toyota has issued its sixth diversity & inclusion (D&I) bond in the amount of $750 million, continuing Toyota Financial Services’ comprehensive D&I platform and its commitment to helping diverse underwriting firms build their experience and work on high-profile deals.

  • The new bond builds on Toyota’s relationships with MWBE brokers by elevating their stature in transactions and allows them to take the lead underwriting role on a bond.

Forbes: How To Build A Stronger, More Diverse Post-Pandemic Network

  • During the global COVID-19 pandemic, personal and professional networks notably shrunk, according to professors at the Yale School of Management. In the professional world, there is value in “weak ties,” or those not in our immediate circles. These are often the people who do not have the same experiences, functional expertise, demographics, and backgrounds, and who provide new perspectives. Unfortunately, these are the people most likely to be cut during the network shrinkage of the pandemic.

  • There are a few steps individuals can take to build stronger and more diverse networks:

  • Connecting intentionally but liberally

  • Segmenting networks by purpose

  • Contacting people from old networks

  • Reaching out even when there are no immediate needs.

ESG Disclosures, Standards, Rankings, and Reporting

The Wall Street Journal: Wall Street Rails Against Costs of Chairman Gary Gensler’s Regulatory Agenda at SEC

  • Many private and public companies have voiced concern about new policy proposals from Gary Gensler, SEC Chairman, claiming the costs would be greater than the benefits.

  • The proposals include requirements for public companies to disclose climate change-related information and stricter rules for products advertised as environmentally responsible.

  • The SEC is required to produce studies about the possible economic impacts each new rule could have, yet some believe the studies done are flawed and understated.

  • SEC officials, former and current, encourage commenters to substantiate their concerns and views with data.

GreenBiz: We Need New Corporate Energy Procurement Standards to Decarbonize the Grid

  • Current standards for corporate energy procurement have been effective in encouraging large corporations to invest in renewable energy, but it is now necessary to evolve to account for the location and the timing of clean energy.

  • Green Strategies and The NorthBridge Group have released a report recommending fundamental changes to the accounting rules used in Scope 2 emissions calculations from electricity purchases. The updated rules encourage businesses to improve their alignment in procurement and investment to maximize their carbon reduction impact.

  • According to Clean Energy Buyers Association (CEBA), large corporations signed deals for more than 11 GW of new renewable energy in 2021, which has catalyzed the marketplace for renewable electricity, and even more could be accomplished for decarbonization if the accounting methods were more aligned.

  • The current rules do not require companies purchasing renewable energy to evaluate the carbon reduction impact of their procurement; therefore, investments are usually made at the lowest cost option regardless of the most effective investments for reducing carbon emissions.

  • By applying an updated accounting system, large corporations will be encouraged to make the strategic investments necessary to accelerate commercialization and cost reduction of the technology needed to support a zero-carbon grid.

Investment Trends

Reuters: The challenge of investing in the face of state anti-ESG legislation

  • Due to ambiguities in terminology around ESG, certain global regulators are concerned that investment managers may be “greenwashing” their investment products, or even overly leaning on ESG features of these products.

  • More recently, anti-ESG Bills started to pass in several states. In almost all cases, anti-ESG bills require states to take certain actions, such as divesting from companies that engage in ESG investing or refusing to contract with companies that engage in ESG discrimination

  • The scope of anti-ESG Bills can vary depending on the bill, but all cases are limited in their application to the activities of state entities; they do not impact the ability of private investors, in their own account, to sell ESG-related investment strategies or invest in a particular entity.

  • These Bills could result in states being prohibited from investing in such products and potentially (depending on how the law is interpreted) from engaging ESG investment managers to manage any of the state’s assets, even in non-ESG-related investment products.

The Wall Street Journal: Texas Blacklists BlackRock, UBS and Other Financial Firms Over Alleged Energy Boycotts

  • The State of Texas recently opted to blacklist financial institutions, such as BlackRock, UBS Group AG, and others for allegedly boycotting the fossil-fuel industry. This move is expected to lead state pensions and other public entities to sell their shareholdings in those companies.

  • Texas is among several conservative-leaning states that are seeking to use the public purse to push against the ESG movement.

  • BlackRock said this decision is not “fact-based”, mentioning that it has invested over $100 billion in Texas energy companies. UBS said it provided “extensive information” showing it doesn’t boycott energy companies even under a broad interpretation of Texas law.

  • Texas maintains several blacklists of entities marked for scrutiny under state divestment law. Apart from banks and funds that boycott energy companies, it has also targeted companies with ties to Iran, Sudan, and foreign terrorists, along with companies that boycott Israel.

Companies and Industries

Forbes: The Power Of Sustainable Software

  • The digital industry seems to be diminishing our impact on the environment, but when we look closer, that’s not exactly the case. As digitalization grows and the shift to cloud computing continues, it is now clear that software applications are also leaving a huge imprint on the earth.

  • Data processing involves CO2 use, and this continues to grow with the rise in digital consumption. Energy consumption is directly associated with the online services we use. According to the Shift Project Report, global digital energy consumption is increasing by about 9% per year.

  • There are different ways to reduce our footprint. There are good examples from tech companies including a sustainable agenda in their corporate mission, calling for energy and cost-efficiency products and services, such as:

  • Reallocating energy sources to areas with renewable energy sources

  • Using software that causes less environmental impact

  • Developing more software with lower environmental impact.

The Wall Street Journal: Toyota Commerical Truck Unit Hino Faces Widening Scandal Over Emissions Data

  • Toyota Motor Corp.’s chief addressed Hino Motos, its commercial truck unit, regarding a scandal over falsified fuel performance and emissions data. Hino is 51%-owned by Toyota and announced this week that it failed to meet emissions testing requirements.

  • Hino has suspended the shipments for their trucks with the engine in question, as Japan’s Transport Ministry found that 643,635 automotive engines had falsified data with more than 60,000 of those engines subject to recalls.

  • Products involved in the recalls are confined to Japan and there is no confirmation of falsified data outside Japan at this time, and the company is cooperating with a connected investigation underway in the US.

  • A report released this month found that Hino had been falsifying data on fuel economy and performance of its engines for about two decades in Japan.

Greenbiz: This Company Wants Your Post-Industrial Textile Waste

  • Everywhere Apparel, a material science company, is focused on material innovation and development and is currently working on commercializing a new type of material. Everywhere's materials include 100% recycled cotton fabric, and they have successfully created a closed loop system for it.

  • Everywhere is a small company but they are already working with hundreds of brands and their vendors, to promote their 100% recycled products from fibers to packaging.

  • Their goal is to design solutions that won't require any additional equipment or machinery, the recycled materials are designed to be implemented immediately, allowing brands to input directly into their supply chain.

  • The inputs in their materials include recycled cotton from post-industrial sources, including deadstock, unsold materials sitting in retail stores or never making it to a consumer. Companies or individuals can recycle with Everywhere by visiting its website.

ESG Today: First-Ever Cross Border CO2 Transport and Storage Deal Signed Between Northern Lights JV, Yara

  • Northern Lights (a joint venture between Equinor, Shell, and TotalEnergies), in partnership with crop nutrition company Yara, has signed the first-ever commercial cross-border CO2 transport and storage agreement.

  • Under the new agreement, CO2 from Yara’s plant in the Netherlands will be captured, compressed, and liquified in the Netherlands, then transported for permanent storage under the seabed in the Norwegian North Sea. The first phase of the project is expected to be operational in 2024, with transportation and storage beginning in early 2025.

  • The Northern Lights project eventually aims to expand its capacity to a total of five million tons of annual storage.

The Wall Street Journal: Boeing and Airbus Want to Get Greener. Why Aren’t They Building New Planes?

  • Following the pandemic, the aviation industry worked to get greener. Wisk, owned by Boeing, pitched battery-powered air taxis, and Airbus began testing the use of hydrogen combustion, yet there was no talk of designing new jets instead of just updating the old ones.

  • The International Council on Clean Transportation believes the aviation industry will fail to meet its net zero carbon emissions pledge by 2050 and it has been forecasted that there will be only a 1.1% improvement in energy intensity per year through 2030.

  • With the current travel increase, operational efficiency won't be enough, sustainable fuel will be key.

  • A big reason the aviation industry is holding back on designing and developing new jets is the cost, it makes better financial sense to upgrade current jets.

The Wall Street Journal: EV Charging Companies Struggle to Build as Climate Bill Boosts Incentives

  • The Inflation Reduction Act (IRA) incentivizes purchases of electric vehicle chargers, but permitting and supply issues may be obstacles for production to meet demands. The Biden administration aims to have 500,000 public chargers by 2030 although McKinsey & Co. estimates the need for 1.2 million, and the U.S. currently has only 124,000.

  • The IRA budgets about $1.7 billion in tax credits for chargers or other alternative-fuels equipment, which may persuade more businesses to produce and buy chargers. States may receive $7.5 billion for charging. The law “would boost the maximum potential tax credits of 30% for construction of charging stations to $100,000 a charger, up from $30,000 a site currently, and would extend the program by a decade.” The tax credits would be unavailable for chargers installed in wealthier areas.

GreenBiz: Walmart’s would-be role as circular packaging matchmaker

  • In 2016, Walmart set a packaging goal of using 100% recyclable packaging for its private brands by 2025. Walmart later included reusable and industrially compostable packaging and aimed to use at least 17% post-consumer recycled plastic content for its private brands. In a recent report, Walmart reached 55% of its packaging goal.

  • Walmart plans to use Circular Connector, an online tool to promote its sustainable packaging ideas with other consumer products businesses. One of Walmart’s partners, U.S. Plastics Pacts, will assess the ideas submitted for innovation awards. Plastic IQ is another online resource for redesigning products and packages.

  • Community Recycling Hub is a Walmart initiative connected with TerraCycle, which collects items that cannot be curb-recycled.

GreenBiz: Combating climate change by transforming waste into value

  • Current record temperatures and record heat waves across North America, Europe, and South Asia have caused concern and experts warn that greenhouse gas emissions need to be halved by 2030.

  • Carbon capture and use (CCU) and biogas upgrading are two ways to help reach that goal.

  • Carbon can be extracted, purified, liquefied, and repurposed for technologies such as sodium bicarbonate, which is used to treat kidney failure.

  • Biogas is produced during the anaerobic digestion of organic material. Methane is then separated from CO2 and other gases to create biomethane. Biomethane can replace natural gas and has been growing in popularity.

  • Pentair has been involved in the carbon capture space for almost 80 years and they currently offer carbon capture and biogas upgrading solutions to partners to help them reach different environmental goals. They have over 2,000 customer installations, including their latest project with Tata Chemicals Europe.

  • CCU and biogas are especially important for industries that have unavoidable emissions and companies like Pentair are making an important contribution to reducing overall greenhouse gas emissions.

GreenBiz: Innovative partnerships bring community solar to low-income households in the US

  • Over the last 15 years, installed community solar has increased by almost 700%.

  • This increase has not expanded to low- and moderate-income customers. Relationships between utility companies, developers, and other stakeholders will be key in the expansion of community solar to those income customers.

  • LG&E and KU have created a community solar program that involved Kentucky Habitat for Humanity leveraging grant funding to subscribe to 180 shares of community solar that was then gifted to 10 low- and moderate-income households, which in turn lowered those households' electricity bills by 30%.

  • FedEx used one of its warehouses in DC as a solar facility and has provided electricity to power 150 homes.

  • Efforts to provide green energy to low- and moderate-income households will be critical if the US wants to reach the Biden Administration's goal of powering five million homes with community solar by 2025.

ESG News: Honda & LG to Invest $4.4 Billion into EV Battery Production in the U.S.

  • The new JV plant, established by Honda and LG, aims to have an annual production capacity of 40 GWh.

  • The two companies believe expanding local electric vehicle production and battery supply will put them in the best position during the rapidly growing market.

  • The two companies aim to be leading battery innovation and will begin construction in 2023.

Government Policy

The Wall Street Journal: Inflation Reduction Act’s Real Climate Impact is a Decade Away

  • The Inflation Reduction Act (IRA) could speed up the advancement of sustainable technologies like green carbon along the learning curve and accelerate its adoption

  • President Biden and supporters of the law treat the IRA as the “Emissions Reduction Act”, as it will allow the US to reduce carbon emissions and move closer to its international reduction commitment. Incremental reduction in emissions from the IRA is calculated to be about 6% to 10% according to Rhodium Group, which accounts for only a 1% to 3% reduction in global emissions by 2030.

  • The potential consequential impact of the bill is in the acceleration of technology adoption which will drive emissions lower beyond 2030. History has shown that climate policies like taxes and subsidies are effective catalysts for innovation and demand boosts.

  • Advances like a 96% price drop for photovoltaic (PV) modules between 1980 and 2012, and a 6% drop in solar-generated power between 2018 and 2021, are a result of the promises of demand that government incentives make possible.

  • IRA has the potential to replicate the experience of solar energy with other technologies, to help decarbonize the hard-to-reach sectors like aviation, industrial processes, and agriculture.

The New York Times: What to Know About California’s Ban on New Gasoline-Powered Cars

  • California regulators recently approved a plan to phase out the sale of new gas-powered vehicles in the state by 2035 in favor of electric vehicles or other emissions-free models.

  • California is the largest auto market in the U.S., and some experts argue that this regulation could become “one of the world’s most important climate change policies.”

  • The rule requires that 35% of new passenger cars and light trucks in California be emissions-free by 2026, and the benchmarks increase to 68% in 2030, then 100% in 2035. The rule does not require consumers to buy these vehicles, but it does fine automakers that do not comply with the targets. The rule also does not affect the sale of pre-owned gas-powered cars.

  • In recent years, as California has been at the forefront of emissions standards and other climate legislation, many states have followed suit. It is expected that these states will also eventually adopt similar auto policies in the coming years.

The New York Times: DeSantis Claims Win in Campaign Against E.S.G.

  • Florida Governor DeSantis advanced his campaign against ESG as the State Board of Administration “adopted his proposal to ban considering ‘social, political, or ideological interests’ when making investment decisions for the state’s pension fund.” DeSantis claims that corporate power has been imposing an ideological agenda on Americans against financial investment priorities.

  • States conflict in perspectives and initiatives on whether to divest state pension funds from gun, oil and gas, and coal companies or divest from companies boycotting such companies. Asset managers are not as divisive as states.

Reuters: BlackRock, European firms face Texas pension ban over energy policies

  • Texas Comptroller Glenn Hegar determined around 350 individual funds violated the new law that protects Texas’ oil and gas sectors, and they were boycotting the energy industry.

  • Among those are BlackRock and nine European firms, and Texas agencies may bar them from doing some business with the state. Many investment companies are disputing the call out. Hegar’s list also includes Credit Suisse Group, BNP Paribas SA, UBS Group AG, and Schroders PLC.

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