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ESG Weekly News Update: September 23, 2022

General ESG News

Forbes: Three Steps For Engaging The Board In ESG Initiatives

  • Company board members must understand ESG-related risks to advocate for the related initiatives. They should consider the following steps:

  • Differentiate ESG from CSR. Under CSR, organizations are self-regulated as they choose initiatives aligned with corporate messaging and they can be successfully performed. An ESG agenda integrates quantifiable environmental and social goals and actions into corporate strategies with a strong governance framework, resulting in measurable impact assessments.

  • Communicate with measurable and actionable insights towards ESG risks and the board’s advocacy. Reviewing other companies’ ESG initiatives and priorities is supportive to stay on top of trends as well as governmental or public surveillance.

  • Carve ample time to evaluate risk data, understand ESG regulations relevant to the business, and decide with consideration of all key stakeholders.

Sustainable Brands: Team of Scientists Unveil Space-Tech Platform That Tracks Carbon in Every Tree

  • The nonprofit organization CTREES is launching a digital platform that calculates the carbon in every tree on the planet with complete accuracy.

  • Nature-based solutions can help close the gap between emerging carbon-removal technologies and net-zero targets, and many of the projects in the voluntary carbon market focus on forests. The success of these projects will depend on accurate accounting, which is what CTREES intends to provide.

  • CTREES has already developed national and jurisdictional forest carbon data and will launch the full digital platform at COP27.

Forbes: Build Your Business Sustainably To Encourage Resilience And Retention

  • IBM Institute for Business Value found that “more than two-thirds of the full potential workforce respondents are more likely to apply for and accept jobs with environmentally and socially responsible organizations.”

  • Here are some tips on how to go about building your business around sustainability principles.

  • Start with a vision. How do you want your employees to feel working for the company? How do you want the world to see your company? What are your environmental, social, and governance goals?

  • Take care of your staff from day one. Having well-defined HR policies will be beneficial.

  • Reinvent the office. Equip your team with the necessary technology to work wherever they are which also will help you build resilience in your business.

  • Greenwashing is not going to fly.

  • Choose your supply chain carefully. Your supply chain is an extension of your own business.

  • Diversify your workforce. A diverse workforce will bring talent from varied backgrounds as well as differences in knowledge and experiences.

  • Give back to the community wherever you are. No matter how big or how small your company may be, it is important to build a relationship between you and the local communities you operate in.

  • Think big. Build your business according to what you believe be coming in the future.

Bloomberg: Biden to Skip UN Meeting as Climate Change Moves to ‘Back Burner’

  • President Joe Biden is set to miss the United Nations roundtable on climate action, creating concern that other G7 leaders will also forgo the session rent to help pave the way for international global warming negotiations.

  • Secretary General Antonio Guterres stated, “the climate crisis is the defining issue of our time period it must be the first priority of every government in a multilateral organization, and yet, action is being put on the back burner -- despite overwhelming public support around the world.”

  • David Waskow, Director of the World Resources Institute’s International Climate Initiative, stated, “this is a global crisis that requires the global response, and discussion at the leader level is essential.”

  • These warnings come as more than one million people in Puerto Rico lack power after hurricane Fiona and upwards of thirty million people in Pakistan continue to recover from historic flooding. “Multiple and often interconnected crises of recent years have exposed significant gaps in global governance,” said Kassym-Jomart Tokayev, the president of Kazakhstan.

Forbes: How Business Leaders Can Take Action On ESG

  • Businesses are struggling to integrate ESG strategies and practices into their business plans, as well as track the progress and success of those practices.

  • Pamela Rucker, CIO Advisor and Instructor for Harvard has come up with some ways to help leaders be successful in incorporating ESG practices. Some of her suggestions include:

  • Creating time regularly to meet about ESG work and progress.

  • Engage employees and customers by creating a conversation about how ESG impacts them personally.

  • Create goals that are achievable and measurable.

  • Be transparent with established goals and their progress.

Forbes: 14 Strategies HR Professionals Use To Build A Sustainable Company Culture

  • Many HR professionals struggle with sustaining company culture and sustaining company culture is a key aspect of their role.

  • Forbes Human Resources Council shared some ways for other companies to be successful in sustaining company culture. A few of these include:

  • Making sure employees feel heard and are heard.

  • Creating an open-door policy that encourages trust and provides support.

  • Act as ambassadors for company culture – create a vision and implement it in HR.

  • Be clear and communicate about the company’s values and align company decisions with those established values.

GreenBiz: Citizens disillusioned about progress on corporate sustainability, poll finds

  • Greenwashing has been at the forefront of consumers' minds and in turn, has created skepticism towards corporations' sustainability programs.

  • Out of 19,000 people polled, 70% were suspicious about corporate progress yet the concern hasn’t yet been translated into action on the business side of things.

  • To make things more complicated for companies, less than 7% of consumers polled responded that they would be willing to pay more for sustainable products.

ESG News: Nike Launches Community Climate Resilience Program with $2 Million Grant to Trust for Public Land

  • The new Nike program will fund climate resilience projects and help create access to public green space, which can be vital in reducing urban heat island effects and flooding.

  • Nike is focusing on communities that are disproportionally impacted by climate change and they hope to create equal opportunities for those community members to be part of the athletic world.

  • Currently, the included communities are in New York, Chicago, and Los Angeles.

Diversity, Equity, and Inclusion

The Wall Street Journal: Law Firms Jockey to Help Companies Manage Diversity and Equity

  • Driven by shareholder pressure at top U.S. companies, law firms are increasingly including race and diversity audits in their practices. Companies are assessing their hiring practices, compensation and promotions, products and services, and policies for possible discrimination or bias vulnerability.

  • Amazon performed its audit on its own. Starbucks, Facebook, and Airbnb recently pursued audits in response to negative publicity or occurrences about workplace culture and discrimination. According to Sustainable Investments Institutes, there have been 44 shareholder proxy proposals for audits this year.

  • Legal teams for racial-equity audits involve eight to twelve lawyers over about a year. The lawyers typically analyze company policies, interview employees and executives, and draw input from communities affected by the business. Some audited companies have adopted recommendations and created new programs. The purpose of these audits is to identify strengths and weaknesses and correct negative outcomes of the review.

ESG Disclosures, Standards, Rankings, and Reporting

GreenBiz: Disclosing your Climate Fingerprint – the next frontier in corporate climate policy

  • In 2022, the company Seventh Generation published its 2022 Climate Impact in Full Disclosure, which highlights that companies can find their climate fingerprints across a wide range of corporate spending and activities, including their financial service providers, insurers, creative services, and even advocacy and philanthropy.

  • The Climate Fingerprint methodology, developed by Seventh Generation and Pure Strategies, includes three main components:

  • Measure: Review the climate practices and policies of business partners and service providers.

  • Influence: Engage partners.

  • Activate: Make changes and improve performance.

Investment Trends

The New York Times: Cracking Down on a Wall Street Trend: E.S.G. Makeovers

  • In recent years, major asset managers have given many of their funds ESG “makeovers,” with new mandates to invest in companies with the best ESG performance, ratings, and/or reputation. The firms and their new ESG funds aim to capitalize on growing investor demand for such investments, and there is now a total of 588 sustainable ETFs in the U.S., according to Morningstar.

  • In response to the ESG investing boom, the SEC has begun cracking down on funds’ misleading sustainability claims, dedicating a specialized ESG enforcement task force to the work. So far this year, the task force has brought just two enforcement actions and subsequent investigations.

  • Many fund managers make ESG investing decisions based on companies’ ESG ratings, provided by big financial research companies. However, these ratings are often more reflective of how a company compares to its competitors than how good the company is for people and the environment.

  • Some experts also worry that the rise in ESG investing is, unfortunately, shifting the conversation away from taking real action on planetary welfare. Others argue that the best course of action for the future is that no funds are dedicated as “ESG funds,” but that ESG is incorporated into good corporate investment management.

Bloomberg: The Booming ESG Bond That’s Facing Growing Skepticism

  • Sustainability-linked bonds are debt that can carry the benefits of green bonds. It means that it offers lower interest rates compared to conventional bonds. It has a unique feature that allows the issuer to spend on less environmentally oriented projects.

  • Issuers set sustainability performance targets with timetables and then make extra payments to bondholders if they fail to achieve them. The penalty could be higher coupons during the life of the bond or an additional payment on the maturity.

  • There is a range of ESG metrics to pick from, depending on their operations and existing sustainability plans. While most companies set environmental goals such as carbon emissions, supermarket chain Carrefour SA linked a transaction to its levels of food waste and packaging.

  • In the more mature sustainability-linked loan market, some deals are tied to ESG ratings.

ESG Today: HSBC Launches Global Circular Economy Fund

  • HSBC has launched its GIF Global Equity Circular Economy Fund, which will be classified as Article 9 under the EU Sustainable Finance Disclosure Regulation (SFDR) and will invest in companies enabling the transition to a circular economy and delivering against all 17 UN Sustainable Development Goals (SDGs).

  • The new fund will target investment in companies focusing on designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.

ESG Today: ECB Introduces Climate Scores to Decarbonize €387 Billion Corporate Bond Portfolio

  • The European Central Bank revealed details of its plans to decarbonize billions of corporate bond holdings, including the introduction of climate scores that will be incorporated into future purchase decisions. This process would begin in October of 2022.

  • These actions are aimed at reducing the Eurosystem’s exposure to climate-related financial risk as well as supporting the green transition of the economy.

Companies and Industries

Sustainable Brands: On Advances Circular Ambitions With Industry First Shoe Made From Carbon Emissions

  • Swiss sports brand On unveiled Cloudprime this week, the first shoe made from carbon emissions. On is the first company to turn captured carbon into ethylene vinyl acetate (EVA) foam. The shoe is made from foam material called CleanCloud, made from carbon emissions.

  • The brand envisions a future where every On product is fossil-free and fully circular. To create Cloudprime, On has partnered with organizations such as LanzaTech, Borealis, Technip Energies, and Novoloop.

GreenBiz: How can energy storage maximize decarbonization? This consortium has an idea

  • Energy storage projects are financed and structured to maximize return on investment. Often, they make money by selling energy at market rates to the grid, determined by electricity supply and demand at a given moment.

  • If the goal is to decarbonize the power sector, it is important to change the financial model for these projects. It will require two stages of innovation: emissions related to energy generation in real-time, and the incentivization of emission reductions.

  • As more companies are looking toward reaching 24/7 carbon-free energy, a cottage industry has emerged with innovators looking to better understand real-time emissions.

  • Just like any other capital-intensive project, energy storage capabilities require funding. The big question is how to structure deals to send price signals that align with emission reduction.

The New York Times: An Anti-E.S.G. Activist Takes on Apple and Disney

  • Vivek Ramaswamy, one of the most prominent Wall Street conservative investors and critics of ESG, has gained attention after his letter to Apple and Disney to halt their “racial equity audit” and remove diversity considerations from hiring compensation policies.

  • In his letters, Ramaswamy says that if Apple doesn’t change its policies, he will try to raise the issue at its next shareholder meeting. Regarding Disney, his position is that the company has hurt its brand by speaking out against government policies that do not directly affect its business.

  • Many critics believe that managers from certain funds are limiting companies’ profits and ability to compete. ESG proponents say looking at the long-term impact of corporate decisions on the environment and society might sacrifice short-term gains but will lead to higher profits and more sustainable firms.

Forbes: Sustainable Transport Is About Much More Than Electrification

  • Electrification is considered the leading way to reduce transportation emissions. When factoring in where the power for battery-electric vehicles (BEV) comes from, it becomes less clear to understand if the source of power is indeed clean. Emissions from electricity generation vary a lot across countries and even within countries, depending on the balance of fossil fuel, renewable and nuclear energy used.

  • In terms of vehicle production, BEV manufacturers have created more initial pollution than internal combustion engine (ICE) vehicles, mostly because of the batteries.

  • Looking at total lifecycle emissions, the research from the International Council on Clean Transportation concluded that BEVs still cause lower lifetime emissions than ICE, wherever they have been made and fueled.

Bloomberg: Truck Duels Kick Off With Batteries Battling Fuel Cells For Top Spot

  • In 2024, Nikola will release its fuel cell truck in Europe, with a range of 500 miles and a 20-minute refueling time. The company is also releasing battery-electric vehicles, demonstrating the current struggle many manufacturers are facing when deciding between emissions-free technologies.

  • Experts note that it is difficult to predict which option will be most cost-effective for consumers, and decarbonization will likely require a mix of technological alternatives.

GreenBiz: Worth it: Building demolition and reuse

  • Building demolition currently accounts for more than 90% of the 600 million tons of construction-generated waste in the U.S. annually. This total is projected to reach 2.2 billion tons globally by 2025.

  • While reclaiming materials and retrofitting buildings seems like a partial solution to this problem, it is both complex and expensive.

  • Similarly, deconstructing a building at the end of its life can result in up to 85% less waste being sent to landfill compared to demolition, but labor costs can increase by up to 80%.

  • For deconstruction and reuse to be viable solutions to construction waste generation, there will need to be supportive policy, more thoughtful design principles, better-distributed organizations in the construction reuse sector, and improved engagement and awareness about the embedded costs and carbon of construction materials.

ESG News: Mercedes-Benz To Build Wind Farm in Germany With Output of Over 100 MW

  • Mercedes-Benz plans to build a wind farm in Papenburg, northern Germany, anticipating an output of over 100 MW to cover more than 15% of the annual electricity demand of Mercedes-Benz Group AG in Germany. Mercedes-Benz is also planning to invest a triple-digit million euros amount to expand the installation of photovoltaic systems by 2025.

  • Mercedes-Benz is generally prioritizing the expansion of solar and wind energy. This year, production at company plants has been CO₂-neutral, and the company is progressing on the goal of covering over 70% of the energy demand in production with renewable energies by 2030. Another goal is to at least halve CO₂ emissions per passenger car over the entire life cycle by the end of this decade compared to 2020. The strategy for this goal involves the electrification of the vehicle fleet, charging with green electricity, improvement of battery technology, and comprehensive use of recycled materials and renewable energies in production.

GreenBiz: Can Polestar pull off a fully climate neutral car by 2030?

  • Polestar is a Swedish electric automotive company established by Volvo cars. Polestar has been developing with about a 125% increase in sales for the first half of 2022 and partnered with Hertz to deliver 65,000 vehicles over the next five years. However, Bloomberg discussed criticism against Polestar regarding insufficient cash funds for 2022.

  • In April 2021, Polestar announced its Polestar 0 project with the goal to create the first fully climate-neutral car by 2030. The project involves identifying and eliminating all greenhouse gas emissions in the entire process without using offsets or credits -- from raw material extraction to car delivery to the customer.

  • General Motors, Mercedes, and others have committed to climate neutrality.

The Wall Street Journal: Salesforce Enters the Carbon-Credit Business

  • Salesforce is launching a carbon credits marketplace called Net Zero Marketplace in partnership with Climate Impact Partners, South Pole, Calyx, Sylvera, and Verra’s Verified Carbon Units.

  • The marketplace will be a platform for both carbon credit sellers and buyers.

  • There are still concerns associated with carbon credits as there are no regulated costs and they are not recognized currently by SASB as Scope 1 and 3 offset options.

  • There is major competition in the current industry but with Salesforce’s extensive client base, they will most likely be successful.

Sustainable Brands: In Our Water- and Climate-Stressed World, There’s No Excuse for Wastewater Going to Waste

  • Only 0.5% of the Earth’s water is freshwater, and a quarter of the world’s population lives in water-stressed countries. Approximately 80% of all wastewater is discharged into the local environment with minimal or no treatment, which is water that could be recycled and reused.

  • Aquacycl is a California-based startup with a unique idea to protect water resources and mitigate costs for companies. Aquacycl’s Bio-electrochemical Treatment Technology (BETT) “uses natural bacteria to clean wastewater, reduce sludge and produce direct electricity.” Bacteria from around a customer’s site would be used to break down organic matter in wastewater. In this process, electrons are released, captured as a direct current in the BETT system, and can be used to offset the power consumption of the system. The overall process speeds up microbial respiration and cuts the wastewater treatment time to hours compared to days or weeks by most anaerobic processes.

  • Aqucycl calculated that treating high-strength wastewater onsite means BETT systems can mitigate 90% of GHG emissions, which would otherwise be generated during aerobic treatment.

Forbes: 5 Best Practices For Sustainability Distributed Consumer Goods

  • One-third of food produced worldwide is never eaten. With 828 million people worldwide going to bed hungry, this volume of waste is extremely unnecessary and unsustainable. The consumer goods industry should take this opportunity to reevaluate how they do things.

  • A new model that the consumer goods industry could adopt is titled the sustainably distributed consumer goods (SDCG) model. This model aims to minimize waste and maximize balanced distribution. The following are five SDCG best practices:

  1. Understand market demand in real-time.

  2. Avoid over- or under-stocking supermarket shelves.

  3. Price for your market with penny perfect pricing – everywhere.

  4. Avoid cannibalizing the category with mistargeted trade promotions.

  5. Enable sustainable distribution across all customer channels.

Sustainable Brands: Seventh Generation Launches Comprehensive Framework for Calculating Corporate Climate Impacts

  • Seventh Generation launched its Climate Fingerprints report on Tuesday, September 20th.

  • This report factors in more than individual operations, including all areas the company has influenced and invested in.

  • This includes banking, insurance, advocacy, tax dollars, and more.

  • This report is in response to the slow progress made toward keeping global temperature changes down.

  • The report also includes the company’s progress in reducing greenhouse gas emissions by 90% from a 2012 base year and their target to convert all manufacturing partners and vendors to renewable energy sources.

Reuters: ESG tech firm Datamaran gets Fortive backing in latest funding round

  • Datamaran, a software platform, has received $13.3 million in financing as companies are looking to assess ESG risks.

  • The software platform identifies over 400 risk factors.

  • This platform will potentially reduce greenwashing practices or consumer scrutiny toward companies' ESG claims.

ESG News: Apex Group expands pioneering ESG offering with new Impact Investing Solution

  • The new Impact Positive Solution will help investors and companies demonstrate measurable impacts, as many have struggled with the current lack of specific impact measurements.

  • The Impact Positive Solution uses a five-step process to identify material impacts. These steps include assessments, regular data collection, and data verification processes.

  • The Solution is part of Apex’s ESG Impact Month, which is designed to raise awareness about ESG issues in the financial services industry.

  • Currently, more than 350 LPs and GPs are working with Apex to report on their current investments that are in line with ESG industry standards.

Bloomberg: Big Fashion’s Sustainability Push Has A Huge Hole

  • Fashion Week and Climate Week in New York City almost overlapped this year, shedding light on the lack of climate goals in fashion industries and in their business models.

  • Many fashion brands have announced plans for changing how they manufacture their products over the past year so. The buzzword of circularity continues to be thrown around in these plans. Many in the fashion industry are beginning to wonder if it's possible to decouple climate goals from production and investor expectations.

  • One example of success is Gucci, which managed to cut its emissions by 15% compared to 2019 levels while still boosting sales. There's also been a rise in resale, rental, repair, and remaking businesses, all of which could potentially aid in the decrease of fashion's climate footprint.

ESG Today: Comcast Pledge to Double Energy Efficiency of Network by 2030

  • Comcast announced Monday its new goal to double its network efficiency, cutting the electricity consumed per unit of data in half by 2030.

  • Comcast outline initiatives it has been pursuing to improve the efficiency of its network, including making investments in virtual and cloud-based technologies. Comcast will also increase efforts to reach these targets by investing in renewable energy to power its network and operations, shifting to more energy-efficient technologies and facilities.

Government Policy

Bloomberg: How to Create Climate Laws that Stick

  • The UK’s Climate Change Act of 2008 bound the country to achieve net-zero emissions by 2050 with a framework to ensure the government remains on track even through crises. Many countries such as New Zealand, France, and Sweden have followed this legislation that has three key pieces:

  • The UK has a stringent, five-year carbon budget to reach the 2050 net-zero goal. Although the UK is slightly off track in meeting future budgets, the UK met its first two budgets and is on track to hit the third by the end of the year.

  • Under the act, the government has the power to enact policies to meet climate targets. For example, the government may deploy a zero-emissions vehicle mandate or redirect subsidies.

  • The act also created the Committee on Climate Change to independently analyze whether the government is on track to meet climate goals and evaluate the policies’ effectiveness.

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