ESG Weekly News Update: September 3, 2021
General ESG News
Bloomberg: Don’t Throw Out the Baby with the Greenwashing
Currently, it’s impossible to agree what qualifies as an “acceptable investment,” but when more effort is made, outcomes will be better, even if they fall short of perfection. The pressure to compete in offering ESG investment products, as is the pressure to make good on sustainability promises.
Some critics note that government action is what is needed to solve the planet’s major problems, not investor or asset managers, which have been forced to the forefront of the climate fight simply because they are the primary capital allocators.
IR Magazine: Fulfilling the promise of The Business Roundtable’s statement on corporate purpose
Two years ago, 181 CEOs signed The Business Roundtable's statement on corporate purpose, which accelerated the ESG movement, but in trust, many of the CEOs signed the pledge without consulting their board or establishing the necessary operational and governance oversight for achieving their goals. Now, many are concerned about their reputational risks.
By raising stakeholder expectations and scrutiny without fortifying operational and governance practices, companies are increasing their exposure and are at risk of being accused of simply making aspirational ESG marketing statements with no substance.
With ESG, many companies are reversing the “under-promise and over-deliver” axiom, and stakeholder frustration is reflected in real financial consequences.
To deliver on their promises, companies need to integrate enterprise-wide processes and ensure proper ESG oversight.
Forbes: How Decarbonizing Your Business Can Help Fight Climate Change
Governments, regulators, investors, and stakeholders alike are pushing companies to report and manage their climate impacts.
For most organizations, accurate measurement is the first step. Modern cloud data analytics will be crucial for the decarbonization process, followed by:
Acting on the data
Implementing alternative production techniques (if currently outsourced)
Participating in meaningful offsets.
Forbes: The Cost of Ignoring ESG
According to a recent U.S. SIF Foundation report, one out of every three dollars under professional management in the U.S. is managed “in accordance with sustainability metrics.”
Additionally, a recent MSCI study found that companies with high ESG scores face lower costs of capital, equity, and debt than companies with low ESG scores. A McKinsey study takes this further, insisting that higher ESG scores could result in capital costs about 10% lower.
Better ESG scores and performance result in lower regulatory, environment, and litigation-related risks, making ESG a strategic business imperative.
Accountability for ESG and sustainability programs is growing, with the energy sector actually leading the way in this area -- 100% of G250 companies in the oil and gas industry published sustainability reports in 2020.
Fortune: It’s time for ESG to incorporate health
While rising health costs and disparities have been a problem in the U.S. for some time, the COVID-19 pandemic has highlighted these issues and pushed them further into public consciousness. It has also drawn attention to the fact that economic performance relies on overall public health.
While health is typically included within the ‘Social’ pillar of ESG, some are pushing for it to occupy its own letter in the acronym: ESHG
Companies should measure the impact of their goods and services on customer health, and they should be self-regulating before government regulators intervene with product bans or financial penalties.
Companies can even crowdsource solutions by soliciting input from employees. However change happens, once investors decide to prioritize health, regulation will not be far behind.
Sustainable Brands: The Road to Zero Waste Is Paved with Incremental Changes
Small steps the packing industry and other companies can take to reduce waste and reduce reliance on less-sustainable materials include:
Reducing plastic in production
Increasing consumer expectations on sustainability
Reducing the need for void fill substances
Creating recyclable solutions with in-store appeal
Ensuring safety and quality for end customers.
JWN Energy: 2021 Top Operators Report: ESG factors becoming integrated into financial risk management
The last 12-18 months have made ESG mainstream, accelerated especially by the growing public focus on climate change, DE&I, and public health. Investors and companies are realizing how vulnerable they are to these external factors, and they are starting to recognize them as financial risks.
Additionally, companies are realizing that things like diverse workforces lead to better overall governance and adaptive capabilities.
The ways in which companies tell their ESG stories are also evolving to become more data-driven and focused on materiality and performance against targets. Financial regulators are now getting involved and providing guidance to enhance data integrity.
Yahoo! Finance: ESG: Why now ‘is probably one of the most interesting times to be looking at this area’
Both stakeholder interests and competitive returns are drawing investor attention to ESG-related funds. While ESG investing has been “trendy” in the past, the momentum is now different, accelerated by the impacts of the COVID-19 pandemic.
In 2020, research found that funds with ESG considerations outperformed their conventional peers. However, it is important to note that there are currently no uniform ESG standards or disclosure requirements, which makes it difficult to compare ratings and returns.
Renewable energy is expected to be one of the fastest growing investment areas as the “hydrocarbon era” comes to a close.
Money Control: ESG is here to stay and it will disrupt business models: Richard Rekhy
Richard Rekhy, the former CEO of KPMG India, insists that despite persistent biases, ESG is not a fad, and that the way to ensure success will be for boards to lead organizations with an awareness of ESG.
Recent climate calamities have “fast-paced” the trust that stakeholders have in ESG, and they are holding corporations more responsible for ESG parameters. Business leaders will be judged by their societal impact rather than their market capitalization.
ESG is currently measured qualitatively, but with the help of tools like blockchain and AI, data integrity will be improved and we will be able to better measure and report the quantitative aspects of ESG, including social and governance factors.
Going forward, companies’ success will depend on how inclusive they are, and the culture of inclusivity will have to be established and driven by top leadership.
Financial Times: Corporate bonus culture impedes the push for net zero
Despite initiatives to accelerate climate action, a recent study has found that only about a fifth of public companies in the Forbes Global 2000 list have made net zero commitments, and climate disclosure rates remain low.
There are several reasons for this, including lack of stewardship (which is expensive and time-consuming), limits on institutional investors’ voting power, and detached long-term asset owners.
Performance-linked pay metrics rely heavily on share price movements, and one way to solve this could be to attach ESG criteria to incentive structures. Many companies are already doing this, but consultants at Willis Towers Watson estimate that only a small percentage of companies in the S&P 500 actually include ESG metrics in incentive plans that are relevant to the time horizon for decarbonization.
ESG Disclosures, Standards, Rankings, and Reporting
S&P: Companies, investors face new pressure from compulsory disclosure of climate risk
TCFD has emerged as one of the main frameworks endorsed by many global policymakers, and its guidelines help organizations disclose information on material climate risks by explaining their plans to manage exposure.
New Zealand is the first country to institute mandatory TCFD disclosure, and the UK, Hong Kong, and Switzerland have all announced plans to implement mandatory TCFD-aligned reporting in the coming years. Alternatively, the EU has implemented the SFDR, which goes beyond climate reporting. Currently, the U.S. is lagging in ESG disclosure regulation.
Momentum behind TCFD support accelerated further when the G7 group of countries backed mandatory TCFD disclosure, and the TCFD organization proposed new guidelines to strengthen its framework.
From 2017 to 2020, the number of corporations supporting the TCFD has jumped from 282 to 1,505, but it is important to note that TCFD-aligned reporting is not the same thing as actually making climate-related disclosures or actions.
One major challenge with TCFD implementation is that it is difficult to collect and analyze detailed emissions data in all areas of business operations -- it requires buy-in across the organization.
Ballotpedia: Economy and Society: SEC weighing human capital disclosures
SEC Chairman Gary Gensler recently tweeted to explain what is next on the agency’s ESG agenda, stating that he asked his staff to propose recommendations for its consideration on human capital disclosure.
This continues the growing momentum surrounding ESG advocates hoping to expand disclosures specifically around human capital and climate change.
FM Magazine: 5 steps to successful ESG reporting
Maura Hodge, CPA, an audit partner at KPMG who leads the firm’s ESG and sustainability insurance practice, notes five key stages in the ESG reporting journey:
Establish -- conduct a materiality assessment and create meaningful KPIs, then determine how and where to report the relevant information.
Assess -- determine gaps in control and evaluate technological capabilities.
Design and implementation -- decide how to implement controls and who will act on them, and determine how to connect ESG issues with financial reporting.
Sustain -- ensure continuous monitoring.
Assure -- seek assurance to ensure data integrity.
ESG Today: ISS ESG Launches Automated Portfolio Reporting Solutions for EU Taxonomy, SFDR Compliance
ISS ESG is adding automated portfolio reporting capabilities to its EU Regulatory Solutions suite to help facilitate compliance with the EU Taxonomy and SFDR.
The new EU Taxonomy Reporting provides a snapshot of the Taxonomy-eligible portion of a portfolio and the full alignment assessment across all issuers within a user’s portfolio.
Investment Trends
ESG Clarity: Latest launches: BlackRock launches ESG version of bond ETF
BlackRock has launched the iShares Global Aggregate Bond ESG UCITS ETF (AGGE) to meet client demand for sustainable products, and it tracks the Bloomberg MSCI Global Aggregate Sustainable and Green Bond SRI Index.
The bond excludes issuers with an MSCI ESG rating lower than BBB, as well as sovereign and government bonds that are on UN sanction lists. It also aims to hold at least 10% green bonds.
Stanford Social Innovation Review: How Venture Capital Can Join the ESG Revolution
Of the top 50 largest venture capital funds, only five currently mention ESG or a commitment to sustainability, and only a few dozen firms globally have made public ESG commitments.
In recent decades, the focus of startups has shifted to creating companies specifically for rapid growth no matter the social cost. Companies want to be the first to market and often disregard moral, legal, and ethical boundaries to get there.
Venture capital is led by a group of almost exclusively white, elite-educated men that have the tendency to invest in companies with similar leadership demographics.
However, this mindset has been changing over the past two years, driven by examples like the success of long-standing impact-driven funds like DBL Partners and new, progressive funds like Obvious Ventures.
One main challenge in this area is the fact that robust ESG data and ratings are not available for ventures like they are for public companies. Adoption of ESG practices in venture capital, for the time being, will require experimenting with new methods:
Venture capital funds can adopt ESG practices in their operations.
Limited partners can include ESG in capital allocation decisions and advance an ESG agenda in their own portfolios.
Market researchers and data providers can include ESG in their trends reports.
Regulators can (and are beginning to) require mandatory ESG disclosure.
Bloomberg: Silicon Valley Exchange Lists First Two Companies in ESG Push
Twilio Inc. and Asana Inc. will be the first two companies listed in the Long-Term Stock Exchange, which caters to ESG investing due to its strict protocols and long-term approach and lacks a physical trading floor.
Companies listed on the new exchange agree to abide by listing standards, such as being required to publish strategic planning information and to align executive and board compensation with performance.
Also covered in The Wall Street Journal: Twilio, Asana to List on Long-Term Stock Exchange as ESG Push Continues
Reuters: India has fewer ESG funds than other top 10 economies
India -- the world’s sixth largest economy -- has just 23 ESG funds, compared to the U.S. and Britain with more than 500 each. Japan has 182, and China has 119. Analysts attribute this difference to Indian investors not being completely attuned to the concept of sustainable investing.
Most of the funds in the Indian ESG investing sector are new and lack a track record of outperformance, which also deters investors. Some institutional investors even have policies in place that don’t allow them to invest in funds less than three or five years old.
In India, retail investors have been driving money into ESG funds, and these investors chase recent performance.
The Securities and Exchange Board of India (SEBI) launched new ESG disclosure norms for the top 1,000 listed companies, and they aim to improve transparency and help companies gauge their ESG impacts.
State College: ESG Is Becoming a More Mainstream Consideration for Investors
Sustainable investing has been progressing from an exclusionary principle to incorporating companies making positive ESG impacts, but the exact criteria that constitutes a sustainable investment is still subjective.
For those looking to move money into an ESG fund, one way to decide which fund to invest in is to consider the stated objective(s) of the fund, and look for the best performing but least expensive options.
Bloomberg: Funds Holding $10 Trillion Are Told Their ESG Goals Fall Short
Christina Figueres, former executive secretary of the United Nations Framework Convention on Climate Change, says that sovereign wealth funds need to develop robust climate change mitigation strategies instead of looking to take advantage of temperature increases for economic gain.
Currently, trillions of dollars are being funneled into strategies that are designed to maximize returns, not fight climate change.
Figueres didn’t accuse wealth funds of greenwashing, but she criticized their failure to embrace carbon reduction strategies.
ESG Clarity: Latest launches: Liontrust launches sustainable multi-asset global fund
The Liontrust GF Sustainable Future Multi-Asset Global Fund will launch in October of 2021, and its managers will use 21 investment themes to identify companies for investment, aiming for 40-60% in equities, 20-50% in bonds, and 20% in cash.
The goal of the investments is to identify companies with products and operations that capitalize on transformative changes that will lead to quality management and better growth than the market acknowledges.
ESG Clarity: Investors list their top three ESG concerns
Research in Finance asked retail and institutional investors to identify their top three ESG issues when making their investment decisions. The top identified issues are as follows:
Environment: Climate change, emissions, and pollution
Social: Workers’ rights conditions, fairness/equality, and diversity
Governance: Executive pay, board diversity, board independence, and corruption
ESG Clarity: Sustainable funds among 2021’s biggest winners
FE Investments has rated 17 ESG funds with its highest “crown score;” BNY Mellon’s Sustainable Global Equity, Jupiter’s Global Sustainable Equities, and Montanaro’s Better World funds are worth noting because they received the highest rating at the first time of asking.
The strong performance of sustainability funds results from both favorable market conditions and growing interest in ESG from investors and fund groups.
Additionally, as ESG investing has taken off in recent years, many ESG-related funds are just not coming to three- or five-year maturity, making them eligible for FE’s crown rating.
However, it is worth noting that as the economy reopens, the funds that were riding the ESG investment boom will face challenges in replicating their strong performance going forward.
ESG Clarity: Engagement will only be credible if investors are prepared to divest
Investors must reduce the carbon footprints of their portfolios, and these reductions must be linked to real-world emissions reductions. One way to ensure this is to shift portfolios away from high-emitting sectors like steel and utilities while increasing exposure to sectors like IT and healthcare.
Investors should also engage with companies to deepen their decarbonization commitments by providing incentives to do so.
Investors must also take a forward-looking view of companies’ decarbonization commitments and deselect investments that fail to show sufficient commitments.
ESG Today: EY Study Finds Oil Majors Considering Investment Choices as ESG Becomes Key in Attracting Capital
A recent EY study found that ESG considerations are increasingly dictating the ability of oil and gas companies to attract capital, largely influenced by the global transition to cleaner energy sources and the increasing number of companies and countries making net zero commitments.
ESG Today: LGIM Study Into Shareholder Votes Reveals ESG Dominating Top Issues for Investors
Legal & General Investment Management (LGIM) released the results from a shareholder vote analysis, which revealed that ESG issues are among the top resolutions attracting investor votes.
According to the analysis, “Pay” is the main issue attracting resolutions and votes, followed by “Climate,” “Paris Agreement,” and “Rights” (encompassing human, social, and animal).
Companies and Industries
Forbes: Nestle CMO Addresses Consumer Demand For Sustainable Foods
The gap between accessibility/affordability and sustainability is coming into focus as the demand for sustainable products grows, and many of these products come at a price premium. For Nestle, addressing this gap means, at least in part, honoring the reasons customers are choosing to buy its brands.
For its ambitious emissions reductions goals, Nestle is investing more than $3 billion and making changes to its products and processes including ingredients, packaging, and transportation.
In terms of diversity and inclusion, Nestle is partnering with its suppliers and vendors to especially advance diversity in both its marketing and its workforce.
Lexology: ESG financing -- A case for nuclear energy?
Nuclear energy is one of the cleanest and most efficient sources of energy, but it is consistently excluded from ESG discussions. It is important to note that nuclear energy satisfies several ESG criteria, including:
Producing carbon-free electricity 24/7 and producing minimal toxic waste
Requiring less materials than other forms of low-carbon energy
Having one of the lowest death rates when compared to other energy sources
Having nuclear waste fully accounted for and its costs included in the development of a nuclear project
Being one of the highest regulated industries globally
Having strict requirements for employee training, education, and skills
Offering long-term job prospects and comparative job stability
Despite these benefits, nuclear waste disposal and the potential for nuclear accidents are cited as issues in nuclear’s ESG assessment, but the very long life cycle of nuclear power plants makes long-term assessments more challenging.
Nuclear energy’s high capacity and low carbon footprint will make it critical to the future energy transition and for meeting global environmental policy goals.
Valdosta Daily Times: Moody’s ESG Solutions Launches Data Solution to Help Investors Align Strategies with UN Sustainable Development Goals
Moody’s launched the SDG Alignment Screening to help integrate the UN SDGs into investment strategies, funds, indices, and reporting.
The new solution provides data for about 5,000 listed companies covering more than 300 data points, and the methodology uses a dual materiality approach -- it captures the contributions a company makes to the SDGs and a company’s impact on the SDGs.
Earlier this month, Moody’s also launched the Global Compact Screening to evaluate companies against the UN Global Compact.
Also covered in ESG Today: Moody’s Launches SDG Alignment Screening Tool for Investors
GreenBiz: Why activists are putting a premium on insurers
The “ESG boom” this year has centered mostly on debt and equity markets, but the insurance industry has the potential to price climate risk high enough that it changes corporate behavior (something investors and regulators have not been able to do) simply by limiting coverage to certain assets or sectors.
The Net Zero Insurance Alliance (NZIA), though it lacks membership from any U.S. firms, is committed to transitioning their underwriting portfolios to net zero by 2050.
It is worth noting that while activists and investors have placed pressure on fossil fuel companies and their financiers, the insurance companies backing such projects have historically not faced similar pressure, though this is changing.
The Insure Our Future Campaign has been pushing U.S. insurers to align their underwriting practices with climate rhetoric, and the longer the industry waits to make progress, the more pressure it will face.
Center for American Progress: The Oil and Gas Industry’s Dangerous Answer to Climate Change
The same ecological fallouts from oil and gas companies that are impacting communities are also affecting the companies’ bottom lines, yet the industry continues to fund climate science denial and lobby to maintain the status quo. Despite this denial, oil and gas companies do acknowledge the ways in which climate change threatens their operations and are seeking short-term, self-destructive fixes to stay afloat.
In response to melting Arctic ice, oil companies are installing artificial “chillers” to lower temperatures around rigs and pipelines in order to refreeze the ice in the drilling areas. Increased use of these chillers is creating a spike in demand from energy companies.
In response to rising sea levels, oil and gas companies are investing in adaptations like offshore platform decks while still denying climate science and resulting in significant debts for local residents.
Accounting Today: Accounting firms accelerate ESG services as climate risks increase
Accountants are increasingly being asked to vet ESG disclosures, and some firms are starting to offer ESG assurance services. The main focus (and anxiety) is around climate-related issues.
EY conducted a global climate risk barometer survey to help support its clients, Deloitte issued a report on the intersection of ESG and accounting/financial reporting standards, and KPMG has been focusing on ESG from the auditing and assurance side.
Currently most ESG information is disclosed in standalone ESG reports or investor relations webpages -- not integrated in SEC submissions. While companies aren’t seeking the same level of assurance they do for their financial filings, just over half of S&P 500 companies subjected their ESG disclosures to some sort of assurance.
Accounting firms still have not caught up with consulting firms and sustainability specialists in helping companies vet their ESG information, but the number of companies seeking assurance from auditors is increasing.
Barron’s: Big Banks Are Funding Climate Disaster. Business Needs to Push Back.
In the five years since the inception of the Paris Agreement, the 60 biggest global banks have increased their investments in coal, oil, and gas to nearly $4 trillion -- decarbonization progress is slow.
CEO activism is one action that can help, as responsible business leaders can start placing pressure on irresponsible banks.
Many big firms have standards for selecting partners they hire for other services, but they don’t apply the same level of scrutiny to the banks they choose to partner with, and the next generation of stakeholders will likely not tolerate this.
IPE: DWS rejects allegations about ESG disclosures
A former DWS employee made allegations that the company made misleading disclosures about its ESG investing practice. DWS responded by stating that it stands by its annual report disclosures, and that its report differentiated between “ESG Integrated AUM” and “ESG AUM” -- the investing terminology that led to the allegations.
According to DWS, its “ESG Integrated” assets were not counted toward its “ESG Dedicated” AUM. Still, ther German regulator BaFin has launched an investigation into the company.
Insurers face climate risk on the asset side of their balance sheets as well as on the underwriting side (especially for property, casualty, and liability).
According to S&P research, 66% of major global companies have at least one asset at high risk of physical impacts due to climate change, leading to underwriting that makes insurance less affordable and available in vulnerable areas.
Additionally, many insurers’ portfolios have high fossil fuel exposure despite growing awareness of those companies’ contributions to climate change.
The U.S. is unique in that insurance is primarily regulated at the state level, which can make it difficult to reach a unified approach, but President Biden’s recent executive order will help in addressing the adequacy of state regulators’ oversight of climate risk in the insurance sector.
Yahoo! Finance: GreenCo Recommended ESG Measures for Companies Going Public (IPO)
GreenCo has launched a new ESG advisory package for companies planning an IPO to support all applicants looking for compliance and excellence in ESG management. Prior to (and during) the IPO process, GreenCo recommends preparing:
ESG disclosure in IPO prospectus
ESG capacity building & training
ESG materiality assessment & risk analysis
ESG policy development & enhancement
ESG reporting
ESG target-setting
ESG benchmarking
Climate scenario analysis & carbon management
Reuters: Europe’s banks lagging on sustainability -- BlackRock study
BlackRock prepared a report for the European Commission that will be used to help integrate sustainability into banking rules. However, BlackRock’s role as an investor in many of the banks it found to be lagging on ESG led to the report facing criticism about conflict of interest.
Conclusions from the report insist that policymakers should take more action to achieve effective ESG integration, especially as banks face pressure over their role in investing in heavy emitting companies. It also urges banks to develop standardized definitions of ESG risks.
The report also notes that while ESG factors are widely integrated in lending policies, they are often superficial and coverage is limited.
Just Drinks: Which beverage brand owners are ESG leaders or laggards?
A recent GlobalData consumer goods report from Q1 2021 found that ¾ of consumers now demand more environmentally friendly products. The “ESG action feedback loop” is seesaw then companies take climate action, win stakeholder support, gain a competitive advantage, then draw more participation for further action.
BrewDog is an important example, as it became the world’s first carbon-negative beer business in 2020 and established itself as an environmental leader, but damaged its reputation when former employees accused the company of having a “toxic culture” in 2021 -- being a laggard in one ESG area can discredit the entire company’s reputation.
Businesses face several ESG issues in FMCG supply chains, but this is not an excuse to slack on due diligence.
Environmental leaders: Diageo, Molson Coors, BrewDog; Social leaders: PepsiCo, Nestle; Social laggards: BrewDog; Governance leaders: Anheuser-Busch InBev: Governance laggards: Diageo, Coca-Cola, Heineken, Danone.
Market Watch: Deutsche Bank investigation will be just the beginning for ESG managers, experts warn
DWS shares fell significantly after the launch of an investigation into its potentially misleading ESG investing claims, and Deutsche Bank (which owns DWS) also sw its shares fall.
Experts warn that this example is just the first, as the SEC has signaled that it will be increasing its scrutiny, stating that misleading ESG disclosure keeps money from going to the “right place.” The agency also aims to hold investment managers responsible for disclosing the principles they use to create sustainable investment funds.
Critics note that there is still a lack of clarity surrounding ESG criteria, so it is difficult to define what is “misleading” and what could lead to investigation -- this may deter companies from trying to take any action at all. Further criticism argues that the SEC is just looking to establish a quick precedent to use across the industry.
The Business Times: Fidelity research finds link between ESG and historic dividend growth
Recent research shows that ESG leaders are more likely to offer attractive dividend growth than laggards. This can be explained largely by the fact that good management of ESG risks leads to companies avoiding litigation, brand erosion, stranded assets, and high regulatory costs.
Companies in sectors with structural sustainability issues (such as oil and gas and utilities) may face weaker dividend growth even if they are well-managed. However, utilities with renewable energy operations are benefiting from new regulatory actions and subsequent investment tailwinds.
It is also worth noting that reasonable dividend distributions are also a sign of good governance as they help to align management and shareholder interests.
High-quality ESG businesses should be able to maintain dividends at sustainable levels and offer better potential long-term dividend growth.
Environment + Energy Leader: Why Healthcare Organizations Need ESG and Climate Action Plans
Historically, ESG considerations were secondary to the core mission of patient care and organizational survival, but they are now rising to the forefront.
The healthcare industry is a major carbon emitter -- nearly 5% of total global emissions -- and these emissions can be social determinants of health (e.g., aggravating respiratory diseases, injuries from weather-related disasters, changing patterns in infectious diseases, etc.) Developing a robust ESG strategy can help mitigate these impacts while supporting the core mission of the industry.
Currently, a lack of expertise and specialized ESG knowledge in the healthcare industry is a major challenge, and developing a robust action plan will require baselining, goal setting, execution planning, implementation, and reporting.
Financial Times: Big Four accounting firms rush to join the ESG bandwagon
In response to increased client demand (and budgets) for sustainability initiatives, PwC launched a $12 billion investment plan with provisions for new employees and training clients in ethics, as well as rebranding to align with client values.
Deloitte announced a “climate learning program,” and KPMG’ recent work has involved helping major companies analyse their ESG risks and advising on the first green bond issued in India.
However, some partners question whether these new initiatives will actually transform businesses and warn that firms may face backlash if they fail to live up to the new standards they’re promoting.
CNBC: Amazon’s biggest, hardest-to-solve ESG issue may be its own workers
Amazon has been facing increasing pressure from its workforce and external organizations about its inadequate workplace safety, but labor issues tend to not rate as highly with investors as ESG themes like climate change. Most of the attention comes from sources like reporters, former employees, etc.
Additionally, many workplace topics are typically lumped together and not all ESG rating models weight worker safety equally across all sectors. So, Amazon’s scores in this area may not be reflected accurately if they score better in other areas like pay and benefits.
Amazon’s turnover rate is nearly double that of its peers, and occupational safety experts note that the company will need to support its staff better as they forecast a declining pool of available talent.
Still, despite these issues, Amazon’s brand still remains among the strongest, and the company announced a goal this year to reduce its recordable incident rate by 50% by 2025.
The climate-focused investor engagement initiative Climate Action 100+ released a set of investor expectations, developed by Ceres and PRI, for the food and beverage sector to facilitate the transition to a net-zero economy.
Food and beverage sector emissions account for about one third of global greenhouse gas emissions and are some of the most difficult to address since most come from the supply chain. Climate Action 100+ insists that a scope 3 emissions reduction of 85% in the sector is needed to reach net zero by 2050.
Key areas with the greatest emissions reduction potential are eliminating deforestation, reclaiming land, and employing carbon sequestration practices in agriculture.
ESG Today: Apple Commits $30 Million to Racial Equity and Justice Initiatives
Apple announced an addition of $30 million in new commitments to its Racial Equity and Justice Initiative (REJI), which will go toward projects aimed at helping prepare the next generation of students and leaders to dismantle structural inequities and institutional racism.
The new projects include a partnership with California State University to launch a Global Hispanic-Serving Institution Equity Innovation Hub and collaborating with institutions throughout the country to equip students for career success. Apple will also expand its Entrepreneur Camp program and will invest in organizations that support racial justice, including the Anti-Recidivism Coalition, the Innocence Project, The Council on Criminal Justice, and more.
ESG Today: AT&T Launches Initiative to Help Businesses Reduce Emissions by 1 Billion Tons
AT&T has launched its Connected Climate Initiative to help businesses reduce one billion metric tons of greenhouse gas emissions by 2035 (equivalent to about 15% of annual U.S. greenhouse gas emissions).
The company will collaborate with leading technology, digital infrastructure, and energy companies (e.g., Microsoft, Equinix, and Duke Energy), as well as universities and other organizations (e.g., Texas A&M University System’s RELLIS Campus) to deliver global climate solutions, including artificial intelligence, IoT solutions, and broadband technologies. Other collaborators include SunPower, IndustLabs, BSR, RMI, the Carbon Trust, and more.
One example of a solution is the AT&T Guardian device with Azure Sphere that enables companies to collect and analyze data to find efficiencies and reduce sources of carbon emissions.
ESG Today: EIB Launches Climate-Focused Advisory Council Chaired by ECB President Christine Lagarde
The European Investment Bank (EIB) launched its Climate Advisory Council, chaired by European Central Bank President Christine Lagarde, to advise on EIB’s climate and sustainability actions and ambitions.
This announcement follows EIB’s approval last year of the board of directors for the EIB Group Climate Bank Roadmap that guides the European investment Fund (EIF)’s future climate action financing.
Government Policy
Lexology: Spotlight: climate change law, regulation and policy in USA
The Clean Air Act of 1970 does not explicitly address climate change from greenhouse gases, but subsequent environmental legislation provides the EPA with more regulatory authority on this issue. The Clean power Plan of 2015 was designed to cut pollution from the power sector, and the Natural Gas Air Pollution Standards of 2016 were meant to curb methane, VOCs, and other toxic air pollutants from the oil and natural gas sectors.
However, in 2017 and 2018, the Trump Administration took actions to relax EPA requirements and rollback other environmental actions, such as revoking the waiver that allowed California to set strict emissions standards.
The EPA’s Renewable Fuel Standard program is still in place and is estimated to reduce greenhouse gas emissions by 138 million metric tons by 2022.
The Trump Administration also withdrew the U.S. from the Paris Climate Agreement, prompting states and local governments to enact their own agendas to combat climate change while waiting for President Biden to rejoin the Agreement.
The Hill: Negotiating from strength: Washington, Beijing and climate change
President Bisen is facing pressure to de-escalate tensions with China to promote climate cooperation. Currently, China’s position as the largest global CO2 emitter (about 27% of all emissions) and the country’s policymakers’ views on climate change are making cooperation difficult.
Fossil fuels are still the backbone of China’s economy despite the fact that the country boasts about its wind and power technology. Alternatively, in the U.S., greenhouse gas emissions have been trending downward in the past decade and its energy portfolio is the most diversified it has ever been.
Recent research has found that Chinese strategists see climate change as part of a zero-sum struggle between the U.S. and China for global dominance. The country is currently more concerned with having a competitive edge over the U.S. than making meaningful climate negotiations.
To make meaningful progress, the U.S. will need to make it clear to China that failure to act will lead to significant international costs, such as by levying a tax on trade with any Chinese companies involved in coal or helping developing countries transition to green energy in response to China’s coal-powered Belt and Road Initiative.