ESG Weekly News Update: September 30, 2022
General ESG News
Forbes: The Challenges of Achieving A Sustainable, Circular Economy
Amit Jain, chief product officer at ServiceMax, discusses a key challenge that is preventing manufacturers from designing truly circular products – the disconnect between delivering value to shareholders by selling more products and designing products that don’t need to constantly be repurchased.
Many companies believe that if they design durable and long-lasting products, they will be setting themselves up for reduced long-term profitability. Jain believes that the solution to this problem requires a three-pronged approach:
Government sustainability mandates
Tax incentives that drive sustainability
New and innovative business models that align sustainability with profitability.
For now, focusing on products that are software-enabled can allow manufacturers to design products that last a long time but that still deliver profit through the launch of new features.
Barron’s: Without Collaboration, Green Transition ‘Delayed By Decades’: IEA
According to the International Energy Agency (IEA), a lack of international collaboration threatens to jeopardize decarbonization and net-zero commitments.
The IEA has urged nations to use the upcoming COP27 conference to “accelerate progress toward net zero emissions by decades, cut energy costs, and boost food security for billions of people worldwide.” Increased collaboration between countries will make green technologies cheaper for developing nations to deploy at scale.
The IEA has recommended the establishment of low carbon “super grids” across multiple nations that can improve energy security while also reducing emissions. It has also called for international financiers to channel funding into coal-dependent nations to help accelerate their low-carbon transition.
Forbes: The Power of Purpose: How ESG Affects Your Company’s Talent
A Unily report found that 83% of workers claim their employers were lacking efforts to be more sustainable and act on climate change. Additionally, 65% said they would be more likely to work for a company with robust environmental policies. Studies support the idea that consumers and stakeholders are currently holding companies accountable to be environmentally and socially responsible. Talent is increasingly declining jobs or choosing others with lower pay if the business reflects their values.
Companies have opportunities to start employee awareness campaigns, improve employee engagement to develop sustainable working practices, and exchange disposable plastics for reusable options. Office plants may also be beneficial to absorb air toxins while creating a calmer and happy environment and boosting productivity.
Bloomberg: The World Is Too Busy to Do Its Climate Summit Homework
In Glasgow last year, many country leaders made large climate commitments at the COP26 meeting. Only 19 out of 193 countries that promised to cut greenhouse gas emissions were able to do so by the deadline last Friday.
Countries that have not updated their climate plans “were obligated to do so ‘as soon as possible,’ and all nations committed to ‘revisit and strengthen’ their 2030 targets by the end of 2022.”
Many big emitters that have outdated climate plans have not submitted new targets in time to include them in this year’s future warming estimate, which will be released before COP27.
GreenBiz: Can Companies Ever Move Past Incremental Approaches To Climate Action?
Companies working to implement sustainable practices and climate action are investor-driven, but there needs to be bold climate action to mitigate climate change and climate-related risks. But because climate action is investor-driven, there can be limitations.
A report published by Oliver Wyman and Climate Group determined that consumers are not putting enough pressure on investors, and in turn companies, to take bold actions.
The report did find that 83% of practitioners are looking to implement either moderate or significant climate transitions.
It will be important for companies to move beyond just furthering their current practices, they will need to work to find innovative solutions.
Forbes: Three Tips For Building A Business With Sustainable Growth
Inflation has begun to affect companies, especially startups that previously were experiencing success and rapid growth. Three tips can help these businesses with sustainable growth.
Adopting a growth mindset is key to a sustainable business. This requires a company to understand its strengths and weaknesses, both individually and collectively. A commitment to learning how to use strengths and minimize weaknesses will help a company reach its full potential.
Commit to overachieving on smaller, daily tasks to create a reputation that attracts new business.
Commit to growth at all levels of the company. Foster entrepreneurship, encourage natural leaders, and identify employees that will be key to the organization’s growth.
Bloomberg: Solar Outshines Wind To Lead China's Clean Energy Transition
Installing solar panels in China has become so popular that Chinese officials have drafted regulations to ensure developers do not put them on land that is needed for other uses. China's solar capacity rose 1.9% to 349.9 gigawatts in August, surpassing wind, according to the National Energy Administration.
The cost of solar power in China is about $44 per MW per hour, down from $183 in early 2014, according to BNEF.
Space for solar panels is becoming a concern. The ministry of water resources issued a rule in May banning projects on certain waterways, lakes, and reservoirs to protect ecology, among other things.
Diversity, Equity, and Inclusion
Forbes: Looking To Improve Diversity And Inclusion? Invest In Remote Work
Diversity is proven to improve organizations’ innovation, decision-making, and competitive performance. Remote work opportunities can help companies improve diversity and reap additional benefits:
Remote work expands hiring options beyond local populations and reaches new talent pools.
With good remote work policies that maintain flexibility and trust, companies can accommodate underrepresented demographics and raise talent retention.
Remote work also enhances inclusions because even before the COVID-19 pandemic, experts found that remote workers had better engagement and productivity, and they were less likely to quit.
Companies remain relevant and competitive if they prioritize diversity. Employee resource groups are supportive within the company and outside as means to expand networks.
Forbes: Are Business Diversity Certifications Worth The Effort For Suppliers
According to a study from Jagger, fewer than 50% of diverse business suppliers have a certification that communicates their identity. The commercial advantages of diversity in the supply chain are significant. Supplier diversity programs also spotlight company efforts and commitments to ethical and equitable standards.
These diverse supplier certifications can be obtained from a variety of reputable independent organizations. The most widely known certifications include women-owned, minority-owned, veteran-owned, disability-owned, etc. Each application process is unique. If a certification requires a renewal, most of them are quite easy to complete.
It is important for businesses to research which organizations and certifications would offer the greatest access to opportunity. These certificates help to open doors and can give businesses an edge over others that do not have any certifications.
Bloomberg: Citigroup Boosts Diversity Targets After Surpassing Earlier Goals
By 2025, Citigroup aims to increase the percentage of its Black employees in roles from assistant vice president and up to 11.5% in the U.S., Canada, and Puerto Rico after surpassing its goal of 8% in the U.S. last year. It also aims to increase the percentage of women in those roles to 43.% globally after achieving 40.6% last year.
The company’s CEO, Jane Fraser, states that these targets reflect a “long-term strategy, not a short-term objective.” Citigroup has also been transparent about its gender wage gap and its efforts to close the gap through its hiring and retention efforts.
Sustainable Brands: Moonshot Disability Accelerator Fund on Mission to Close the Disability Wealth Gap
SmartJob, in partnership with Enable Ventures, launched a Clinton Global Initiative commitment to Action to close the disability wealth gap. The Moonshot Disability Accelerator Fund will directly fund 10 global accelerators.
About 1.5 billion people globally live with disabilities and about two-thirds of people who are of working age with disabilities are not employed.
SmartJob will act as an impact consultant to the fund and will be making recommendations on where the funds are invested. The fund is looking to support 220 early-stage companies from 2022 to 2023.
Some global accelerators the fund will be supporting include Access to Success Accelerator, Global Disability Innovation Hub Incubator, and Communication Service for the Deaf – Social Venture Fund Incubator.
ESG Disclosures, Standards, Rankings, and Reporting
ESG Today: ServiceNow Launches ESG Data Management and Reporting Solution
ServiceNow has announced the launch of ESG Management, which includes enhancements to its existing ESG Solution, such as allowing companies to establish and document ESG goals and KPIs, track their performance, collect, and validate data, and create framework-aligned reporting disclosures.
Key features of ESG Management include GHG emissions accounting, metric tracking tools, and strategic portfolio management.
Reuters: The Greenwashing Wave Hits Securities Litigation
Greenwashing occurs when an entity is presented as more environmentally or socially impactful than it truly is. The SEC has anticipated the need for oversight in this area. In March of last year, the SEC announced the creation of its new climate and ESG enforcement task force.
This task force is responsible for overseeing ESG-related disclosures, investments, and compliance efforts by security issuers and advisers.
As companies are continuously pushed to factor ESG considerations into their business operations and investment strategies, it is likely that greenwashing will continue to rise.
Investment Trends
Bloomberg: Al Gore Calls Out Greenwashing Risks As Funds Quit Green Club
Former U.S. Vice President Al Gore discussed the commitment made by the largest group of investors and bankers in the field of green development ahead of Climate Change Week in New York.
The Glasgow Financial Alliance for Net Zero (GFANZ) group, which accounts for roughly 500 members representing more than $135 trillion in assets, was hailed as a milestone at the COP26 climate summit last year. GFANZ has sought to build credibility while remaining a voluntary alliance without binding rules that might frighten off members. For some of them, there’s a growing realization that they may fail to meet the goals set out by the alliance, while others have expressed fear the organization’s requirements for decarbonization could make them legally vulnerable.
In an interview with Bloomberg Television, Mark Carney, former Bank of England governor, played down the risk of defections and said Race to Zero, the UN-backed net-zero project that underpins GFANZ, had gone “too far” with recent requirements for more stringent decarbonization targets.
Forbes: How The Conversation On ESG-Friendly sectors Is Evolving
Pletz International recently found that while ESG investments account for about one-third of professionally managed assets, hedge funds have been slow to join the recent influx of ESG practices and policies.
Defense and weapon stocks have moved from their previous position of being excluded from the ESG conversation to the forefront because of the current war in Ukraine. This is only one sector that is being looked at as more ESG-friendly. Another example includes traditional energy companies, which have moved back into the spotlight after Europe's recent energy crisis.
GreenBiz: It's Critical, Not Controversial: Why We Must Double Down On Nature Investments
The science behind nature-based solutions includes the simplest and cheapest solutions for absorbing and sequestering carbon dioxide to restore and protect nature. One-fourth of net global annual greenhouse gas emissions come from agriculture, forestry, and other land uses.
Carbon markets can help further climate goals. For example, companies can purchase carbon credits representing the reduction or removal of carbon from the atmosphere. Buyers in the carbon market must also aggressively decarbonize their own businesses.
Many large companies have joined The Climate Pledge, committing themselves to the ambitious goal of reaching net-zero emissions by 2040.
ESG Today: S&P Slashes Sustainable Bond Forecast on Worsening Market Conditions
Global issuance volumes for green, social, sustainability, and sustainability-linked bonds (GSSSB) are expected to fall 16% this year to $865 billion, according to S&P Global Ratings.
Sustainability-linked bonds are the only GSSSB bonds to see growth this year. SLBs typically tie funding costs to performance on sustainability goals.
S&P expects changing regulation, among other factors, to lead an absolute growth in GSSSB issuance.
Reuters: Blackrock's Pension Funds Face ESG Criticism From New York Comptroller
The world's largest asset manager has faced criticism from many sides in the debate on low-carbon fuel, with environmentalists protesting it does too little to press for change at fossil fuel companies on one side, and Republican U.S politicians accusing it of boycotting energy stocks.
BlackRock had warned the SEC last month that its proposed rules aimed at fighting greenwashing by fund managers will confuse investors.
Regulators and activists have become concerned that U.S. funds looking to cash in on the popularity of ESG investing may be misleading shareholders over their ESG credentials.
Companies and Industries
ESG Today: TD Securities Launches Carbon Advisory Business
Canadian investment bank TD Securities announced the launch of a new Carbon Advisory business, aimed at clients with end-to-end carbon market solutions.
The new business will be led by Managing Director Andrew Hall, who joined TD in June, after serving as Director of Sustainable Finance for TMX Group.
Services provided by the new group will include carbon offset advice for project acquisition and investment, access to carbon markets and strategic insights, carbon offset portfolio structuring, M&A-focused risk assessment and valuation related to carbon assets and liabilities, and more.
Sustainable Brands: Industry Continues To Arm Itself In War On Plastic Waste
The U.S. Plastics Pact began accepting applications for its Reuse Catalyst program which is designed to support and develop innovators of scalable reuse and refill solutions for the United States. Even if 20% of global plastic packaging were converted to reusable packaging, $10 billion will be added to the economy, according to the Ellen MacArthur Foundation.
Wide collaboration and backing are essential in driving a broader shift away from disposable as usual. The U.S. Pact has an ambitious goal of creating a circular economy for plastic in the U.S. by 2025.
The reuse catalyst was jointly created by the U.S. Pact, Closed Loop Partners, the Reusable Packaging Association, and the World Wildlife Fund.
Bloomberg: Americans Have Always Bought Too Much Car. Now They're Doing It With EVs
Automakers are responding to the growing demand for EVs with higher mileage range, longer-lasting batteries, and eliminating smaller vehicles. Of the more than 80 EV models and their various trims currently available in the US, all but three come with at least 200 miles of range.
When consumers buy an EV, the single most expensive and heaviest component is the lithium-ion battery that powers EVs. This means that bloated batteries are wasteful in two different ways:
Buyers spend more on miles that they will rarely take advantage of;
Vehicles spend kilowatts carrying around the excess weight.
According to BloombergNEF, the most recent price survey shows that battery packs cost automakers an average of $118 per kWh. Basically, one 91kWh battery is likely to cost $11,000 to make.
Reuters: PepsiCo’s Biggest Challenge: Winning Over Millions Of Farmers To Regenerative Agriculture
Last year, PepsiCo made a pledge to “spread regenerative farming” across seven million acres and sustainably source 100% of its key ingredients and crops by 2030. However, in the first year, PepsiCo achieved only 345,000 acres of its goal.
The slow start is part of the greater challenge of convincing and training the agricultural community to transition to regenerative farming.
PepsiCo recently announced its "strategic commercial partnership with ADM to expand regenerative farming across their shared North American supply chains, aiming to reach two million acres by 2030.”
Sustainable Brands: Carbon Trust Teams Up with Tech Giants to Tackle Climate Impact of Connected Devices
Carbon Trust is a climate consultancy that has decided to partner with tech giants Amazon, Meta, Microsoft, Samsung, and Sky Global to “develop the industry’s first specification for measuring, accounting for, and decarbonizing the emissions associated with connected devices while being used by customers.”
The world’s connected devices have an annual combined electricity consumption equal to France, 500TWh of energy in 2020. This includes devices any device that can connect to another or a network via the internet, including phones, speakers, laptops, and smart home appliances.
The plans and efforts of this group will improve understanding and accounting of these emissions in a standardized way while working towards reducing emissions.
ESG Today: JetBlue Orders 25 Million Gallons of Sustainable Aviation Fuel Made from Captured CO2
JetBlue announced an agreement with AIR COMPANY to purchase sustainable aviation fuel (SAF) made from captured carbon dioxide. AIR COMPANY is a climate tech startup that creates consumer and industrial products from carbon dioxide. They use proprietary technology with air, water, and renewable energy to produce carbon-negative alcohols and fuels.
Starting in 2027, JetBlue intends to purchase 25 million gallons of SAF from AIR COMPANY over five years. JetBlue has a goal that by 2030, 10% of its total jet fuel will be from blended SAF, and by 2040, JetBlue will achieve net zero carbon emissions.
GreenBiz: Solar Panels Have Come a Long Way. Recycling Them Has Not
The solar industry has grown by an average of 33% per year over the past 10 years, and this growth is only expected to accelerate after a boost in funding from the federal climate bill.
Alongside the growth in the solar industry, there are questions arising about what to do with the photovoltaic panels at the end of their useful life, in 25 to 30 years. Experts say the industry for solar panel collection and disassembly is nascent and unevenly distributed in the U.S.
Additionally, the commercially available resources for solar panel recycling have not kept pace with the advances in the industry. And beyond this, the economics behind solar panel recycling currently don’t make sense – it costs more to break down the panel and recover the raw materials than the raw materials are worth.
There are also regulatory barriers, as solar panels are considered hazardous waste in most parts of the country. A lack of educated solar owners and developers also poses an obstacle to the proper recycling of end-of-life solar panels.
Solutions some companies and experts are exploring include non-recycling strategies and extending asset life beyond photovoltaic use for other industrial and commercial applications.
Forbes: The Construction Industry’s Role In Building A Sustainable Future
As climate risks become more evident, 71% of millennial respondents in a Pew Research study said that climate change should be a top priority for all companies.
Construction companies have taken a major role in sustainable development because of their used resources, job opportunities, and the infrastructure they build. They have a major influence on the use of renewable materials, such as renewable mass timber to replace steel.
The construction industry also has an influence on the potential changes and upgrades to existing structures.
To build a greener building, there are a few steps someone can take. The first step is to determine if retrofitting is an option or if building a new building is a better option. If building a new building, location and land impact should be top considerations as well as utilizing sustainable building materials and building designs that allow for green technology such as passive solar power.
ESG Today: AXA IM Launches €500 Million Nature-Based Solutions Strategy
On September 23, 2022, a new Natural Capital strategy was announced with the goal to expand AXA Group’s platform of nature-based solutions that will address climate change and protect biodiversity.
The strategy will focus on investments that include strategic equity, carbon solutions, and direct project financing to protect habitats from deforestation.
Wall Street Journal: Amazon, Pfizer Among Companies Pledging to Hire 20,000 Refugees
Amazon is one of the current 100 major U.S. companies that have pledged to hire more than 20,000 refugees in the next three years.
This pledge will help Afghan and Ukrainian refugees that have recently arrived in the US.
Amazon has made the largest pledge, looking to hire 5,000 refugees in the next three years.
Many companies are also working to provide training resources and internships.
Refugees have been shown to be loyal employees and benefit businesses in the long run.
Forbes: GreenPlaces CEO Talks Sustainability Strategy Best Practices
Boston Consulting Group research shows that companies that embrace total social impact have 12% higher operating margins on average.
Alex Lassiter discusses how many large companies are setting their own climate goals. One facet of these large companies is the carbon footprints of vendors and suppliers. Companies are asking vendors to report on emissions which is a great first step in assessing the company's emissions.
The Wall Street Journal: Hertz to Buy Up to 175,000 EVs From GM
Hertz is planning to purchase 175,000 electric vehicles over the next five years from GM's four main brands. These brands include Chevrolet, Buick, GMC, and Cadillac.
Hertz planned to purchase electric vehicles from Tesla last year but there was disagreement over the purchase timeline.
GM’s sale of electric vehicles to Hertz should help them hit the sales targets that investors have been told to expect.
There is concern that because electric vehicles are more expensive, have more upfront additional costs and it is harder to find charging stations than gas stations, the electric vehicles could be too complicated for consumers.
Government Policy
Bloomberg: You Don’t Have to Own a Home to Go Solar
The recent boom in renewable energy installations, especially household solar, has largely left out households that rent. However, the recently passed Inflation Reduction Act (IRA) will expand access to low-cost solar energy by providing incentives for “community solar.”
Community solar projects are small-scale developments on vacant land in or near communities, as well as on the rooftops of commercial buildings. Renters can pay a monthly fee to subscribe to a community “solar garden” and receive a discount on their utility bills for the clean energy they’re helping to fund in their community.
Currently, 21 U.S. states and the District of Columbia allow community solar projects, and the IRA will make these projects cheaper and easier to develop. It will also offer a tax incentive to build solar systems that serve low-income communities.
Renewable energy experts believe the effects of these programs can be wide-ranging, from reducing household utility bills to powering electric vehicles to reducing the pressure to build large solar power plants on environmentally sensitive lands.
Bloomberg: Bhutan Reopens to Tourists Willing to Pay $200-a-Day Visitor Tax
Bhutan is reopening its borders to tourists after closing in 2020 due to the COVID-19 pandemic, but it is charging a $200 tax per night, an increase from its previous $65-per-night Sustainable Development Fee. The objective is to attract “high value, low volume” tourism.
The small, landlocked nation intends to use the tourism proceeds to offset the carbon footprint of tourists, enhance workers’ skills in the sector, and improve infrastructure.
Bloomberg: California Moves to Ban Natural Gas Furnaces and Heaters by 2030
With California’s new plan to ban natural gas furnaces and heaters by 2030, they are the first state in the U.S. to do so and will most likely influence other states to do the same.
California still gets 40% of its power from fossil fuels but is working toward a carbon-free grid by 2045.
Gas stoves are not included in this new ban, but some areas have already applied that to the new rule in new buildings.