What's Happening in Sustainability & ESG (Week Recap 22.10 - 28.10) 🌎

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This week’s read time: 8 minutes

Welcome to this edition of Green Digest, where you will get updated about everything happening in the Sustainability & ESG space in less than 10 minutes. 🌎

We go through tons of articles and data from the most reliable sources, filter & simplify them, and serve them to you in bite-sized chunks every week. 🍀

In this edition, we’ll cover:

• 502 companies now committed to voluntary TNFD-aligned nature-related reporting 🌳

• The UNEP Emissions Gap Report 2024 warns of insufficient climate action, projecting a 3.1°C rise by 2100 🔴

• The European Commission announced €4.8 billion in grants for 85 decarbonization technology projects 🇪🇺

• Morgan Stanley lowers climate target, warns on slower-than-expected green transition 📉 

• US SEC charges advisory firm WisdomTree with failing to adhere to its own investment criteria for ESG-marketed funds 🇺🇸

• and other news 🌍

THIS WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🌳 The Taskforce on Nature-related Financial Disclosures (TNFD) announced that over 500 companies and financial institutions, representing $6.5 trillion in market capitalization and $17.7 trillion in assets, have committed to adopt TNFD-aligned reporting for fiscal years 2024 or 2025. This reflects a significant increase from 320 companies earlier this year, following the release of TNFD’s final recommendations in September 2023, aimed at standardizing nature-related governance, strategy, risk management, and targets. The TNFD’s framework supports the development of broader sustainability standards, with organizations like the ISSB, CDP, and GRI integrating its guidance into their initiatives. New adopters include KPMG, abrdn, Qantas, and Tokyo Electric Power, with participation spanning 54 jurisdictions and 62 of 77 SASB sectors. David Craig, TNFD Co-Chair, emphasized the growing recognition among companies that nature-related risks present both challenges and competitive opportunities.

The TNFD also published a discussion paper that sets out draft guidance on nature transition planning to help companies and financial institutions align their practices with the Kunming-Montreal Global Biodiversity Framework (GBF). Announced at COP16 in Cali, Colombia, the guidance builds on the work of GFANZ and the Transition Plan Taskforce (TPT) by integrating nature into transition plans beyond climate goals. It outlines how organizations can set targets, actions, and accountability mechanisms to address biodiversity risks and contribute to nature-positive outcomes. Feedback on the draft guidance is invited until February 1, 2025, with the final version to be published later that year following consultation and potential pilot testing.

Business momentum in biodiversity and nature reporting is growing, as highlighted by a 43% increase in biodiversity disclosures since the adoption of the GBF in 2022, according to new data from CDP. Water-related reporting rose by 23%, and forest disclosures increased by 10%. However, only 10% of companies assess their dependency on biodiversity, despite biodiversity loss potentially costing the global economy up to $20 trillion annually. Freshwater management shows progress, with a 22% reduction in corporate water use. While some businesses are advancing transparency, financial risks related to nature remain under-assessed, and fewer companies include financial figures when reporting risks. CDP and Business For Nature leaders stress the need for stronger regulations and faster corporate action, urging businesses to align with nature-positive practices and governments to implement ambitious policies to meet 2030 targets.

Despite positive developments, nations at COP16 are struggling to agree on funding strategies for conservation goals, with only $163 million pledged on ‘Finance Day’—far short of the billions required. Discussions are ongoing around financing, Indigenous inclusion, and conservation policy, with progress being made on recognizing Indigenous representation in biodiversity decision-making. However, trust issues between nations are hindering negotiations, and many are concerned about whether the summit will deliver effective funding solutions.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🔴 The UNEP Emissions Gap Report 2024 warns of insufficient climate action, with global emissions remaining at record levels and policies falling short of limiting warming to 1.5°C. Current trajectories project a 3.1°C rise by 2100 unless urgent interventions occur. Even with full implementation of unconditional Nationally Determined Contributions (NDCs), warming is expected to reach 2.8°C, far beyond the Paris Agreement targets. Efforts to cut emissions, adopt renewable energy, and phase out fossil fuels have not slowed emissions growth. The report emphasizes that limiting warming to below 2°C requires reducing emissions by 28% by 2030 and 37% by 2035 from 2019 levels, with further delays making these cuts more difficult and costly. CO₂ concentrations also hit a record 420 ppm in 2023, the highest in human history, with methane and nitrous oxide also spiking. Tropical fires from El Niño and declining forest absorption rates further accelerated emissions growth.

📑 The Impact Disclosure Taskforce, led by JPMorgan and Natixis, released voluntary Impact Disclosure Guidance to help businesses and governments measure and report their contributions toward the UN Sustainable Development Goals (SDGs), addressing global challenges like poverty, education, and environmental protection. With an annual investment need of $4 trillion to meet the SDGs, the guidance outlines a five-step process for assessing and disclosing the development impact of corporate strategies and national plans, focusing on outputs, outcomes, and forward-looking targets. It encourages adoption by banks, investors, and regulators to align with sustainable finance rules and facilitate capital flows toward sustainable investments.

🇺🇸 New York City Comptroller Brad Lander proposed expanding the city’s pension funds’ fossil fuel investment exclusion policy by halting future investments in midstream and downstream fossil fuel infrastructure, such as pipelines and LNG terminals, within private equity and infrastructure portfolios. This follows prior steps, including divesting from fossil fuel reserve owners in public equities (2018) and excluding upstream fossil fuel investments in private markets (2023). With over $200 billion in assets across pension funds like NYCERS, TRS, and BERS, the proposal aims to mitigate climate risks impacting both the environment and financial portfolios. The policy will be presented to trustees in early 2025 for adoption after further research and impact assessments.

🇪🇺 The European Commission announced €4.8 billion in grants for 85 decarbonization technology projects, funded through the EU Emissions Trading System (EU ETS). Established in 2005, the EU ETS raises revenue by pricing carbon emissions from key sectors like energy, aviation, and manufacturing, generating an estimated €40 billion between 2020 and 2030. The grants, part of the EU’s Innovation Fund under the European Green Deal Industrial Plan, support projects across various scales, focusing on cleantech manufacturing, energy storage, renewable hydrogen, carbon management, and net-zero mobility. This fourth and largest round of funding brings the total awarded to €12 billion and aims to drive the EU’s transition to climate neutrality. The next call for proposals is set for December 2024.

WHAT ARE COMPANIES DOING?

Corporate sustainability, new tools and services & companies in the news

📑 Morgan Stanley revised its emissions reduction targets for its corporate lending portfolio, now aiming to align with a global temperature rise of 1.5 to 1.7°C, acknowledging slow progress in the green transition. The bank identified challenges such as lagging EV adoption, slow biofuel uptake in aviation, and policy hurdles in the power sector. Its updated targets, based on a 2022 baseline with improved data, cover six key sectors: Energy, Power, Autos, Aviation, Chemicals, and Mining. Morgan Stanley highlighted ongoing energy security pressures and cost challenges, particularly for sustainable aviation fuel, as key risks to meeting these targets. Despite this, the company signed an agreement with Climeworks, a direct air capture (DAC) startup, to remove 40,000 tonnes of CO2 from the atmosphere by 2037. DAC technology extracts CO2 from the atmosphere, which can be permanently stored or used as a resource. Climeworks, founded in 2009, operates Mammoth, the world’s largest DAC plant, and is involved in US projects funded by the Department of Energy, including Project Cypress.

🌊 Microsoft also entered a new agreement with marine carbon removal provider Ebb Carbon to remove up to 350,000 tonnes of CO2 over ten years. Ebb Carbon uses Electrochemical Ocean Alkalinity Enhancement (OAE) technology to enhance the ocean’s ability to absorb CO2 and reduce ocean acidification. This process separates seawater into acidic and alkaline streams, with the alkaline stream returned to the ocean to convert CO2 into bicarbonate ions, improving marine health.

🚙 Volkswagen (VW) is under significant pressure to cut costs and is considering shutting at least three factories in Germany, laying off tens of thousands of workers, and freezing salaries in 2025 and 2026. The company faces challenges from high costs, competition from Asia, weakening demand in Europe and China, and a slower-than-expected transition to EVs. VW aims to align factory costs, which are currently 25-50% above target, with competitors. The company is currently negotiating new contracts with workers, who have threatened to strike if a deal isn’t reached by December. The situation highlights broader challenges for German automakers, including rising tariffs on Chinese EVs and declining profitability. Unions and workers are demanding government intervention to secure jobs and prevent further industrial decline, with German officials in talks to address the issue.

🛩️ DHL and IAG Cargo announced an expanded partnership involving the use of 60 million liters of sustainable aviation fuel (SAF) between 2024 and 2025, making it the largest SAF agreement between an airline and a customer to date. The collaboration will reduce GHG emissions by approximately 165,000 tonnes of CO2e. The SAF, derived from sources like used cooking oil and food waste, offers up to 80% lower lifecycle emissions than conventional jet fuel and is ISCC-certified.

EVERYTHING FINANCE

Sustainable finance, funding rounds, acquisitions & private equity deals

🇺🇸 The US Securities and Exchange Commission (SEC) charged asset manager WisdomTree with misstatements and compliance failures, finding that three of its ESG-focused ETFs invested in fossil fuel and tobacco-related companies, contrary to their stated investment criteria from March 2020 to November 2021. The SEC determined that WisdomTree lacked adequate screening policies and relied on third-party data that failed to exclude all prohibited companies. To resolve the issue, WisdomTree agreed to a $4 million civil penalty and a cease-and-desist order without admitting or denying the allegations. The SEC emphasized the importance of investment firms adhering to disclosed criteria to maintain investor trust.

⚡️ KKR acquired a 25% stake in Enilive, the biofuels and mobility-focused business of Italian energy company Eni, for €2.94 billion ($3.2 billion), valuing the unit at $12.8 billion. Launched in 2023, Enilive integrates Eni’s biorefining, biomethane, and smart mobility activities, with plans to more than double biorefining capacity by 2026 and reach over 5 million tons annually by 2030. Both companies aim to leverage their expertise to scale Enilive’s impact in sustainable mobility and decarbonization efforts.

📈 M&G and its impact investing unit, responsAbility Investments, launched the M&G responsAbility Sustainable Solutions Bond Strategy, a new fund focused on investment-grade corporate bonds that support environmental and social goals. The fund, classified as Article 9 under the EU’s SFDR, will invest in green, social, and sustainability bonds tied to specific projects or issued by companies addressing environmental or social challenges. The investments will align with the UN SDGs, targeting six key areas: health, education, social inclusion, circular economy, environmental solutions, and climate action.

📈 Mirova has been selected to manage “Objectif biodiversité,” a new €100 million fund launched by a consortium of French institutional investors to support companies transitioning to sustainable business models and developing innovative biodiversity solutions. Focused on European SMEs, the fund will leverage data from environmental platform CDP to assess companies’ risks, impacts, and progress on biodiversity-related issues. The consortium includes major institutions like BNP Paribas Cardif, Caisse des Dépôts, and Société Générale Assurances. Mirova, working with Af2i, aims to engage companies on biodiversity as a key investment priority, with further fund launches planned for 2025.

🟢 Redaptive, a provider of Energy-as-a-Service solutions, raised $100 million in equity investment to accelerate its growth. Founded in 2015, the Denver-based company helps large Commercial & Industrial businesses reduce energy waste, costs, and emissions through energy efficiency programs, offering diagnostics, project management, and real-time energy monitoring with no upfront cost. The new investment will support Redaptive’s expanding customer base as demand for decarbonization solutions grows.

🌊 Planetary Technologies, a Canada-based ocean tech startup, raised $11.4 million in Series A funding. Founded in 2019, Planetary aims to combat climate change through ocean alkalinity enhancement, a process that adds alkaline substances to seawater to boost carbon absorption, reduce ocean acidification, and enhance natural carbon storage. Planetary’s approach mimics natural CO₂ regulation processes.

🚢 Carbon Ridge, a cleantech startup focused on decarbonizing maritime shipping, raised $9.5 million to advance its onboard carbon capture and storage (OCCS) solution. Founded in 2021, Carbon Ridge’s modular system captures CO2 from a vessel’s exhaust, compresses it, and stores it for later sequestration or utilization. The system offers a 75% reduction in volume compared to conventional technologies, consumes minimal energy, and significantly reduces emissions of particulates, NOx, and SOx. With a cost five times lower than alternative fuels like methanol and ammonia, the funding will support commercial demonstrations.

🛩️ Universal Fuel Technologies (Unifuel) raised $3 million to advance its projects and open lab space in Texas, aiming to reduce SAF production costs. SAF, made from resources like waste oils and agricultural residues, can cut lifecycle emissions by up to 85% but faces challenges due to limited supply and high costs. Unifuel’s Flexiforming technology upgrades low-value byproducts, such as naphtha and LPG, into high-value SAF, increasing production efficiency and profitability for producers. The process can reduce SAF costs by 50% and production emissions by 75%, enabling flexible, cost-effective scaling.

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