What's Happening in Sustainability & ESG (Week Recap 24.09 - 30.09) 🌎

This week’s read time: 9 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:

• A report on ESG reports 🔍

• US companies’ boards are deprioritizing ESG, saying it’s not synonymous with Sustainability 🇺🇸

• Morningstar survey finds that asset managers see ESG as more material than five years ago 📈

• New York Climate Week 2024 main takeaways 🇺🇸

• EU initiated infringement procedures against 17 EU member states for failing to transpose the CSRD into national law 🇪🇺

• and other news 🌍

THIS WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

Executive advisory firm Teneo analyzed 250 sustainability reports from S&P 500 companies published between Jan. 1 – July 30 and found that while ESG reports very much live on, the pomp and circumstance surrounding their launch is dwindling. Less than half of the companies issued a press release to accompany the report, compared to the 75% that did so in 2021, and only 14% provided an executive summary of their reports, down from the 26% in years prior. Instead, more companies are investing in sustainability-focused micro-sites within their corporate websites.

According to the study, ESG reports are getting longer, with most averaging 83 pages long, a 20% increase compared to the reports from 2021. The shortest 2024 report came in at 15 pages, while the longest was 211 pages. Language has evolved as well. "Sustainability" overtook "ESG" as the most common keyword within report titles, while the mention of "impact" nearly doubled since last year. 94% of companies continued to use the term "DEI" within reports, and the remaining 6% focused more broadly on themes of belonging and inclusion. Additionally, fewer companies are including a section highlighting the progress they've made toward reaching their goals than in years past, according to the report. And finally, roughly 1 in 5 mentions the responsible use of AI in their 2024 reports.

US companies’ boards are deprioritizing ESG, saying it’s not synonymous with Sustainability

A recent PwC survey of over 520 US public company directors revealed a decline in focus on ESG issues in corporate boardrooms. Less than half (47%) of respondents reported that ESG is a regular agenda item, down from previous years, and 66% agreed that “ESG means different things to different people,” with more than a third viewing ESG as a “charged term.” Only 7% of directors equate ESG with sustainability, and only 42% believe that ESG is consistently understood by their boards. The survey also highlighted that larger companies are more likely to link ESG to financial performance, with 32% of large company directors seeing a direct impact on the bottom line, compared to only 15% at smaller companies. Many boards still face challenges in managing ESG topics, with only 57% feeling prepared to oversee upcoming mandatory ESG disclosures and 56% understanding the impact of climate commitments on capital allocation.

Another survey by Morningstar finds that asset managers see ESG as more material than five years ago

Over two-thirds of asset owners report an increasing focus on ESG in their investment processes, according to a new Morningstar survey. Conducted among 500 asset owners managing $18 trillion in assets, the survey found that 67% see ESG as more material than five years ago, particularly in APAC (71%) and Europe (68%). The transition to net-zero emissions, labor practices, and business ethics are key ESG factors influencing decisions. Senior leadership, regulations, and stakeholder pressure are the primary drivers for ESG consideration, while the impact on returns and lack of standardized data are barriers. Most asset owners believe ESG tools, such as data, ratings, and indexes, have improved, though they seek more accurate and standardized reporting.

MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🗽 New York Climate Week 2024 brought together over 100,000 participants from policymakers to startup founders, hosting more than 900 events across the city to tackle diverse climate topics, as many attendees opted to skip COP in Azerbaijan later this year. Here are the main takeaways:

Carbon markets captured the spotlight: The voluntary carbon market (VCM) gained renewed support from key figures like UN Special Envoy Mark Carney and Michael Bloomberg during Climate Week NYC. Despite recent scandals and declining sales in 2023 and 2024, efforts to restore integrity to the market are underway. With a market contraction from its $2 billion peak in 2021, stakeholders remain optimistic about the VCM’s future.

Capital stacks are diversifying to fill the missing middle: The gap between Series B and C funding is widening as late-stage investment slows. It’s now about business model innovation, with companies needing credible unit economics to secure investments amid market uncertainty.

No financing without offtake, and no offtake without financing: Startups must prove demand for their products through long-term offtake agreements to unlock financing. Offtake de-risks the technology and assures investors of customer revenue, making it essential for securing project finance.

🇪🇺 The European Commission initiated infringement procedures against 17 EU member states for failing to transpose the CSRD into national law. The affected states missed the July 2024 deadline to implement the directive. The Commission warned that without compliance, harmonization of sustainability reporting across the EU will be jeopardized. In related EU news, the Commission also launched a consultation on a proposed EU Flight Emissions Label (FEL) aimed at informing passengers about the carbon footprint of their flights. Part of the EU’s RefeulEU Aviation regulations, the FEL will provide standardized emissions data for flights within or departing from the EU, addressing the lack of consistent information currently available. Starting in 2025, airlines can voluntarily join the initiative, displaying emissions data and a FEL logo during the online booking process.

📑 The IFRS Foundation released a new guide to help companies voluntarily apply the ISSB’s climate and sustainability disclosure standards. These standards, introduced in June 2023, aim to provide investors with consistent information about companies’ sustainability risks and opportunities. The new guide is intended for companies in jurisdictions without regulatory requirements to adopt ISSB standards but who face investor demand for such reporting.

🏭 The UK’s last coal-fired power plant, Ratcliffe-on-Soar in Nottinghamshire, is closing after 57 years, marking the end of the country’s 142-year history of coal-powered electricity. This move aligns with the government’s long-term policy to phase out coal by 2025. The UK was the first country to build a coal-fired power station and is now one of the first major economies to exit coal, a transition supported by costly carbon taxes and the rise of renewables.

WHAT ARE COMPANIES DOING?

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

🛢️ California and several environmental groups, sued ExxonMobil, accusing the company of misleading the public about the effectiveness of its recycling efforts and contributing to the global plastic pollution crisis. California Attorney General Rob Bonta alleges that Exxon’s promotion of “advanced recycling” technology, which converts hard-to-recycle plastics into fuel, is deceptive and that the company has played a key role in exacerbating the plastic waste problem. Exxon defended its recycling technology, claiming it successfully processed over 60 million pounds of plastic waste, while arguing that California’s recycling issues stem from the state’s own shortcomings.

⚡️ Microsoft and Constellation Energy signed a 20-year power purchase agreement to restart Pennsylvania's Three Mile Island Unit 1 nuclear reactor. Microsoft will use energy from the plant to power its data centers with carbon-free electricity, supporting its goal to be carbon-negative by 2030 and to match 100% of its electricity consumption with clean energy. A relaunch of Three Mile Island, which had a separate unit suffer a partial meltdown in 1979 in one of the biggest industrial accidents in the country's history, still requires federal, state, and local approvals. In related Microsoft news, the company also signed a new agreement with UNDO, a developer focused on enhanced rock weathering carbon removal projects, to remove 15,000 tonnes of CO2 from the atmosphere. UNDO accelerates natural geological weathering by spreading crushed silicate rock on agricultural land, where plants and microbes help remove CO2 and enrich the soil.

🌳 Amazon and several other companies, including Bayer, BCG, Capgemini, H&M, and Walmart, committed to purchasing carbon offset credits through the LEAF Coalition to support the conservation of the Amazon rainforest in Brazil’s Para state. The deal, valued at approximately $180 million, will see the companies buying 5 million credits at $15 each, well above the average market price. Proceeds will primarily benefit Indigenous, local, and traditional communities, with a portion allocated to Para’s emissions reduction efforts.

🟢 Shell, Equinor, and TotalEnergies completed their CO2 storage project on Norway’s west coast, part of the Longship project, and expect to receive the first CO2 deliveries in 2025. The project, called Northern Lights, is considered to be a key milestone in demonstrating carbon capture and storage (CCS) as a viable option to reduce emissions. The site features 12 metal tanks capable of storing 7,500 m³ of CO2, which will be sent through a 110 km pipeline for permanent storage 2,600 meters below sea level. The first phase will store 1.5 million tons of CO2 annually, with plans to expand to 5 million tons. The initial delivery will come from the Brevik cement plant, with future agreements in place with companies like Yara and Orsted for CO2 transport and storage starting in 2025 and 2026.

🛩️ TotalEnergies signed a MoU with Air France-KLM to supply nearly 1.9 billion liters of sustainable aviation fuel (SAF) over a 10-year period until 2035. This builds on a 2022 agreement in which TotalEnergies committed to supply 800,000 tons of SAF. The fuel, made from waste and residue, will be used by Air France-KLM for flights departing from France and the Netherlands, with Europe-wide regulations mandating increasing SAF usage by 2050.

🏡 Real-estate marketplace company Zillow announced that it will now integrate climate risk scores, interactive maps, and insurance information into its home listings. This move allows prospective buyers to see both climate risk data and home insurance recommendations together for the first time. Climate risk information, provided by First Street, includes historical data and future risks from floods, wildfires, extreme heat, and more. As extreme weather events drive up home insurance costs, this feature addresses growing concerns for buyers.

EVERYTHING FINANCE

Sustainable finance, funding rounds, acquisitions & private equity deals

📈 Brookfield Asset Management raised $2.4 billion for its Catalytic Transition Fund (CTF), which aims to drive clean energy investments in emerging economies. The CTF targets investments in South and Central America, South and Southeast Asia, the Middle East, and Eastern Europe.

📈 TPG Rise Climate, part of TPG’s global impact investing platform, raised $1.25 billion in initial capital for its new Global South Initiative (GSI), including a $500 million commitment from UAE-backed ALTÉRRA. GSI aims to attract $2.5 billion in total, focusing on accelerating climate solutions in the Global South by encouraging private equity investment in high-growth opportunities.

📈 Morgan Stanley Investment Management (MSIM) announced the final close of its climate-focused private equity fund, 1GT, raising $750 million. The fund aims to eliminate 1 gigaton of CO2 emissions by 2050 by investing in growth-stage companies across sectors like mobility, power, sustainable food, agriculture, and the circular economy in North America and Europe.

🏦 BBVA formed a strategic partnership with US investor KKR to focus on investments tied to the low-carbon transition. As part of the agreement, BBVA will invest $200 million in KKR’s Global Climate Strategy and seek additional climate-related infrastructure investments. KKR’s climate strategy has already funded ventures like Zenobe and Avantus, with co-head Emmanuel Lagarrigue noting the immense investment opportunity in the global transition to net zero.

⚡️ UAE-based clean energy developer Masdar announced plans to acquire Spain’s Saeta Yield from Brookfield Renewable for an enterprise value of $1.4 billion. Saeta is an independent renewable energy developer and operator, with a portfolio of 745 MW of wind and solar assets across Spain and Portugal, and a 1.6 GW development pipeline.

🏗️ Sublime Systems, a low-carbon cement producer, announced a $75 million equity investment and partnership with building materials giants CRH and Holcim. Sublime’s proprietary process uses an electrolyzer to produce cement at ambient temperatures, significantly reducing carbon emissions compared to traditional cement production, which accounts for 8% of global CO2 emissions.

🟢 Utility Global, a clean fuel startup, raised $53 million in a Series C funding round to support the commercialization of its technology that converts industrial gases into clean fuels, helping decarbonize hard-to-abate industries like steel without using electricity. The company’s proprietary eXERO technology transforms hydrogen and syngas from industrial waste gases, providing a cleaner alternative to carbon-intensive methods.

♻️ Cyclic Materials, a Canadian recycler of critical metals used in EVs and wind turbines, raised $53 million from investors, including BMWi and Hitachi Ventures, in its second funding round. Cyclic Materials specializes in extracting rare earth metals from end-of-life motors and electronic waste, aiming to reduce Western dependence on China’s near-monopoly on these critical materials.

📊 ESG data management startup Atlas Metrics raised €12.2 million in a Series A funding round. Founded in 2021, the Berlin-based company leverages automation, AI, and advanced analytics to simplify ESG reporting, particularly focusing on mid-sized companies and financial institutions complying with regulations like the EU’s CSRD.

🟢 Ayrton Energy, which focuses on transporting liquid hydrogen, raised $6.8 million in seed funding to advance its liquid organic hydrogen carrier (LOHC) technology. Ayrton’s LOHC technology allows hydrogen to be transported and stored more efficiently by using a carrier oil, eliminating the need for high-pressure tanks or cryogenic conditions, thus reducing costs and risks.

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