What's Happening in Sustainability & ESG (Week Recap 19.11 - 25.11) 🌎

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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:

• The final COP29 recap: key outcomes 🌎

• The EU Council adopted a regulation banning products made with forced labor & approved the EU’s first certification framework for carbon removals 🇪🇺

• Swedish battery manufacturer Northvolt, once a symbol of Europe’s battery independence, filed for Chapter 11 bankruptcy 🔋

• HSBC’s CSO stepped down following a recent management reshuffle that removed her role from the bank’s top decision-making group 🏦

• For the first time since tracking began in 2018, global climate funds are set to record net withdrawals 📈

• and other news 🌍

THIS WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🌎 At COP29 in Baku, nearly 200 countries agreed to a $300 billion annual climate finance target by 2035, aimed at supporting developing nations in addressing climate change impacts. The deal, which replaces the previous $100 billion target, also sets a broader $1.3 trillion goal from public and private sources but has been criticized as insufficient by developing nations. Negotiations were contentious, reflecting divisions between wealthy nations constrained by domestic challenges and vulnerable countries demanding greater financial support. The agreement outlines no detailed steps for phasing out fossil fuels or scaling renewable energy, with Saudi Arabia reportedly blocking ambitious proposals. Amid escalating global climate disasters, the deal marks a step forward but falls short of the urgent funding needed to limit global warming, leaving significant work for future climate summits.

Other COP29 Highlights

• Establishment of a Global Carbon Credit Market:

COP29 finalized a decade-long effort to set rules for a global carbon credit market, enabling countries and companies to trade emissions offsets. The agreement provides guidelines for centralized UN trading and bilateral exchanges, aiming to mobilize billions into climate projects. The market could grow to $250 billion annually by 2030, offsetting 5 billion metric tons of emissions, though oversight and quality assurance remain challenges.

• Nationally Determined Contributions (NDCs):

Countries are required to submit updated NDCs by February 2025, detailing emission reduction strategies. This process emphasizes collaboration between governments and businesses, potentially shaping regulatory and market dynamics while advancing alignment with climate goals.

• Tourism’s Inclusion in the Agenda:

Over 50 governments signed a UN declaration to make tourism more climate-friendly, integrating it into the Action Agenda for the first time. The sector, responsible for 8.8% of global emissions, pledged to update NDCs and adopt frameworks like the World Sustainable Hospitality Alliance to track and reduce environmental impacts across 55,000 hotels.

• Climate Finance Shortcomings:

Economists noted that the $300 billion pledge lacks inflation adjustments, reducing its real value over time. Critiques highlighted its reliance on private sector funding, insufficient public finance mechanisms, and a lack of quality indicators like ease of access for developing nations.

• Symbolism of the $300 Billion Target:

The target equals 45 days of global military spending or 40 days of global crude oil consumption and is almost the equivalent of Elon Musk’s net worth. This comparison underscores both the scale of the pledge and its perceived inadequacy relative to global financial flows.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🇪🇺 The EU Council adopted a regulation banning products made with forced labor from being sold or exported in the EU, marking the final legislative step following earlier approval by the European Parliament. Aimed at combating modern slavery, the rules empower customs and national authorities to identify, investigate, and remove such products from the market, whether imported or produced within the EU. Non-compliant firms may face fines, but products can return to the market if forced labor is eradicated from their supply chains. The regulation includes criteria for assigning investigative authority and mandates the EU Commission to create a database and list of high-risk sectors and regions. It will take effect three years after publication in the EU’s Official Journal.

🇪🇺 The EU Council also:

• approved the EU’s first certification framework for permanent carbon removals, carbon farming, and carbon storage in products. This voluntary system will quantify, monitor, and verify carbon removal efforts to combat greenwashing and support climate neutrality goals under the European Green Deal. Certification will require projects to meet strict criteria, including long-term carbon storage, additionality, measurable net benefits, and no significant harm to the environment, while promoting co-benefits for sustainability. Eligible activities, such as direct air capture, carbon farming, and carbon storage in durable products, must undergo independent third-party verification. An EU-wide electronic registry will be established within four years to ensure transparency and traceability. The regulation takes effect 20 days after publication and will apply across all EU member states.

• adopted new rules to regulate ESG ratings providers, aiming to enhance the reliability, comparability, and transparency of ESG ratings and boost investor confidence in sustainable financial products. The legislation places ESG ratings providers under the supervision of ESMA, requiring authorization, adherence to rigorous and objective methodologies, conflict of interest prevention, and transparency in methodologies and assumptions. Non-EU providers must meet equivalence standards or collaborate with authorized EU providers to operate within the EU. The rules will take effect 20 days after publication in the EU’s Official Journal and apply 18 months later, aligning with global efforts, such as the UK’s recent draft legislation to regulate ESG ratings providers.

🛩️ Major oil and gas companies are significantly investing in sustainable aviation fuel (SAF), with 43 projects expected by 2030, adding a production capacity of 286,000 barrels per day (bpd), according to consultancy Rystad. Industry leaders like BP, ExxonMobil, Shell, and TotalEnergies are driving this shift, with BP leading at 130,000 bpd capacity. SAF, made from waste and organic crops, emits similar carbon dioxide levels as kerosene but is less polluting due to its renewable sourcing. Governments are mandating SAF adoption, including the EU’s 2% SAF requirement by 2025 and the U.S.’s goal for full SAF usage by 2050, despite SAF’s higher costs.

🇺🇸 The US Department of Energy awarded up to $2.2 billion to hydrogen projects in the Gulf Coast and Midwest, funded by the 2021 bipartisan infrastructure law. These hubs aim to produce clean hydrogen using electrolysis, wind energy, nuclear power, and natural gas with carbon capture, supporting heavy industries like steel and transportation. The Gulf Coast hub in Texas received up to $1.2 billion, while the Midwest hub spanning Illinois, Indiana, Iowa, and Michigan got up to $1 billion.

WHAT ARE COMPANIES DOING?

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

🔋 Swedish battery manufacturer Northvolt, once a symbol of Europe’s battery independence, filed for Chapter 11 bankruptcy in the US on November 21, citing production shortfalls, leadership instability, lost contracts, and safety issues. Despite raising $15 billion from investors like Volkswagen and BlackRock, the company was left with just $30 million in cash. Its Skellefteå gigafactory operated at less than 1% capacity due to operational flaws, while missed deadlines and quality issues cost it a €2 billion BMW contract. Leadership disarray, employee turnover, and safety incidents, including three fatalities, further eroded confidence. The bankruptcy underscores systemic challenges in Europe’s green tech strategy. Europe struggles to compete in battery manufacturing, relying on Chinese suppliers and lacking domestic expertise. Strategic missteps, over-ambitious growth, and competition from established players like CATL and Tesla exposed Northvolt’s vulnerabilities. To survive, Northvolt must stabilize operations, access $245 million in financing, and reorganize leadership.

🏦 HSBC’s Chief Sustainability Officer, Celine Herweijer, stepped down following a recent management reshuffle that removed her role from the bank’s top decision-making group. Her departure has raised concerns among investors, such as Epworth Investment Management, about the potential dilution of HSBC’s climate commitments under new CEO Georges Elhedery. Julian Wentzel, currently Head of Global Banking for MENAT, will serve as interim Chief Sustainability Officer. While HSBC maintains that transitioning to net zero remains a core priority, critics view the interim appointment of a banker instead of a sustainability expert as a potential shift in focus. HSBC introduced its first net-zero transition plan earlier this year, but challenges persist as banks emphasize the need for clearer government policies to meet global climate goals. Meanwhile, Starbucks appointed Marika McCauley Sine as its new Chief Sustainability Officer. McCauley Sine brings extensive experience in sustainability, having served as CSO at Mars Petcare and holding previous roles at Mars and The Coca-Cola Company focused on climate action, sustainable sourcing, and human rights.

🚗 Mercedes-Benz updated its sustainability strategy, focusing on six key areas: Decarbonization, Resource Use & Circularity, Employees, Human Rights, Digital Trust, and Traffic Safety. This approach, aligned with the EU’s CSRD, aims to address key ESG issues. Main initiatives include achieving net carbon neutrality for its fleet by 2039, advancing vehicle electrification, increasing recycled material use, deploying renewable energy, and promoting circular resource use to reduce waste and energy consumption. Other goals include investing over €2 billion in employee training by 2030, mitigating human rights risks, responsibly using digital technologies like AI, and supporting the EU’s Vision Zero to halve road fatalities by 2030 and eliminate them by 2050.

📑 Deloitte expanded its ‘ESG accelerators’ on the Workiva platform with four new solutions to help companies comply with the EU’s CSRD. These solutions address key requirements like double materiality assessments, financed emissions calculations, regulatory gap analysis, and workflow tracking. The accelerators, including tools like the Double Materiality Accelerator and Financed Emissions Calculator, streamline complex ESG reporting processes, aligning with CSRD’s detailed standards for sustainability disclosures.

📊 ISS ESG introduced a customizable Climate Impact Report to support investors in assessing and communicating their climate-related goals, risk management, and engagement activities. The report analyzes Scope 1, 2, and 3 emissions, transition and physical risks, and climate scenario alignment using models from IEA, NGFS, and UNEP. It offers tailored outputs, including Implied Temperature Rise, sectoral analysis, and key metrics for medium- and long-term horizons (2030 and 2050), addressing demand for improved portfolio alignment measurement in line with GFANZ recommendations.

EVERYTHING FINANCE

Sustainable finance, funding rounds, acquisitions & private equity deals

📈 For the first time since tracking began in 2018, global climate funds are set to record net withdrawals, with nearly $24 billion pulled out in the first nine months of 2024, compared to $40 billion in deposits during the same period in 2023, according to Morningstar Sustainalytics. This contrasts with peak inflows of $151 billion in 2021. The outflows reflect poor renewable energy stock performance, greenwashing concerns, anti-ESG sentiment, and the impact of high interest rates on growth-oriented companies like solar firms. Despite the withdrawals, climate funds’ total assets grew 6% year-to-date to $572 billion, driven by market appreciation. Europe dominates the climate fund market, holding 85% of assets. Climate-transition funds outperformed with an average return of 17.2% through September, while clean energy/tech funds lagged with a negative return of 3.2%. Climate fund launches have slowed, with 69 launches through September, down from over 200 in 2023.

🌳 BNP Paribas Asset Management (BNPP AM) launched the BNP Paribas Future Forest Fund (FFF), an Article 9 sustainable forestry fund under the EU’s SFDR regulation. Developed in partnership with International Woodland Company (IWC), the fund targets sustainable timberland investments to deliver financial returns while combating climate change, enhancing biodiversity, and improving asset resilience. With an initial raise of $130 million and a target size of $500 million (capped at $750 million), the fund will invest in FSC-certified or certifiable forests across the US, Australia, New Zealand, and Europe

📈 Equinix, a data center and digital infrastructure company, issued €1.15 billion in green bonds to finance renewable energy, decarbonization, and other sustainability projects. This issuance, comprising €650 million in senior green notes due 2031 and €500 million due 2034, brings Equinix’s total green bond issuance to $6.9 billion, placing it among the top five US green bond issuers.

⚡️ Tokamak Energy, Europe’s best-funded nuclear fusion startup, raised $75 million, completing a $125 million funding round. The UK-based company, which has now secured $335 million in total funding, aims to commercialize its high-temperature superconducting (HTS) magnet technology for use in fusion reactors and other industries. Tokamak’s spherical fusion reactor design promises greater efficiency and lower costs than traditional tokamaks, but the company doesn’t expect to achieve commercial viability before the 2030s. In the meantime, it plans to generate revenue from its HTS magnet technology across various sectors.

🟢 Liquid Wind, a Swedish eFuel production developer, raised €44 million in Series C funding, marking one of the largest investments in Europe’s eFuel sector this year. The funding will accelerate Liquid Wind’s plan to develop 10 eFuel facilities by 2027 and 500 globally by 2050. The company produces eMethanol, a low-carbon maritime fuel made from biogenic CO₂ and renewable electricity, offering 94% lower emissions on a “Well-to-Wake” basis. Each facility can produce 100,000 tonnes of eFuel annually while capturing 150,000 tonnes of CO₂, supporting the International Maritime Organization’s net-zero targets for over 100,000 ships by 2050.

📊 Amsterdam-based TRACT, a provider of sustainability measurement systems for supply chains, raised $11.2 million to expand its SaaS platform aimed at helping agricultural and food companies reduce carbon footprints. The funding will enhance services for tracking Scope 3 emissions, farmer income, and compliance with EU regulations like CSRD and CSDDD. TRACT’s platform simplifies sustainability reporting and provides actionable insights for reducing environmental impact, with methodologies endorsed by major companies like Nestlé and Cargill.

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