What's Happening in Sustainability & ESG (Week Recap 06.02 - 12.02) 🌎

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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:

• EU agrees on new regulation aimed at promoting local production of clean tech and another agreement to regulate ESG ratings providers 🇪🇺

• China's three major stock exchanges announced new sustainability reporting guidelines for listed companies 🇨🇳

• The value of global carbon markets reached a record $949 billion in 2023 🌍

• Bloomberg Intelligence says global ESG assets will reach $40 trillion by 2030 📈

• PFZW, one of Europe's largest pension funds, has divested from over 310 fossil fuel companies 🇳🇱

• Barclays announced that it will cease direct financing of new oil and gas fields 🏦

• and other news 🌍

⭐️ The week’s top news:

🇪🇺 As usual, a couple of things happened in the EU the past week:

• EU lawmakers reached a provisional agreement on the Net-Zero Industry Act (NZIA), a new regulation aimed at promoting local production of clean tech equipment and reducing reliance on China. The EU aims to produce 40% of its clean tech needs by 2030 and streamline permits for EU manufacturing projects. The agreement will need to be formally adopted before becoming law. As part of the act, the EU Commission launched a strategy to significantly increase industrial carbon capture, storage, and utilization capacity in the EU. The strategy aims to develop at least 50 million tonnes per year of CO2 storage capacity by 2030, scaling up to 280 million tonnes by 2040 and 450 million tonnes by 2050.

• EU lawmakers also reached an agreement to regulate ESG ratings providers, aiming to introduce more rigor into ESG investing and prevent 'greenwashing'. Under the new rules, ESG ratings providers in the EU will need to be authorized and supervised, and ratings from providers based outside the EU will need to be endorsed by an EU-regulated rater. The deal is expected to come into force in 2025.

• And lastly, the EU Commission proposed a target for the EU to cut net GHG emissions by 90% by 2040. However, the recommendation weakened the target for agriculture following protests by farmers. If agreed, it would transform Europe's energy mix, phasing out coal and reducing fossil fuel use by 80%.

🇨🇳 China's three major stock exchanges, Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and Beijing Stock Exchange (BSE), have announced new sustainability reporting guidelines for listed companies. Starting in 2026, larger cap and dual-listed issuers will be required to disclose on a broad range of ESG topics. The guidelines include reporting on governance, strategy, impact, risk and opportunity management, and indicators and goals. The requirements will apply to over 450 companies.

• The value of global carbon markets reached a record $949 billion in 2023, with the EU's Emissions Trading System (ETS) accounting for 87% of the total. While the volume of carbon permits traded remained similar to the previous year, record prices in Europe and North America contributed to the overall increase. However, the price of carbon permits in the EU ETS fell towards the end of 2023 due to weak demand. The UK's ETS also experienced a decrease in value, while North American markets and China's national ETS saw record-high prices. 🌍

• The UK Labour Party has made a major U-turn on its green investment plans, slashing its spending pledge on green policies by nearly 75%. The party has abandoned its commitment to spend £28 billion a year and now plans to spend £23.7 billion over the entire course of the next parliament. The party's aim of achieving a decarbonized power grid by 2030 remains in place. 🇬🇧

• Netherlands-based PFZW, one of Europe's largest pension funds, has divested from over 310 fossil fuel companies (worth around €2.8 billion), including Shell and BP, due to a lack of convincing decarbonization plans. Only seven fossil fuel companies remain in its portfolio. PFZW aims to achieve a climate-neutral portfolio by 2050 and a 50% absolute carbon reduction by 2030. 🇳🇱

• According to Bloomberg Intelligence, global ESG assets are predicted to reach $40 trillion by 2030, accounting for over 25% of projected global assets under management. Despite challenges, the ESG market is expected to mature and align with global regulations. Europe is projected to remain the largest contributor with over $18 trillion in ESG assets, while the US may experience slower growth due to elections and ESG backlash. Enhanced scrutiny and regulations are expected to bolster the credibility of ESG assets. 📈

• According to a survey by Salesforce and GlobeScan, only 27% of senior business executives have access to high-quality sustainability data, while nearly 60% anticipate difficulty complying with new sustainability reporting regulations. Despite recognizing the importance of sustainability, only 37% consider it to be very integrated into their businesses. The study highlights key barriers to sustainability progress, including data limitations, lack of collaboration with finance and technology, limited capital allocation, and perceptions of value creation. 📊

🧐 What are companies doing?

• Moody's Investors Service has introduced the Net Zero Assessment (NZA), a scoring system that allows investors to evaluate and compare companies' decarbonization plans. The NZAs assess a company's carbon emissions reduction profile based on its ambitions, plan, and governance. The NZAs aim to provide an independent and comparable assessment to help market participants understand the relative positioning of companies as they transition to a low-carbon future. 📊

• MSCI has launched MSCI Private Company Data Connect, a platform that collects and communicates sustainability and climate data from private companies to investors and lenders. The platform aims to provide insights into sustainability practices at private companies, similar to those used for public companies. 📄

• Barclays, the largest lender to the oil and gas industry in Britain, has announced that it will cease direct financing of new oil and gas fields and impose stricter lending restrictions on energy companies involved in fossil fuel production. The move is part of the bank's Transition Finance Framework and is aimed at reducing emissions and supporting greener alternatives. 🏦

• HSBC has partnered with Google to finance fast-growing climate technology firms selected by Google for its Google Cloud Ready-Sustainability program. The partnership aims to provide financing to companies working on solutions to global climate change. The tie-up follows HSBC's acquisition of Silicon Valley Bank's UK arm in 2023 and its commitment to provide $1 billion in funding to climate tech companies by 2030. 📈

• Chemicals and materials science company Dow has issued its inaugural green bond, raising over $1.2 billion to support its decarbonization and circular economy strategies. The proceeds from the green bond will be used to achieve Dow's climate protection and circular economy goals, including carbon neutrality by 2050 and reducing emissions by 5 million metric tons by 2030. 🟢

💸 Recent funding rounds, sustainable finance, acquisitions, and private equity:

🟢 Clean fuel startup Koloma has raised $245.7 million in a funding round led by Khosla Ventures, with participation from Amazon and United Airlines. The company leverages techniques developed by the oil and gas industry to extract hydrogen, which is generated naturally in underground pockets. Geologic hydrogen is seen as a cost-effective alternative to green hydrogen produced through electrolysis.

📈 Decarbonization-focused VC investor Voyager Ventures has raised $100 million for its second venture fund, Voyager Partners Select I, focusing on investments in climate technology startups. The fund aims to support early-stage companies in sectors such as mobility, energy, materials, food, and carbon removal.

🛩️ Velocys, a sustainable aviation fuel (SAF) technology company, has raised $40 million in growth capital. Velocys aims to provide SAF solutions to the aviation industry, helping to decarbonize the sector and meet climate goals. Velocys' proprietary Fischer-Tropsch-based technology enables the production of drop-in fuels from waste materials.

🟢 Cleantech startup Avnos has raised $36 million in a series A financing round to support the growth and expansion of its proprietary Direct Air Capture (DAC) carbon removal technology. Avnos offers a Hybrid Direct Air Capture (HDAC) solution that captures both water and CO2 from the atmosphere using air, electricity, and solid sorbents. Avnos has received multi-million-dollar projects from the US Department of Energy and the US Office of Naval Research.

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