What's Happening in Sustainability? (Week Recap 11.07 - 17.07) 🌎

This week’s read time: 7 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. 🍀

⭐️ The week’s most important news:

🇪🇺 The European Parliament narrowly passed a law to restore degraded natural ecosystems, requiring countries to introduce measures restoring nature on a fifth of their land and sea by 2030. The legislation aims to reverse the decline of Europe's natural habitats, 81% of which are classed as being in poor health. The European Commission has also proposed new regulations to decarbonize the freight transport sector, including rules to accelerate the shift to electric heavy-duty vehicles, attract more freight shipping to rail, and help shipping companies communicate their carbon footprint. The EU aims to cut transport emissions by 90% by 2050, with freight responsible for around 30% of transport emissions.

🇺🇸 The U.S. Environmental Protection Agency has launched two grant programs with $20 billion in funding to promote clean energy investments, particularly in low-income communities. The $14 billion National Clean Investment Fund will provide grants to national clean financial institutions, enabling them to partner with the private sector to provide financing to tens of thousands of clean technology projects nationwide. While the $6 billion Clean Communities Investment Accelerator competition will support nonprofit groups to build the clean financing capacity of local lenders in disadvantaged communities.

⛔️ Amundi, Europe’s leading asset manager, has voted against the re-election of over 500 directors at 84 companies in the Energies & Utilities sectors this year due to concerns about their climate strategies. The firm also voted against executive remuneration-related proposals at 89 oil & gas and utility companies for their failure to include climate-related performance criteria in senior management variable compensation schemes. Amundi's new voting policy requires companies in climate mitigation risk-exposed sectors to include climate-related criteria in variable remuneration metrics and views favorably shareholder resolutions asking issuers to increase transparency on environmental and social issues. BNP Paribas Asset Management also rejected over half of corporate climate strategy resolutions and nearly half of director appointments due to diversity reasons, according to its 2023 AGM season voting record. The firm's voting policy considers whether companies disclose relevant emissions, set net-zero targets, and report in line with TCFD standards. BNP Paribas AM also rejected over half of executive compensation resolutions, citing disproportionate remuneration schemes and a lack of ESG performance criteria.

🌡️ Extreme heat is a physical risk that poses a threat to businesses' assets and operations, with a report from Impax Asset Management Group finding that two-thirds of large companies globally have at least one asset highly exposed to the physical risk of climate change. Financial disclosures from companies like Walmart and Disney show that heat is already being noted as a material financial risk. In other news, more than half of the world's oceans have become greener in the past two decades, likely due to global warming. Scientists have discovered this by studying the wavelengths of sunlight reflected off the ocean's surface to estimate the amount of chlorophyll, which is an indicator of the presence of living organisms such as phytoplankton and algae. The shift in color could be due to changes in nutrient levels caused by warming oceans, but the exact cause is still unknown. Meanwhile, 16 cities in Italy have been issued with red alerts as southern Europe faces a heatwave, with Sicily and Sardinia possibly seeing record-breaking temperatures. Other parts of Europe, the US, China, North Africa, and Japan are also experiencing heatwaves.

🌎 The EU and 17 other countries, including Germany, France, Chile, and New Zealand, have cautioned against over-reliance on carbon capture technologies, stating that they are no substitute for reducing fossil fuel use. The group, which includes climate-vulnerable island states, said that carbon capture and storage (CCS) should be limited to sectors without other CO2-cutting alternatives and should not be used to justify continued fossil fuel expansion. The issue of CCS is expected to be debated at the upcoming COP28 summit, with some countries supporting it as a route to tackle emissions while others warn that it risks diverting investment from renewable energy.

🟢 A group of 27 investors managing $2.1 trillion, led by AXA Investment Managers and Sycomore Investment Management, are collaborating to help tech companies reduce the potential negative impacts of technology on the mental health of their customers. The group will engage with various tech firms to ensure they are developing action plans to protect the mental health and well-being of consumers and will guide them to set goals, which can be monitored by shareholders. If the tech firms do not meet expectations, members of the group could choose individually to downgrade their ESG scores, vote against management during annual general meetings or file shareholder resolutions.

🇪🇺 The European Securities and Markets Authority (ESMA) has released guidelines for sustainability-related disclosures in equity and non-equity prospectuses. The guidelines include expectations for issuers to provide the basis for any statements concerning their sustainability profile, reporting in accordance with the Non-Financial Reporting Directive (NFRD), and disclosure regarding the use of proceeds for bonds such as green, social, and sustainability bonds. ESMA also noted that sustainability-related disclosures in advertisements should be included in prospectuses if material.

• ESG has become a top priority for procurement executives, rising to the 2nd spot in a survey by Deloitte. Companies face increasing regulatory and stakeholder pressure to manage and report on sustainability factors, and procurement plays a key role in driving the sustainability agenda, including identifying more carbon-efficient suppliers. While ESG rises in the list of priorities, initiatives to quantify sustainability factors remain at an early stage. 🟢

• India is taking a unique approach to ESG reporting by requiring "reasonable assurance" on a limited set of metrics, according to Larry Bradley, global head of audit at KPMG. This is in contrast to global regulators who are mandating "limited assurance" on a broader set of disclosures. The metrics on which Indian companies will need to provide assurance include greenhouse gas emissions, job creation in small towns, and gross wages paid to women. Bradley stresses the need for global consistency in ESG reporting rules to avoid confusion for multinationals and capital markets. 🇮🇳

• The EU Innovation Fund will award over €3.6 billion to 41 large-scale clean tech projects across 15 EU Member States and Norway, covering industries such as cement, steel, biofuels, wind and solar energy, and renewable hydrogen. The projects aim to contribute to the greening of significant sectors of the European economy and have the potential to avoid 221 million tonnes of CO2 emissions in their first 10 years of operation. The selected projects were evaluated against five award criteria and will all enter into operation before 2030. 🇪🇺

• A group of Republican state attorney generals has warned the 100 largest US companies that certain diversity policies could be illegal following the US Supreme Court's decision to strike down affirmative action in higher education. The officials urged companies to abandon race-based quotas or preferences in hiring, promotion, and contracting, threatening legal action if they do not. The decision is expected to spur legal challenges to corporate diversity initiatives that take race into account, despite proponents arguing that they attract better talent and can be good for business. ⛔️

• According to a survey by WTW and the Nasdaq Center for Board Excellence, nearly half of board members report lacking skills and expertise in their organizations for addressing climate issues, despite recognizing the value of a strong ESG strategy. The study found that most board members recognized value in sustainability-focused initiatives, with human capital and governance ranking as top priorities, while only half ranked environmental and climate in their top-three priorities. 👀

🧐 What are companies doing?

• ExxonMobil has agreed to acquire Denbury, an energy company focused on carbon capture and CO2 utilization, for $4.9 billion. Denbury's primary business is producing oil, but it has achieved net negative Scope 1 and 2 emissions and has a significant focus on carbon capture, utilization, and storage (CCS) solutions, with the world's largest owned and operated 2,000-km CO2 pipeline network. The acquisition will help Exxon accelerate its low-carbon opportunities and provide carbon capture services to hard-to-decarbonize industries. 🟢

• Rio Tinto and Sumitomo have partnered to build a pilot plant at Rio Tinto’s Yarwun Alumina Refinery in Australia to reduce the carbon intensity of alumina production. The pilot project will test the viability of using hydrogen in the calcination process, with the aim of replacing natural gas in Rio Tinto’s refineries. The project is part of a $75m program to lower carbon emissions from the alumina refining process and is expected to produce the equivalent of about 6,000 tonnes of alumina per year. If successful, the technology could be adopted globally, with the potential to reduce emissions by 500,000 tonnes per year. 🟢

• The Coca-Cola Company has launched a new sustainability-focused venture capital fund with $138 million in capital, including investments from the company and eight of its bottling partners. The fund will invest in startups with solutions to reduce the carbon footprint of the Coca-Cola System, focusing on areas such as packaging, heating and cooling, and distribution. The fund will be managed by Greycroft, a venture capital firm that invests in enterprise and consumer solutions. 📈

• LeapFrog Investments plans to invest over $500 million in climate solutions companies to provide green tools and technologies to 50 million low-income people in Africa and Asia, with a focus on the built environment, energy, mobility, and food sectors. The company aims to generate 90 million new jobs and avoid 8 gigatonnes of greenhouse gas emissions by 2030. ✅

That’s it for this week, thanks for making it to the end! If you enjoyed reading this newsletter, don’t forget to subscribe and share it 🍀