What's Happening in Sustainability & ESG? (Week Recap 29.08 - 04.09) 🌎

This week’s read time: 6 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 hours of research and 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 top news:

🇪🇺 The EU is preparing to push for a global deal on phasing out fossil fuels at the upcoming UN COP28 climate summit in Dubai. The EU's negotiating stance, seen by Reuters, calls for the global phase-out of fossil fuels and a peak in their consumption in the near term. The document is still being negotiated and could change before it is due to be finalized in October, said the energy sector should be largely free of fossil fuels "well ahead of 2050" because cost-effective, CO2-free energy sources are already available. While some EU countries want to agree on limits on CO2-capturing technologies, some economies reliant on income from selling oil and gas are expected to resist the deal.

🇺🇸 The Biden administration announced a financing package of over $15 billion to support the transition to electric vehicles, including $10 billion in loans and $2 billion in grants to help automotive manufacturers convert factories to produce EVs. The new programs, launched by the US Department of Energy, aim to accelerate the shift to clean mobility and support the administration's initiatives to direct investments to disadvantaged communities. The loan program will provide up to $10 billion for automotive manufacturing conversion projects that retain high-quality jobs, while the grant program will support the expansion of electrified vehicles and components manufacturing. The administration also intends to invest $3.5 billion to increase the production of advanced batteries and battery materials for EVs and grid storage.

💡 The EU burned 17% less fossil fuel to generate electricity in the first half of 2023 compared to the same period in 2022, according to a study by Ember. The drop in fossil fuel generation was driven by a fall in demand for electricity and some growth in clean power. The EU made 410TWh of electricity from sources that release planet-heating gases, which is the lowest level since 2015 and “very likely” since 2000. The report called on governments to build more wind turbines and solar panels, expand the electricity grid, build more batteries to store electricity and streamline the process of getting permits for clean energy infrastructure.

🇬🇧 A group of financial institutions managing £1.5 trillion in assets under management has warned that recent policy signals from the UK government have reduced confidence in its commitments to climate policies, which threatens investors' willingness to fund the UK's net zero transition. The UK Sustainable Investment and Finance Association (UKSIF) has called on the government to provide long-term policy certainty to ensure that policies driving investments will not be changed abruptly. The group also noted that sustainable finance is a major growth industry in the UK and that purposeful and predictable policy can position the UK financial services sector as a global leader in green investment.

💭 Over 30 investors have called on proxy advisor ISS to improve its guidance on decarbonization and climate change risks, saying its policies have failed to keep pace with rising concerns. Institutional Shareholder Services (ISS) is highly influential as it provides advice on how to vote at corporate annual meetings on everything from boardroom diversity to corporate efforts to get to net-zero carbon emissions. The investors, including UBS Asset Management and AXA Investment Managers, want a specialty net-zero policy for the 2024 proxy season that fully integrates net-zero benchmarks into policy and voting recommendations. They also want more robust climate proxy voting recommendations in ISS's widely used Benchmark Policy, which acts as a baseline for many investors.

• The European Securities and Markets Authority (ESMA) has warned that the surge in money going into biodiversity funds is the "next frontier" of ESG investing and requires increased monitoring to avoid greenwashing. Biodiversity-related funds remain a small niche, less than 0.1% of Article 8 and 9 funds, but the cumulative flow of money into biodiversity funds reached €854 million in the two years to June 2023, with 73% of the funds launched since 2022. ESMA has called for increased levels of market monitoring to maintain an environment of trust and avoid potential greenwashing. 👀

• The EU is also introducing new rules to reduce clothing waste, including requiring retailers to contribute to the cost of collecting used clothes for reuse and recycling, setting targets for textile waste recycling, and aiming for all textile products sold in the bloc to be made of recycled fibers and durable, repairable, and recyclable by 2030. The proposed rules apply to all textile products sold in the EU and would be enforced by national governments. The fashion industry is taking steps to reduce its environmental impact, but it will take a concerted effort from all stakeholders to make the sector more sustainable. The EU produces around 5.2 million tonnes of textile waste annually, with only a quarter being recycled. While some fashion companies are taking steps to reduce their environmental impact, the proposed rules are just one part of the solution, and a concerted effort from all stakeholders in the fashion industry is needed to make the sector more sustainable. 🇪🇺

• Investors representing over $1 trillion in assets under management (including Achmea, Ethos Foundation, and La Française Group) have urged the IFRS Foundation’s ISSB to prioritize the development of global reporting standards for companies to disclose on human capital and human rights. The letter, sent in response to the ISSB’s Request for Information, notes that investor demand for workforce data and related issues has reached “an all-time high,” particularly as companies are being impacted by “growing resignation numbers, layoffs, and stalling labor market recoveries following the COVID-19 pandemic.” 🟢

• Voluntary carbon markets have shrunk for the first time in at least seven years, with companies such as Nestle and Gucci reducing buying and studies finding several forest protection projects did not deliver promised emissions savings. The quality of schemes was also an issue, with negative studies causing some companies to pause purchasing and wait for more guidance on what sort of credits to buy. The number of credits used by companies fell 6% in the first half of the year, the first dip in at least seven years, data from BloombergNEF shows. The decline is bad news for poorer nations that stand to lose if the flow of funds from multinational companies to fund climate mitigation projects slows. 📉

• A survey of over 1,000 executives by consulting group Capgemini showed that automakers and suppliers are deprioritizing sustainability initiatives in their sourcing policies and focusing on lowering exposure to geopolitical risk. The number of companies deploying sustainability initiatives declined by 9-11 percentage points between 2022 and 2023, and the average amount suppliers are investing in sustainability initiatives has fallen to $30.5 million in 2023 from $36.6 million in 2022. The most common factors respondents based supply chain decisions on were quality, geopolitical risk, cost, and resilience - followed by sustainability. 🔴

🧐 What are companies doing?

• MSCI and Google Cloud are partnering to develop generative AI solutions for the investment industry, including tools to assess portfolio climate risk and identify low-carbon investment opportunities. The expanded partnership will provide MSCI with generative AI-enabled solutions powered by Google Cloud’s Vertex AI platform and climate technology, including BigQuery Geospatial and Earth Engine. The partnership will also focus on combining MSCI’s proprietary data and analytics with Google Cloud’s generative AI solutions to provide investors with an overview of portfolio and enterprise-level risk while reducing time to analyze and deliver actionable insights. 📈

• Google has also launched three new APIs from the Google Maps Platform that provide up-to-date information about solar potential, air quality, and pollen counts. These tools use AI and machine learning, along with aerial imagery and environmental data, to map environmental information and help businesses, cities, and individuals take steps to reduce their environmental impact. The Solar API can be used to determine if a roof is a good candidate for solar panels, the Air Quality API provides pollution data, and the Pollen API provides pollen counts for common allergens. 🟢

• LEGO has committed to achieving net zero emissions by 2050 and plans to invest over $1.4 billion in environmental sustainability initiatives over the next three years. The company will work with the Science Based Targets initiative to develop emissions reduction targets, with a focus on its supply chain. Some of the outlined focus areas for its environmental sustainability investment plans over the next three years include designing its factories and buildings to be carbon neutral run, increasing the production of renewable energy in its factories, and buying renewable energy for factories, offices, and stores. ✅

• Mizuho has issued a €750 million green bond to finance projects supporting the transition to a low-carbon society, as part of its goal to facilitate $700 billion in sustainable finance between 2019-2030. Proceeds from the bond will be used to finance green projects through Mizuho Bank, as part of the company's medium-term business plan centered on personal well-being and a sustainable society and economy. 📈

• Hyundai Motor Group is investing $397.74 million to acquire a 5% stake in Korea Zinc, a leading producer of nickel, a key material used in electric vehicle batteries, to secure a stable supply of nickel. The investment is part of Hyundai's plan to become a leader in the global EV market, with a target to sell 1 million EVs by 2025 and the construction of a new EV factory in South Korea and a battery manufacturing plant in Georgia. Hyundai has also invested in battery technology companies and plans to launch a new EV brand called Ioniq. 🔋

Recent funding rounds:

🔋 Circular battery materials provider Redwood has raised over $1 billion in a Series D equity round to expand its capacity and create a closed-loop domestic supply chain for lithium-ion batteries. The US-based company aims to produce enough anode and cathode for 1 million EVs annually by 2025, and for 5 million EVs annually by 2030.

🟢 CIM Group has raised $417 million to support the growth of its renewable natural gas (RNG) portfolio company, Terreva Renewables. Terreva builds RNG facilities that convert landfill methane into RNG for large natural gas vehicle fleets and has a projected carbon reduction equal to removing 21,600 cars from the road yearly or displacing 42.3 million liters of gasoline (11.2 million gallons). CIM Group is expanding Terreva to meet the increasing demand for RNG as a vital contributor to decarbonization efforts across transportation, utility, and industrial applications.

♻️ Sortera Technologies, a US-based startup that uses AI and advanced sensors in industrial scrap metal recycling, has raised $30.5 million in a Series C funding round. The funds will be used to support the company's growth and commercialize its first full-scale upcycling facility, which will sort around 100,000 tonnes of mixed metals per year. The facility is expected to be fully operational this year and will provide high-purity recycled and upcycled metal feedstocks from existing scrap streams, boosting recycled material use in manufacturing and cutting metals production costs.

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 🍀