What's Happening in Sustainability & ESG? (Week Recap 22.08 - 28.08) 🌎

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 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:

🔴 According to the International Monetary Fund, global subsidies for fossil fuels reached a record $7 trillion in 2022, with implicit subsidies accounting for the bulk of the costs and likely to keep rising. Explicit subsidy costs have more than doubled since 2020 to $1.3 trillion, but are likely to fall now that energy prices have eased, providing an ideal time to scrap subsidies. IMF states that scrapping explicit and implicit fossil-fuel subsidies would prevent 1.6 million premature deaths annually, raise government revenues by $4.4 trillion, and put emissions on track toward reaching global warming targets.

📉 BlackRock, the world's largest asset manager with $9.4 trillion under management, has reported a decrease in its support for shareholder resolutions on environmental and social issues, citing progress made by companies and poor crafting of the measures by filers. BlackRock's votes have become crucial to many contests at companies around the world, and the company's annual stewardship report revealed that it supported only 7% of 399 shareholder proposals on environmental and social issues, down from 22% and 47% in the previous years. The company has faced criticism from liberal-leaning US pension fund leaders and politicians over the decline. Despite BlackRock denying that ESG criticism influenced its voting record, New York City Comptroller Brad Lander accused the company of caving into a "misinformed and shortsighted war against ESG at the behest of special interests." Vanguard (the 2nd largest asset manager with $8.2 trillion under management) has also supported just 2% of shareholder resolutions on environmental and social issues at US companies this year, down from 12% last year, citing a rising number of proposals and improvements in company disclosure that made many resolutions unnecessary.

🟢 Environmental leaders from 185 countries have adopted a multibillion-dollar fund to support global conservation, with a goal of protecting 30% of land and coastal areas by 2030. The fund aims to mobilize $200 billion per year for conservation initiatives by 2030, with developed countries contributing at least $20 billion per year by 2025. The fund has fallen short of the $200 million it needs to become fully operational by December, but Canada has pledged $147 million and the UK has contributed $13 million. The world's least developed countries and small island states will take priority and receive more than a third of the funds, with a target for as much as 20% to go to projects led by indigenous people and local communities.

🌾 A group of 32 investors managing $7.3 trillion in assets, including Legal & General and BNP Paribas, have urged the G20 group of wealthier countries to align agricultural subsidies with climate and nature goals by the end of the decade. The investors called for governments to link financial support to the sector with environmental obligations, shift incentives to focus on sustainable agriculture, remove subsidies from products with a high impact on climate-damaging emissions, and increase funding to help workers impacted by the switch. The call marks the first time investors have grouped together to tackle global subsidies in this way and follows a 2021 UN report that said around 87% of the $540 billion in total annual subsidies to agricultural producers included measures that were price-distorting and potentially harmful to nature and human health.

💧 The COP28 UAE Presidency has launched its Water Agenda, which aims to elevate water on the climate agenda and drive progress and ambition. The agenda identifies three priority areas: conserving and restoring freshwater ecosystems, enhancing urban water resilience, and bolstering water-resilient food systems. The two-week thematic program includes a special day dedicated to exploring climate action across food, agriculture, and water, and will see the first UNFCCC high-level dialogue on water resilient food systems. Meanwhile, a new report from the UN Environment Programme (UNEP) warns that only 11% of treated wastewater is reused, while half of the world's untreated wastewater still enters rivers, lakes, and seas. However, with the right policies in place, wastewater could provide alternative energy to half a billion people, supply over 10 times the water obtained through desalination processes, and reduce the demand for synthetic fertilizers, according to the report.

• Poland has filed legal challenges to cancel three of the EU's main climate change policies, arguing that they would worsen social inequality. The policies include a law to ban the sale of new CO2-emitting cars in the EU from 2035, a policy setting national emissions-cutting targets, and a law to reform the EU carbon market. Poland produces around 70% of its power from coal and wants the laws annulled, claiming they impose excessive burdens on European citizens and threaten Poland's energy security. The EU has urged governments to use EU money to help vulnerable communities invest in clean energy to bring down bills and cut air pollution. 🇵🇱

• A Bloomberg and Adox Research survey of over 100 executives found that 92% plan to increase ESG data spending by at least 10%, with 18% planning to increase by 50% or more. The top three areas of priority are ESG benchmarks and indices, company-reported data, and ESG scores. However, firms are struggling with data management challenges, with over 70% taking an ad hoc or decentralized approach to acquiring and managing ESG data. The most challenging aspects of ESG data management are handling constantly evolving and new ESG data content, managing multiple vendor data feeds, and aligning ESG content to existing entity data. 🟢

• Guardian reports that carbon credit speculators could lose billions as many offsets they have bought have no environmental worth and have become stranded assets. There is a growing pile of carbon credits equivalent to the annual emissions of Japan that are unused in the unregulated voluntary market. The credits are often generated on the basis that they are contributing to climate change mitigation, but repeated scandals about their true impact and a crackdown from regulators on claims of “carbon neutrality” have meant that demand and prices for offsetting have slumped, with signs that some carbon credit traders are writing off investments that would have been worth hundreds of millions of dollars as recently as last year. 🔴

• The EU’s Global Gateway infrastructure fund is exploring sustainable aviation fuel (SAF) projects in Africa, which has great potential to produce SAF. The EU has pledged to dedicate half of its €300 billion ($324 billion) infrastructure plan to Africa, while it has already backed renewable plants, green hydrogen initiatives, vaccines, and education projects there. The aviation industry's emissions reduction targets will require airlines to use more SAF, creating global demand of 450 billion liters by 2050. However, there is currently no SAF production on the continent, and establishing feedstock supply chains will be a challenge due to poor infrastructure, limited refining capacity, and inadequate regulations. 🇪🇺

• Brazil plans to issue $2 billion in sustainable sovereign bonds in September, with the proceeds going towards green and social projects. The bonds are part of President Luiz Inacio Lula da Silva's efforts to improve Brazil's environmental record and establish a regulated carbon credit market. The initial allocation of the bonds will primarily benefit the Climate Fund, aiming to finance actions to reduce emissions effectively. 🇧🇷

🧐 What are companies doing?

• TotalEnergies has acquired a 40% participating interest in the CO2 storage exploration license ExL004 from CapeOmega Carbon Storage. The license covers an area adjacent to the Northern Lights CO2 storage project, which TotalEnergies is developing with a first phase due to start in 2024. The transaction is subject to customary conditions and is expected to enable the storage of several hundred million tonnes of CO2 from hard-to-abate industries in Europe. 🟢

• Exxon Mobil predicts that oil and natural gas will still meet 54% of the world's energy needs in 2050, with energy-related CO2 emissions projected to reach 25 billion tonnes, more than twice the amount needed to keep global temperature increases below 2 degrees Celsius (11 billion tonnes). The company states that while an energy transition is underway, it is not happening fast enough to achieve society's net-zero ambitions. 👀

• Indian refiner BPCL plans to invest $18.16 billion over five years to expand its oil business and renewable energy portfolio, with a goal of reaching net zero by 2040. The company aims to own 1 GW of renewable energy capacity by 2025 and 10 GW by 2040, and will invest in green hydrogen, carbon capture, utilization, and storage (CCUS) and energy efficiency projects. 📈

Recent funding rounds:

🔋 Swedish lithium-ion battery producer Northvolt has raised $1.2 billion from investors including BlackRock and several Canadian pension plans to build new factories in Europe and North America. Northvolt has raised over $9 billion in debt and equity since 2017 and has secured orders of over $55 billion from customers such as BMW, Scania, and Volkswagen. The company is also close to finalizing plans to build a multibillion-dollar battery factory in Canada.

👷 Schüttflix, a German construction tech firm, has raised $48m (€45m) in funding. The company aims to increase efficiency in the construction industry through innovative solutions that reduce waste and emissions. Schüttflix connects contractors, bulk materials sellers, carriers, and disposers. It uses digital processes to achieve price transparency and ensure that deliveries come on time.

💡 FranklinWH, a US-based whole-home energy management company, has raised $25m in Series B funding led by Particle Future. The company offers the Franklin Home Power system, a whole-home energy management system with AC-coupled storage, and has onboarded over 1,000 installation companies through its FranklinWH Certified Installer program.

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 🍀