What's Happening in Sustainability & ESG (Week Recap 12.12 - 18.12) 🌎

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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. 🍀

⭐️ The week’s top news:

🇪🇺 A couple of things happened in the EU this & the past week:

• The bloc has reached a provisional deal on a corporate sustainability due diligence directive that requires large companies to identify and address child labor and environmental harm in their supply chains. Financial firms will be temporarily excluded from clients' due diligence but must check for forced labor and environmental harms within their operations. The rules apply to EU companies with over 500 employees and a net worldwide turnover of €150 million, and non-EU companies with €300 million of net turnover generated in the bloc. Fines for breaching the rules could be as much as 5% of a company's global turnover.

• The European Securities and Markets Authority (ESMA) has updated its proposed guidance for the use of ESG and sustainability-related terms in investment fund names. The update introduces a new "transition" category and removes the 50% sustainability-related threshold. The guidelines now require an 80% minimum proportion of investments to meet sustainability characteristics, apply Paris-aligned benchmark exclusions, and invest meaningfully in sustainable investments in alignment with the SFDR definition.

• The EU has also agreed to ease capital rules for insurers, potentially freeing up billions of euros for investment in green technology and infrastructure. The changes to the Solvency II rules could allow the insurance sector to invest up to 100 billion euros into the economy, while also requiring firms to consider sustainability-related risks and report on their green credentials.

🇬🇧 The UK was quite active too:

• The UK government announced plans to implement a carbon import levy on certain products by 2027. The carbon border adjustment mechanism (CBAM) will apply to carbon-intensive products in various sectors. The charge will depend on the carbon emissions in the production of the imported goods and the carbon price difference between the country of origin and UK producers. The levy aims to ensure comparable carbon prices for imported products and reduce the risk of carbon leakage.

• The UK government has also removed the cap on penalties for polluting companies, allowing the Environmental Agency to impose unlimited fines through Variable Monetary Penalties (VMPs). The penalties will now be proportionate to the company size and the nature of the offense. The move is expected to enhance compliance with environmental laws and provide stronger protection to the environment, communities, and nature.

• and lastly, the UK financial watchdog is urging ESG raters to adopt a new voluntary code of conduct ahead of potential regulations. The code, developed by the International Capital Market Association and the International Regulatory Strategy Group, aims to increase transparency and trust in the ESG data and ratings market. This voluntary approach differs from the EU’s draft law to regulate ESG raters. The code covers governance, conflict of interest management, and transparency in methodologies. The British government is expected to decide soon whether to expand the FCA's regulatory authority over ESG raters.

🌍 As you have probably heard by now, representatives from nearly 200 countries at the COP28 climate summit reached a deal to begin reducing global consumption of fossil fuels. The agreement aims to signal a united effort to break away from fossil fuels and combat climate change. While some countries celebrated the deal, small island states and advocates for phasing out fossil fuels expressed disappointment, and the OPEC-led oil producer group resisted language targeting specific fuels. The deal calls for transitioning away from fossil fuels, tripling renewable energy capacity, reducing coal use, and advancing carbon capture and storage technologies.

• The US Energy Department has awarded up to $890 million in funding to carbon capture projects at natural gas and coal plants in Texas, California, and North Dakota. These projects aim to demonstrate the viability of carbon capture technologies and prevent millions of metric tons of CO2 emissions. While some environmentalists oppose carbon capture, proponents argue it is necessary to combat climate change. 🇺🇸

• The US House of Representatives Judiciary Committee has subpoenaed BlackRock and State Street for documents and communications related to its investigation into whether their ESG efforts violate antitrust laws. Both companies have cooperated but the committee deemed their response inadequate. Vanguard, another asset manager, has also received a subpoena. 🔴

• Australia's competition regulator, the ACCC, has released its final guidance on environmental claims to combat greenwashing by companies. The guidance includes eight key principles to ensure clear, accurate, and non-misleading green claims. The ACCC will take action against companies making false or misleading representations, with penalties of up to $50 million or 30% of the company's revenue. 🇦🇺

• The UK's Competition and Markets Authority (CMA) has launched an investigation into Unilever over concerns that the company may be overstating the environmental attributes of some of its products. The CMA's broader greenwashing investigation aims to determine if consumers are being misled by sustainability claims in product marketing. Unilever has expressed surprise and disappointment at the announcement, refuting any claims of misleading practices. The investigation will focus on issues such as vague language, exaggerated claims about natural ingredients, and misleading recyclability claims. 🔴

🧐 What are companies doing?

• Crédit Agricole, an international banking group based in Paris, has announced that it will no longer finance new fossil fuel extraction projects and will end financing for independent producers focused solely on oil and gas exploration or production. The bank is strengthening its climate strategy by increasing its focus on renewable energies, and low-carbon infrastructure, and committing to net-zero emissions in various sectors. 🏦

• Boston Consulting Group (BCG) has signed a 15-year purchase agreement with Climeworks, a Direct Air Capture (DAC) company, for the removal of 80,000 metric tons of CO2. This is the largest corporate purchase announced by Climeworks to date. The partnership is expected to accelerate the global rollout of DAC and storage plants, providing planning security and fostering financing efforts. 🟢

• Microsoft has signed a new offtake agreement with Carbonfuture for biochar carbon removal credits, in collaboration with the Exomad Green Concepción project in Bolivia. The deal is set to deliver over 32,000 metric tons of CO2 removal credits to Microsoft by June 2024, making it one of the largest biochar purchase agreements to date. The biochar, produced from biomass, will be buried in soil for long-term carbon sequestration and improved soil fertility. Microsoft has also signed a carbon removal deal with Inherit Carbon Solutions, a startup that captures and stores CO2 released from the production of renewable natural gas. Inherit Carbon Solutions captures CO2 from the conversion of organic waste into renewable energy and transports it for permanent geological storage. 🟢

• TotalEnergies has announced a series of startup acquisitions to accelerate the development of its electricity business and achieve its net-zero ambition by 2050. The acquisitions include energy portfolio management platform Dsflow, renewable project optimization software platform NASH Renewables, AI-driven predictive analytics company Predictive Layer, and EV charging point facilitator Time2plug. 💡

• Chipotle Mexican Grill has announced investments in two sustainable agriculture-focused startups, Greenfield Robotics and Nitricity. Greenfield Robotics uses robotics and AI to provide regenerative agriculture solutions, while Nitricity develops low emissions fertilizer using a non-thermal plasma reactor. 🌾

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

📈 Private equity firm Ara Partners has raised over $3 billion for its third fund, Ara Fund III, which focuses on industrial decarbonization investments. The oversubscribed fund exceeded its initial target of $2 billion and will target buyout and growth investments in the industrial decarbonization sector.

📈 Private equity firm Apax has raised $900 million for the Apax Global Impact Fund (AGI), which aims to invest in companies addressing environmental and social issues. The fund focuses on key themes such as Health & Wellness, Environment & Resources, Social & Economic Mobility, and Digital Impact Enablers.

⚡️ Octopus Energy Group, one of the UK's largest power suppliers, has secured an additional $800 million investment from existing shareholders. This funding will be used to accelerate international growth, expand low-carbon technologies, and create 3,000 green jobs in the UK in 2024.

📈 BNP Paribas has launched a new fund, BNP Paribas Climate Impact Infrastructure Debt, aimed at financing climate change mitigation and supporting energy transition projects in continental Europe. The fund is targeting €500-750 million from institutional investors and will focus on renewable energy, clean mobility, and the circular economy. It has already secured investments in a low-carbon energy producer, a green-sourced district heating platform, and a portfolio of onshore wind farms.

🟢 Stockholm-based clean energy-tech company Aira has secured €86 million in equity funding. With intelligent heat pumps that reduce CO2 emissions and heating costs, Aira aims to revolutionize European heating and serve five million homes across Italy, Germany, and the UK, while creating 10,000 new jobs.

📄 Tacto, a German AI-based supply chain management system, has secured a €50 million investment. Tacto's AI software streamlines procurement workflows, ensures compliance, and can identify cost-saving potentials of up to 10% by analyzing price developments.

🏢 Berlin-based ecoworks has raised €40 million to support the growth of its climate-neutral renovations solutions business. The company utilizes AI-supported digital planning to design and install prefabricated facade and roof elements for rapid apartment building retrofits to a NetZero standard.

🟢 Dimensional Energy, a US-based CO2 utilization company, has raised $20 million in a Series A funding round. The funds will be used to accelerate the production of sustainable aviation fuel and other industrial decarbonization initiatives. The company uses captured CO2 and hydrogen derived from water to produce fuels and product materials.

⚡️ Thermal energy storage startup Fourth Power has raised $19 million in a series A financing round to scale its utility-scale battery storage technology. The company's thermal storage technology uses renewable energy to heat carbon blocks and store the heat for later release as electricity.

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