What's Happening in Sustainability? (Week Recap 01.08 - 07.08) 🌎

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 top news:

💭 Reuters insight: The implementation of new emissions reporting rules is a positive step for investors looking to weed out climate laggards from their portfolios. However, despite these new guidelines, it is still challenging for investors to compare emissions data across companies. The Greenhouse Gas Protocol (GHGP) Corporate Standard is used by most major Western companies to report emissions, but it only defines three main categories of emissions companies should report broadly, leaving plenty of room for interpretation. This makes it difficult for investors to determine whether companies are doing a better job of cutting emissions than their rivals. Comparability issues are particularly prevalent for lifetime emissions in the auto sector and Scope 3 emissions. For instance, as of March 2023, only five car manufacturers have disclosed their assumptions for the average life of their vehicles and grams of carbon dioxide equivalent emitted per kilometer driven. This makes comparisons problematic, and an unrealistically low lifetime figure could make cars appear less polluting than they really are. Scope 3 emissions are also difficult to assess, as companies have to rely on data from customers and suppliers for their calculations, making the data quite limited in its usefulness without researching how firms come up with their numbers. Despite these challenges, regulators expect comparability to improve over time as best-practice, pressure from markets, and peers emerge to improve accuracy. The new mandatory norms are unlikely to provide hard answers, but over the next five years or so, bespoke sector disclosures, along with improvements in auditing and reporting, will emerge to improve data quality.

🇬🇧 The UK government has committed to granting hundreds of licenses for North Sea oil and gas extraction, with plans for more than 100 already confirmed and hundreds more potentially to come. The government argues that domestic fossil fuels will improve energy security and reduce reliance on states such as Russia, but environmental campaigners have criticized the move. The PM also announced fresh support for two carbon capture and storage (CCS) clusters in Scotland and northern England, with the aim of using CCS technology to hold 20-30 million tonnes of CO2 by 2030. Meanwhile, China's focus on energy security has also led to the approval of over 50 GW of new coal power in the first half of 2023, according to Greenpeace research. This is in contrast to China's pledge to cut coal use over the 2026-2030 period, which is now under threat. The increase in coal usage is due to droughts affecting hydropower production and the need to avoid power outages. While China's renewable installations continue to soar, the country's "built-in bias to coal" is preventing it from investing in critical energy storage infrastructure that could make renewable power more reliable.

🔴 Another report by the think tank InfluenceMap, shows that large US-based asset managers have shown less interest in encouraging companies to phase out fossil fuels since 2021, while their European counterparts have remained more active. The report found that managers globally hold almost three times more equity in fossil fuel companies than in green investments and have not made significant progress toward commonly agreed goals such as cutting carbon emissions to net zero by 2050. North American managers' support for climate resolutions at large or high-emitting companies that were not backed by management dropped to 36% at shareholder meetings in 2022 from 50% in 2021, while European groups supported 76% of resolutions of that kind, the report said.

🌎 The International Auditing and Assurance Standards Board (IAASB) has launched a new proposed standard, the International Standard on Sustainability Assurance (ISSA) 5000, focused on assurance on sustainability reporting. The standard is designed to be adaptable to information prepared by any size entity and to work with information prepared under any suitable sustainability reporting framework, including those issued by the EU, ISSB, GRI, ISO, and others. Stakeholders are invited to comment on the proposals until December 1, 2023.

🇬🇧 The UK government plans to create the UK Sustainability Disclosure Standards (SDS) for companies to report on sustainability and climate-related risks, based on the recently published sustainability and climate-related reporting standards issued by the IFRS Foundation’s International Sustainability Standards Board. The UK SDS will ensure that sustainability disclosures by UK companies are globally comparable and useful for investors, with the UK rules diverting from the global baseline only if absolutely necessary for UK-specific matters. The plan to launch the UK SDS follows the update earlier this year of the UK’s Green Finance Strategy, which included a pledge to assess the new IFRS sustainability and climate-related reporting standards once they are published.

• TIME insight: Deep-sea mining for critical minerals needed for the energy transition is a high-risk, high-reward investment that could lead to financial devastation for companies. The potential financial and societal upside remains if mining projects are well executed, but the downside is different from most other high-risk investments because mining companies open themselves up to enormous environmental liability that extends far beyond many other highly speculative investments. Potentially destroying marine ecosystems, contributing to species extinction, and destroying natural capital all have the potential to cause damage that costs the planet trillions of dollars. As demand for sustainable investment products continues, investors financing deep-sea mining risk losing credibility. 💭 

• UK investors have withdrawn over £1 billion ($1.2 billion) from ESG funds since May, with ESG funds experiencing a third consecutive month of outflows in July, according to data from Calastone. Investors remain risk-averse, withdrawing cash rather than investing in equities, with domestic equity funds experiencing a 26th straight month of outflows. Fixed income funds saw inflows of £347m ($442m) in July, while money market funds saw inflows of £403m ($513m), with inflows over the last six months surpassing the previous four years combined. 🇬🇧

• Over half of M&A professionals have canceled deals due to material findings during ESG due diligence, according to a KPMG survey. The study found that 74% of professionals are integrating ESG considerations into their M&A agenda, with ESG risks and opportunities being the top reason for conducting due diligence. The survey also found that more than 60% of investors would pay a premium for targets that demonstrate high levels of ESG maturity and that the frequency of ESG due diligence is expected to increase going forward. However, a lack of robust data was reported as a top challenge by 59% of respondents. 💭

• The US administration has released a new Sustainable Products and Services procurement rule for federal government buyers, requiring them to prioritize sustainable products and services and expand the categories of EPA Ecolabel standards for federal purchasing. The proposal is part of the administration's Federal Sustainability Plan to achieve net zero emissions by 2050, including a target to cut emissions from federal procurement to net zero by that date. The new rules would also direct agencies to avoid the procurement of products containing PFAS, or "forever chemicals.” 🟢

🧐 What are companies doing?

• Lufthansa Group and HCS Group have signed a Letter of Intent for the supply of sustainable aviation fuel (SAF) produced using Alcohol-to-Jet technology, from a planned new 60,000 tonnes per year biogenic SAF facility. The SAF will be produced at the Haltermann Carless site in Speyer, Germany, with initial production volume estimated at 60,000 tonnes per year, and is expected to help Lufthansa achieve its goal of a neutral CO2 balance by 2050 and halving its net CO2 emissions by 2030. The aviation industry sees SAF as a key tool to help decarbonize the industry, and demand for it is likely to rise dramatically over the next few years. 🛩️

• The European Commission has approved a €1.5 billion grant for ProLogium to research and develop a new generation of batteries for electric vehicles and to set up a 48 GWh gigafactory in Dunkirk, France. The grant will be given according to different milestones until 2029. ProLogium's solid-state battery technology is recognized for its innovation and industrialization process at the heart of the European battery ecosystem. The gigafactory will create 3,000 jobs and establish a comprehensive research and development ecosystem, contributing to the achievement of the European Green Deal and EU battery strategy. 🟢

• Kraft Heinz has committed to reducing the use of virgin plastic by 20% in its global packaging portfolio, which is estimated to reduce its use of virgin plastic by approximately 45,000 tonnes (100 million pounds). The company aims to achieve 100% recyclable, reusable or compostable packaging by 2025, halve GHG emissions by 2030, and reach net-zero emissions by 2050. Kraft Heinz is taking actions such as using less plastic, increasing recycled content, and utilizing alternatives to plastic, including launching an eco-friendly multipack paperboard sleeve and developing a paper-based bottle made from wood pulp for HEINZ Tomato Ketchup. 🟢

• Energy company bp has invested £4 million ($5m) in Dynamon, a fleet decarbonization solutions startup that provides fleet management solutions for fleets, OEMs, charging infrastructure providers, vehicle leasing operators, and telematics companies. The investment will be used to expand and commercialize Dynamon's platform and operations in Europe and North America. The company's flagship software solution ZERO uses predictive analytics to provide fleet managers with insights for EV transition planning, optimal EV selection, grid and charging infrastructure design and implementation, cost analysis, electricity pricing plans, and public charging infrastructure analysis. 💡

Recent funding rounds:

🟢 Hybar, a newly formed company, announced that it has raised $700 million of debt and equity financing to build, start up and operate a technologically advanced, environmentally sustainable scrap metal recycling steel rebar mill.

⚡️Compact Membrane Systems (CMS), a company specializing in advanced membrane solutions, has raised $16.5 million in funding. CMS is a leading provider of membranes utilized for the capture and reduction of GHG emissions.

🍀 London-based Revalue Nature, a climate tech startup providing end-to-end solutions for carbon project developers, has secured $10 million in Series A funding.

💫 GlassPoint, a US-based energy startup that produces solar-generated steam, announced that it secured an $8 million Series A funding round. GlassPoint will use the money to expand its business and help industrial companies decarbonize their operations.

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 🍀