What's Happening in Sustainability? (Week Recap 15.08 - 21.08) 🌎

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:

🇺🇸 US President Joe Biden celebrated the first anniversary of the Inflation Reduction Act (IRA), highlighting its economic benefits, including the creation of 170,000 clean energy jobs, more than $270 billion in planned clean energy investments from companies, and shifting production of critical components to the US. The law provides tax credits for electric vehicles, renewable energy, and prescription drugs while raising taxes on wealthy individuals and corporations. While it has shown early signs of economic power, it has also missed the mark on deficit reduction, and many Americans remain unaware of its contents. Europe initially feared that the US’ IRA would cause European companies to leave in search of dollar subsidies, but the EU's decision to relax state aid rules has helped ease those fears. While critics argue the EU's approach favors big states and companies, officials point out that the EU was supportive of green industries earlier than the US and that 37% of its post-pandemic recovery fund is earmarked for climate-friendly investment. While there is some anecdotal evidence of investment diversion, there is no data on whether there has been a massive diversion of investment away from the EU and into the US as a result of the IRA.

🇪🇺 The European Commission has adopted new reporting rules for importers of products under the Carbon Border Adjustment Mechanism (CBAM), the EU’s new carbon tax on imported goods. The rules will require companies to collect data on the embedded emissions of imported products, with reporting beginning by the end of January 2024. The main purpose of CBAM is to avoid "carbon leakage," and will equalize the price of carbon paid for EU products with that paid for products produced in other countries. CBAM will initially apply to specific products from carbon-intensive sectors, with importer obligations limited to reporting product emissions during the transition phase until 2026. Meanwhile, GHG emissions in the EU fell by nearly 3% in the first quarter of 2023, while the economy grew slightly. The EU’s emissions over the January to March quarter amounted to 941 million metric tonnes of CO2e, down 2.9% from a year earlier, while the economy grew 1.2% year-on-year. The EU is pushing towards its target of net-zero emissions by 2050 and earlier this year banned the sale of new petrol and diesel cars from 2035. Emissions fell in 21 of the bloc’s 27 countries, with the largest decreases seen in Bulgaria, Estonia, and Slovenia.

• Western companies are investing in processing plants in Africa to refine battery metals and bypass China's dominance in the production and processing of critical minerals such as cobalt and lithium. Despite challenges such as poor infrastructure and government corruption, the investments show Western executives are willing to take risks to meet the growing demand for battery metals and offer an alternative to Chinese sources. The investments are expected to rise as more Western companies seek to pay a premium for materials that meet environmental and labor standards and are traceable and produced outside of China. ⛏️

• Meanwhile, electric vehicle batteries and other car parts are the latest products under scrutiny as part of Washington's effort to eliminate US links to forced labor in Chinese supply chains. The enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) has already affected solar energy projects, and now components such as lithium-ion batteries, tires, aluminum, and steel are increasingly subject to detentions at the border. This could signal difficult times ahead for automakers who will need solid proof that their supply chains are free of links to a region where the US believes Chinese authorities have established labor camps for Uyghurs and other Muslim minority groups. 🔴

• Global research and consultancy group Wood Mackenzie reports that government targets to increase wind power installations to 80 GW per year by 2030 would require $100 billion in secured investment in the supply chain by 2026, but annual capacity is more likely to increase by 30 GW a year by 2030, which would require $27 billion of secured investment by 2026. The low profit margins on offshore wind production and uncertainty about project timings are making it hard to drum up investment in the sector, and target setting and plans for power market infrastructure to support offshore wind need to extend beyond 2030 to scale up the offshore wind supply chain. 💡

• Plant-based plastics, or bioplastics, are growing in production by 14% a year and are on track to reach up to 3% of the plastics market in the next five years. Bioplastics, derived from plants rich in starch, sugar or pulp, are costlier than fossil-fuel-based plastics, but have environmental benefits such as cutting GHG emissions and causing less pollution when they degrade. Fashion and food-packaging companies have the strongest demand for bioplastics, but interest is rising from companies in cosmetics, electronics, and more durable goods. However, being more expensive than fossil-fuel-based plastics and the limited amount of feedstock are some of the challenges faced. 🟢

🧐 What are companies doing?

• JP Morgan has launched two actively-managed Article 9 equity ETFs, the JP Morgan Global Research Enhanced Index Equity SRI Paris Aligned Ucits ETF and the US Research Enhanced Index Equity SRI Paris Aligned Ucits ETF, both of which aim to outperform a custom universe of sustainable companies while achieving a decarbonisation objective in line with the Paris Agreement. The ETFs can be used as building blocks for clients who want to implement a view on either global equity or US equity, as well as serving as a complement to a client’s existing sustainable ETF investments for greater portfolio diversification. 📈

• S&P Global's Sustainable1 has launched a new Nature & Biodiversity Risk portfolio assessment service, which uses its Nature & Biodiversity Risk dataset to help financial institutions understand and assess portfolio nature-related risks. The service covers over 17,000 companies and more than 1.6 million assets, using metrics such as The Ecosystem Footprint to deliver a deeper understanding of a company's impact and dependency on nature. 📈

• Google has joined American Express Global Business Travel (Amex GBT) and Shell Aviation's sustainable aviation fuel (SAF) program, which enables companies to offset business travel emissions through SAF purchases. The program utilizes a book-and-claim model, enabling business travelers to pay for SAF and claim the environmental benefits, even if the SAF is not available at their departure airport. It also includes Amex GBT's travel management services to aggregate global demand for SAF from its 19,000 global customers. 🛩️

• Bayer, GenZero, and Shell Energy India have launched a collaboration aimed at reducing methane emissions from rice farming. The project will utilize Measurement, Reporting & Verification mechanisms, and remote sensing technology to develop a model showcasing the scalability of methane emissions reduction in rice cultivation. The program aims to reduce methane emissions, conserve water, improve soil health, and enhance community livelihoods for smallholder rice farmers. The partners aim to scale up the program's coverage to 25,000 hectares over the 2023-24 seasons. 🌾

• Ford and South Korean partners EcoProBM and SK On Co Ltd will build a CAD 1.2 billion ($887m) plant in Quebec, Canada to produce electric vehicle battery materials. The factory will produce 45,000 tonnes of cathode active materials per year for Ford EVs, with the materials described as high-quality Nickel Cobalt Manganese for rechargeable batteries targeting greater performance and improved EV range. 🔋

• Occidental has acquired Carbon Engineering, a Canadian-based provider of Direct Air Capture (DAC) technology that removes CO2 from the atmosphere and utilizes it to create clean fuels, in a deal valued at $1.1 billion. The acquisition will help improve cost and capital efficiencies, add new revenue streams, and accelerate the deployment of DAC as a large-scale, cost-effective, global carbon removal solution. 🟢

Recent funding rounds:

🔋 General Motors has led a $40m Series B funding round for Mitra Chem, a US-based battery materials technology startup that produces iron-based cathodes for battery applications. Mitra Chem's technology and development process can reduce lab-to-market time by more than 90%, and the company is one of the only US-based iron-based cathode manufacturers, enabling purchasers of US-made electric vehicles to qualify for the full suite of tax credits.

🔋 US-based startup Rondo Energy has raised $60m to accelerate the global rollout of its industrial heat decarbonisation product, the Rondo Heat Battery. The battery turns intermittent renewable energy sources into continuous, high-temperature heat, enabling the replacement of fossil fuel-fired boilers. The company claims its solution enables industrial decarbonisation at a fraction of the cost of other technologies, storing energy at half the cost of green hydrogen and chemical batteries.

💡 Canada-based startup dcbel has raised $50m in a series B funding round to accelerate the delivery of its Home Energy Station, a bidirectional residential charging solution. The r16 Home Energy Station enables bidirectional EV charging, converts solar energy to electricity, and uses historical energy consumption to predict energy needs and source clean electricity at the lowest cost.

🟢 Advanced Ionics, a cleantech startup focused on green hydrogen production, has raised $12.5m in a funding round led by bp Ventures. The US-based company's water vapor electrolyzer technology, Symbion, reduces the cost and electricity requirements for green hydrogen production, which could reduce the cost of green hydrogen production to under $1 per kg.

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 🍀