What's Happening in Sustainability & ESG (Week Recap 31.10 - 06.11) 🌎

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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 report reveals that only 4% of the top companies in the Forbes2000 index meet the tough UN guidelines for net-zero emissions targets. Net Zero Tracker, an independent data consortium including Oxford University, said corporate targets from Forbes2000 index companies had jumped 40% to 1,003 in October 2023, from 702 in June 2022, covering two-thirds of revenues, some $27 trillion. However, just 4% of the targets meet the criteria laid down by the UN's Race to Zero campaign, for example by covering all emissions, starting to cut them immediately, and including an annual progress update on interim and longer-term targets. Of those to set a target, just 37% had one that covered their Scope 3 emissions, or those tied to a company's value chain. Just 13% had a quality threshold for the use of carbon offsets.

🌍 Global climate negotiators have reached a framework to establish a fund to aid vulnerable countries affected by climate disasters. The fund, known as the "loss and damage" fund, has faced challenges in reaching consensus on details such as funding sources and location. The committee tasked with implementing the fund has recommended the World Bank to serve as trustee and host, although developing nations have expressed concerns about donor influence and high fees. The goal is to have the fund operational by 2024. Developed countries are urged to continue providing support, but there is no consensus on strict financial obligations. The recommendations will be discussed at the upcoming COP28 climate summit in Dubai. Priorly, a report by the UN Environment Program stated that the funding gap for climate adaptation is 50% higher than previously estimated. Developed countries pledged to provide $100 billion annually in climate finance to poorer nations, but the current shortfall for adaptation alone is $194 billion to $366 billion. Existing financial flows reached just $25 billion from 2017 to 2021. The report emphasizes the urgent need for ambitious adaptation action and calls on developed nations to meet their pledges and increase funding for adaptation.

🇦🇺 Australia's Treasury Department has proposed a Sustainable Finance Strategy to support the mobilization of private capital for the transition to a net zero economy. Key proposals include establishing sustainability-related financial disclosures, developing a sustainable finance taxonomy, and introducing a labelling system for sustainable investment products. The strategy aims to improve transparency, address climate-related risks, and position Australia as a global sustainability leader.

• The CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) have released a new guideline called "Definitions for Responsible Investment Approaches" to harmonize sustainable investment terminology and reduce greenwashing risk. The resource provides clear definitions and explanations for key responsible investment approaches, such as ESG Integration and Impact Investing. It aims to improve communication within the investment industry and help investors better understand sustainable finance terms. The organizations encourage the adoption of these definitions for greater consistency. 📈The CFA Institute has also launched a Climate Risk, Valuation, and Investing Certificate to meet the growing demand for climate analysis skills in the investment industry. The certificate will provide financial professionals with expertise in integrating climate considerations into valuation and portfolio construction processes. The curriculum includes five courses covering climate science, risks, regulations, transition finance, and portfolio management. 📄

• Despite a Q3 pullback, sustainable bond issuance is projected to reach $950 billion in 2023, growing by 4% compared to the previous year. Green, social, sustainability, and sustainability-linked (GSSS) bonds experienced a decline in Q3 volumes, with sovereign issuers being a significant contributor to the drop. However, Moody's expects a return to growth in the fourth quarter, driven by COP28-related initiatives. The report also highlights regional variations, with Europe leading in sustainable bond volumes. Green bonds saw the largest decline, while sustainability-linked bonds showed a significant increase. 📈

• Investors are concerned about the growth of electric vehicles (EVs) as recent news and weak sales figures from companies like Tesla, Ford, and General Motors have impacted investor confidence. Factors such as chip shortages, declining vehicle affordability, and a saturated market contribute to the challenges faced by EV manufacturers. However, there are still positive indicators, such as Stellantis reporting a significant increase in EV sales and the growing market share of EVs in the US, Europe, and China. While the industry may face a correction, analysts believe this is a transition phase and not the end of the growth cycle for EVs. 🚙 

• China's state-backed steel association has criticized the Carbon Border Adjustment Mechanism (CBAM) proposed by the EU, stating that it creates a new trade barrier for Chinese exports. The association called for more talks with the EU to address climate issues. The CBAM, which aims to impose a levy on high-carbon goods imports from 2026, poses a big threat to China's steel producers and raises costs for steel products shipped to the EU. The China Iron and Steel Association urged the EU to consider the impact on downstream steel consumers and engage in more communication to address climate challenges together. Meanwhile, India is considering implementing a local tax on high-carbon goods and using the proceeds to support its green energy transition in order to avoid the EU’s carbon tax. The Trade Minister stated that if India collects the tax domestically and uses it for green energy initiatives, there would be no additional CBAM tax imposed by the EU. 💭

🧐 What are companies doing?

• Google has partnered with Drawdown Labs to release an open-source sustainability marketing playbook, aiming to encourage sustainability initiatives and reduce carbon emissions in the industry. The playbook emphasizes understanding sustainability trends, influencing culture through creative choices, and promoting sustainable practices across the industry. 📄

• S&P Global's CRISIL has launched the 'CRISIL Certified ESG Risk Analyst' course to address the skill gap in the BFSI and corporate sectors in the evolving sustainability domain. The self-paced online course provides a comprehensive understanding of ESG concepts, frameworks, regulations, and their applications in investment and lending decisions. It leverages CRISIL's expertise in ESG risk assessment and sustainability consulting. The course aims to quickly ramp up ESG-related skills and address the talent gap in organizations. The demand for ESG professionals is expected to increase due to the growing focus on sustainability and regulatory requirements. 📄

• KPMG Canada has launched a new decarbonization hub to assist companies in achieving emissions reduction and energy transition goals. The hub will offer various climate-focused services, including strategy development, implementation support, regulatory guidance, financing assistance, and climate-related reporting. 🟢

• BNP Paribas and the European Investment Bank (EIB) have signed an agreement to fund home clean energy projects. The EIB Group has invested €400 million from the EIB and €50 million from the EIF in asset-backed securities, with additional investments from private investors. This will enable BNP Paribas to provide new lending of around €627 million to households in France over three years, supporting energy-efficient housing equipment and reducing CO2 emissions. 🏠

• Renewable energy firm Orsted has halted the development of two US offshore wind projects due to supply chain delays and higher costs. The company's impairments have surged above $5 billion, causing its stock to drop as much as 22%. The offshore wind industry is facing challenges from rising inflation, interest rate hikes, and permitting delays, casting doubt on plans to replace fossil fuels with offshore wind. ⚡️

• Toyota plans to invest an additional $8 billion in its North Carolina battery production plant, bringing its total commitment to nearly $14 billion. The investment aims to increase the company's EV battery capacity in the US and support the development of lithium-ion batteries. The facility will feature ten BEV/PHEV battery production lines and four battery lines for Hybrid Electric Vehicles (HEVs), with a total capacity of 30 GWh annually. The investment is expected to create 3,000 jobs, bringing the total job creation to 5,000. 🔋

• Air Products plans to build Europe's largest "blue hydrogen" plant in Rotterdam, with a carbon capture facility. The plant, expected to be operational in 2026, will serve ExxonMobil's refinery and other customers through Air Products' hydrogen pipeline network. The project aims to reduce CO2 emissions and is part of long-term agreements with ExxonMobil and the Dutch State. The captured CO2 will be transported and permanently stored in depleted gas fields in the North Sea. 🟢

💸 Recent funding rounds, acquisitions, and private equity:

🟢 KKR has raised $2.8 billion for its second fund, KKR Global Impact Fund II, which focuses on investing in companies that contribute to the UN’s Sustainable Development Goals. The fund more than doubled the size of its predecessor and targets companies aligned with key investment themes such as Climate Action and Sustainable Living.

⚡️ Private equity investors Blackstone and Vista Equity Partners have agreed to acquire energy market simulation software provider Energy Exemplar. The investment aims to accelerate the company's growth and innovation in supporting grid reliability and the energy transition. Energy Exemplar offers energy market simulation solutions used by utilities and others in the energy transition ecosystem.

🌾 Morgan Stanley Investment Management (MSIM) has invested in the sustainable nutrition company Huel to support its global expansion and sustainability agenda. Huel offers plant-based and ethically sourced food products and has committed to reducing its carbon footprint. With over 300 million meals sold worldwide, Huel's revenues grew by over 40% last year.

🟢 DWS and MEAG have jointly acquired German biomethane and biogas producer Weltec. The acquisition comes as the biomethane market in Europe is expected to expand rapidly, with production targeted to grow tenfold by 2030. Under DWS and MEAG, Weltec plans to increase its biomethane production volumes, upgrade its biogas plants, and transition to sustainable, waste-based sources.

🟢 Infinitum, a sustainable motor company, has raised $185 million in a Series E funding round to expand production and drive industrial decarbonization. The company's motors, equipped with a variable frequency drive, reduce energy consumption and waste. Infinitum is also developing a motor system in partnership with Rockwell Automation. The motors have gained recognition for their efficiency and potential to help the industrial sector meet sustainability goals.

🔋 Irish EV charging company Erapid has secured a €30 million investment from Aviva Investor. The funding will support the expansion of the business and its reach, with plans to create 60 new jobs. Erapid currently manages over 4,000 charging points in 1,500 locations across Ireland and aims to roll out over 3,000 fast DC chargers by 2032. The investment comes as the company experiences strong growth, with approximately 2,000 new users each month in 2023.

🌾 Talus Renewables, a renewable energy infrastructure company and creator of the first modular green ammonia system deployed commercially, has raised $22 million in Series A round. The funding will be used to scale up production and revolutionize fertilizer production with a low carbon footprint. Talus's technology has applications in various industries and aims to reduce supply chain length and costs while promoting sustainability.

📄 AI-based ESG data collection startup ESG Flo has raised $5.25 million in seed capital. ESG Flo helps businesses in the industrial, manufacturing, and infrastructure sectors create robust ESG data infrastructure using AI automation and deep learning. The funding will be used to expand its solution, hire engineers for product development, and scale its growth and marketing team.

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 🍀