What's Happening in Sustainability & ESG (Week Recap 05.12 - 11.12) 🌎

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This week’s read time: 9 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:

🌍 COP28 in Dubai is scheduled to end today, while negotiations for a final deal are still ongoing. The draft proposal released at the UN climate summit in Dubai fell short of demands for a fossil fuel phaseout, causing disappointment among environmental groups, the US, the EU, and vulnerable island nations. The draft suggests reducing fossil fuels instead of phasing them out, leading to concerns about the urgency of transitioning to clean energy sources. Negotiations are ongoing and expected to end soon, with some countries opposing language proposing a phaseout or phase-down of specific energy sources.

Key takeaways worth mentioning from COP28:

• Over $83.9 billion mobilized across the climate agenda (Energy, Finance, Lives & Livelihoods, Inclusion, Green Climate Fund, etc.)

• 118 governments committed to tripling renewables and doubling the rate of energy efficiency improvements by 2030.

• The Global Cooling Pledge, signed by over 60 countries, aimed at reducing emissions from cooling by 68% by 2050.

• The O&G Decarbonization Charter, signed by 50 companies accounting for more than 40% of global oil and gas production. The signatories committed to net-zero operations by 2050 across Scope 1 and 2 emissions, near-zero methane in upstream operations by 2030, zero routine flaring by 2030, and increased transparency in emissions reporting.

• An agreement to operationalize a new Loss & Damage Fund to assist poor nations in dealing with climate disasters, with several countries, including the US, Japan, and the UAE, announcing contributions ($725 million in pledges secured so far).

🇪🇺European Union:

• The three European Supervisory Authorities (EBA, EIOPA, and ESMA – ESAs) have proposed new disclosure requirements for financial products under the Sustainable Finance Disclosure Regulation (SFDR). The proposals include mandatory reporting on social factors such as exposure to tobacco production and inadequate wages, as well as disclosure of GHG emission reduction targets. The ESAs have also suggested improvements to disclosures on sustainable investments and simplification of disclosure templates. The European Commission will review the proposals before deciding whether to endorse them.

• An agreement was reached on a new "Ecodesign" framework to establish sustainability requirements for products across the EU - the regulation aims to improve the environmental sustainability of products, promote circularity, and provide consumers with better information. The agreement includes a ban on the destruction of unsold textiles and the establishment of a Digital Product Passport.

• Another agreement was reached to strengthen the Energy Performance of Buildings Directive, aiming to decarbonize buildings. The revisions include a phase-out of fossil fuel boilers and a target for all new buildings to be zero emission by 2030. Key provisions include requirements for zero on-site emissions from fossil fuels by 2030, a phase-out of fossil fuel boilers by 2040, and minimum energy performance standards for non-residential buildings.

• And lastly, a new regulation aimed at decarbonizing the gas sector and promoting renewable and low-carbon gases, including hydrogen. It establishes common market rules for renewable and natural gases and hydrogen, facilitates connection and access to the existing gas grid, and establishes a market design for hydrogen in Europe.

🇺🇸 The lack of climate reporting rules in the US could expose thousands of US companies to more stringent reporting requirements in the EU, warns the Securities and Exchange Commission (SEC) Chair Gary Gensler. He added that without a US rule, companies may have to comply with the EU's Corporate Sustainable Reporting Directive (CSRD), which has more comprehensive requirements than the SEC's proposal. The SEC has proposed climate disclosure rules but its final rule is expected to be released in April 2024. Gensler suggests that even if the US rule differs from Europe, discussions on "substituted compliance" could be possible.

• International Financial Reporting Standards (IFRS) has shared two integrated reporting resources that recently launched alongside the IFRS Sustainability knowledge hub:These resources are designed to help integrated report preparers apply the ISSB Standards from next year. 📄

  • A mapping tool showing one possible way to incorporate ISSB disclosures within an integrated report

  • Updated FAQs covering the relationship between the Integrated Reporting Framework and the ISSB Standards and other frameworks and standards in the corporate reporting landscape

• Following the release of its final recommendations in September, the Taskforce on Nature-related Financial Disclosures (TNFD) has now published draft sector guidance for eight key sectors. The sectors, which include oil and gas, metals and mining, and forestry and paper, were chosen for their significant impacts on and dependencies on natural resources. The guidance for each sector provides tailored strategies for implementing the TNFD's LEAP approach, along with sector-specific global disclosure metrics. Additionally, it offers illustrative examples of environmental assets, ecosystem services, impact drivers, potential risks and opportunities, and recommended response strategies. Stakeholders are invited to provide their input on the draft guidance until 29 March 2024. 📄

• The Monetary Authority of Singapore (MAS) has released its finalized Code of Conduct for ESG Rating and Data Product Providers (COC), aiming to enhance transparency and reliability in ESG ratings and data. The code outlines principles such as thorough analysis of information, transparency in methodologies and data sources, and disclosure of potential conflicts of interest. The COC is voluntary but encourages providers to comply or explain. 🇸🇬

• Abu Dhabi Global Market, BlackRock, HSBC, and other organizations have launched the Global Climate Finance Centre (GCFC) at COP28. The GCFC aims to accelerate the development of global climate finance, support green finance markets, and address barriers hindering investment flows. It will provide research, policy, and innovation functions, as well as a Climate Finance Academy for training and capacity building. 📈

• The Dutch Central Bank (DNB) has announced a commitment to align its reserves, equities, and corporate bond investments with the goals of the Paris Agreement. By 2030, DNB aims to reduce the carbon footprint of its portfolio by 50% compared to 2019 levels, focusing on real-world emissions reductions. The bank will employ strategies such as investing in low-carbon companies, engaging with investee companies and fund managers, and avoiding companies involved in fossil fuel activities or violating sustainability standards. 🇳🇱

🧐 What are companies doing?

• Microsoft has signed a large carbon removal agreement with Mombak, a startup focused on reforestation projects in the Brazilian Amazon. The agreement will provide Microsoft with up to 1.5 million carbon removal credits and aims to reestablish 25 forests in deforested areas, removing as much as 1.5 million tons of carbon. 🟢

• Lufthansa Group also announced an agreement with Airbus to pre-purchase 40,000 tons of carbon removal credits through Direct Air Capture (DAC) technology. The company sees carbon removal solutions as complementary to its sustainability strategy and believes DAC can contribute to the development of sustainable aviation fuel, with solutions such as Power-to-Liquid or Sun-to-Liquid technologies requiring the utilization of captured carbon. 🛩️

• ExxonMobil plans to invest $20 billion in low emissions opportunities as part of its 2022-2027 corporate plan. The investment will focus on reducing GHG emissions, with around half supporting the Low Carbon Solutions business. Exxon aims to produce enough lithium by 2030 to supply the manufacturing needs of approximately 1 million EVs per year. The remaining investment will be used to reduce the company's own emissions. 🟢

• Nestlé has signed agreements with logistics companies Hapag-Lloyd, Maersk, and CMA CGM to shift half of its global shipping to alternative, lower-emission fuels, reducing GHG emissions by approximately 200,000 tons annually. The agreements cover more than half of Nestlé's shipping volumes in 2023. 🚢

• Amazon declared that it has increased its use of rail and sea transportation by 50% in Europe, resulting in reductions in carbon emissions. The company now distributes products through over 100 rail lanes and 300 sea routes, collaborating with European carriers. 📦

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

⚡️ KKR has agreed to acquire energy infrastructure provider Smart Metering Systems (SMS) for $1.6 billion. The acquisition is expected to support the UK Government's net-zero ambition and accelerate SMS's growth as an integrated energy infrastructure company. The transaction is part of KKR's focus on energy transition infrastructure investments. KKR is also seeking to raise up to $7 billion for its first global climate fund, focusing on energy transition opportunities and environmentally friendly technologies. The fund aims to invest in energy storage, battery-related ventures, transportation, and decarbonizing existing assets, targeting investments in the US, Europe, and Asia Pacific, with each investment ranging from $300 million to $750 million.

🌾 Mirova has launched the Mirova Sustainable Land Fund 2 (MSLF2), a new fund aimed at supporting the transition and decarbonization of agricultural and forestry value chains. The company aims to raise €350 million for the fund, which will focus on sustainable forestry, agroforestry, and regenerative agriculture projects in developing countries.

🌾 Amundi has also launched a new impact investing strategy, Amundi Ambition Agri-Agro Direct Lending Europe (AAAA), aimed at financing European companies in the agricultural and agri-food sectors transitioning to a sustainable, low-carbon model. The strategy has a fundraising target of €750 million and has received an initial commitment of €130 million from Crédit Agricole Group.

🔋 Cleantech startup AM Batteries has raised $30 million in a Series B funding round led by Toyota Ventures. The company's dry battery electrode process eliminates the need for harmful solvents and reduces the number of steps in the manufacturing process. The technology has the potential to reduce energy usage and CO2 emissions by 40%.

🚢 Paris-based company Wakeo has raised €18 million in its latest funding round, bringing its total funding to over €30 million. Wakeo's platform offers real-time visibility on intercontinental multimodal freight transport flows, helping supply chains optimize transport plans, reduce emergency costs, and improve inventory management.

🔋 Estonian cleantech startup UP Catalyst has raised €4 million in seed funding to produce battery materials from CO2. The company uses Molten Salt Carbon Capture and Electrochemical Transformation technology to convert CO2-rich flue gases into sustainable carbon materials. UP Catalyst aims to empower 4 million car batteries with graphite sourced from CO2 emissions by 2030.

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 🍀