What's Happening in Sustainability & ESG (Week Recap 05.03 - 11.03) 🌎

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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. 🍀

In this edition, we’ll cover:

• Key takeaways and implications from US SEC's new climate rule 🇺🇸

• EU lawmakers agree on new sustainable packaging rules, targeting 100% recyclability by 2030 🇪🇺

• Singapore launches grant program to assist companies in meeting climate-related reporting requirements 🇸🇬

• The UK Finance Ministry plans to regulate ESG ratings providers later in 2024 🇬🇧

• Investors are grappling with ESG data challenges due to new regulatory reporting requirements 📄

• and other news 🌍

THE WEEK’S TOP NEWS

Regulatory Oversight & Policies

🇺🇸 The US Securities and Exchange Commission (SEC) has approved new climate-related disclosure rules for public companies, requiring them to report on climate risks, plans to address those risks, and the financial impact of severe weather events. However, the final rule has scaled back initial proposals, most notably removing the requirement for companies to report on Scope 3 emissions.

Key takeaways compiled by Tim Mohin:

• Materiality rules: The SEC rule will require companies to only disclose climate issues that are “financially material”. Exceptions exist for physical climate risks, where financial impacts greater than 1% of pre-tax profits must be disclosed.

• Scope 3 emissions are out, but risks are still in play: Final rule coverage exempts Scope 3 emissions but mandates disclosure of material climate risks, many of which occur in value chain activities.

• TCFD backbone: The final rule is based on the framework from the Task Force on Climate-related Financial Disclosures (TCFD), useful for companies navigating new requirements.

• Phased-in approach: The final rule allows a phased-in approach, with some exemptions for smaller companies. Initial compliance begins with information from FY2025 reported in FY2026.

• Litigation and equivalency: The rule's enforcement could be delayed due to lawsuits. Ten Republican-led states and business groups have already sued the SEC. They argue that the rules will impose significant costs on businesses and violate free speech protections by mandating the disclosures. On the other hand, Sierra Club, an environmental group, is considering suing the SEC, arguing the rules do not go far enough.

Meanwhile, companies still need to comply with similar requirements like the CSRD in Europe and various capital market listing rules (e.g., UK, Japan, Australia, Singapore, China, etc.).

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🇪🇺 EU lawmakers have provisionally agreed on new sustainable packaging rules, targeting 100% recyclability by 2030. The agreement includes packaging reduction targets, a ban on certain single-use plastic packaging, and targets for reusable packaging. The legislation, which also introduces a ban on PFAS in food contact packaging, is yet to be formally approved by the Council and Parliament.

🇸🇬 Singapore has launched a Sustainability Reporting Grant to assist companies in meeting new mandatory climate-related reporting requirements. The grant will cover up to 30% of the cost for large companies to produce their first sustainability reports and is a response to the rising costs of non-financial disclosure obligations. The government will also provide funding support for SMEs to develop their first sustainability reports.

🇬🇧 The UK Finance Ministry plans to regulate ESG ratings providers to improve clarity and trust in benchmarks used for investments. The sector, which includes providers like MSCI, S&P, Morningstar, and the LSEG, is currently unregulated. The ministry issued a holding statement following a public consultation last year and a voluntary industry code of conduct. Further consultation and legislative steps are expected later this year.

📊 Investors are grappling with ESG data challenges such as coverage and quality issues, and managing increasing information volumes due to new regulatory reporting requirements, according to a Bloomberg survey. The primary concern for 63% of respondents was coverage and quality issues of reported ESG data. The implementation of the EU’s CSRD is expected to address these issues but will also increase the volume of reported ESG data. Accordingly, 41% of survey respondents reported that their top ESG data management challenge was the need to handle “constantly evolving and new ESG data content,” and another 25% cited linking ESG data content to existing data systems as the biggest challenge.

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WHAT ARE COMPANIES DOING?

Corporate sustainability, new tools and services & companies in the news

📄 Investors are urging Inditex, the owner of Zara, to disclose its full list of suppliers to better assess supply chain risks, following the example of competitors like H&M and Primark. Inditex, unlike many major clothing retailers, does not disclose the factories it sources from, leading to calls for greater transparency. The company does publish the number of suppliers it sources from in 12 core countries annually but provides no information on individual factories.

📊 EY and IBM have launched a new sustainability reporting Managed Services solution to help companies meet evolving ESG disclosure requirements. The service aims to address challenges in sustainability reporting, including the need for continuous investment in people, processes, and technology, and finding talent with the right expertise. The solution offers features like data management, reporting and analytics, compliance and risk management, and stakeholder engagement tools.

♻️ H&M Group and venture investor Vargas have launched Syre, a company focused on mass-producing recycled textiles to provide a closed-loop solution for the clothing industry. The venture begins with a $600 million agreement for recycled polyester over seven years. Syre aims to support the textile industry's decarbonization and waste reduction efforts, starting with polyester, targeting over 3 million metric tons of recycled polyester production.

EVERYTHING FINANCE

Funding rounds, sustainable finance, acquisitions & private equity deals

🟢 Sunfire, a German electrolyzer manufacturer, has raised €315 million, including a €215 million Series E equity financing round and a €100 million term loan from the EIB. The company's electrolyzers, which produce renewable hydrogen and syngas as climate-neutral substitutes for fossil energy, use pressurized alkaline and high-temperature solid oxide electrolysis technologies.

⚡️ Primergy has raised $588 million in debt financing for its 408 MW Ash Creek solar project in Texas and signed a long-term power purchase agreement with Microsoft. The project, which includes a 300 MW battery energy storage system, is expected to provide enough carbon-free energy to power around 90,000 homes annually. The financing includes a construction loan, tax credit transfer bridge loan, and related letters of credit.

📈 The Inter-American Development Bank (IDB) has approved a $3.5 billion capital increase for IDB Invest, doubling its size and enabling it to fund more projects aimed at poverty reduction and climate change. This will increase IDB Invest's funding capacity to around $19 billion per year. Additionally, IDB's board also approved $400 million for IDB Lab, its innovation and venture capital arm.

🟢 CarbonCapture has raised $80 million from Saudi Aramco, Amazon's Climate Pledge Fund, and others. The US-based company builds modular machines that contain material that absorbs CO2 when cooled and releases it when heated. That allows it to capture the gas for storage underground or used in products such as concrete. Its Wyoming-based Project Bison plans to capture 5 million metric tons of CO2 annually by 2030.

📈 Sustainability-focused investment manager Mirova is launching a new private equity fund, Mirova Impact Life Essentials (MILE), aimed at supporting companies that contribute to societal transition by addressing sustainability challenges. The fund aims to raise €200 million from institutional and individual investors and will target four investment themes: Knowledge & Skills, Well-being & Health, Mindful Consumption, and Diversity & Inclusion.

🟢 Greenlyte Carbon Technologies, a startup specializing in a direct air capturing (DAC) system that efficiently removes CO2 from the atmosphere, has closed a €10.5 million Pre Series A round. The company's technology, which produces hydrogen as a byproduct and can be integrated with renewable energies, is based on 15 years of research.

♻️ Glacier, an AI and robotics company, has raised $7.7 million in a funding round led by New Enterprise Associates and Amazon’s Climate Pledge Fund to enhance its recycling capabilities. Glacier uses AI-powered robots to automate the sorting of recyclables and collect real-time data on recycling streams.

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