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  • What's Happening in Sustainability & ESG (Week Recap 16.07 - 22.07) 🌎

What's Happening in Sustainability & ESG (Week Recap 16.07 - 22.07) 🌎

Is ESG over, or is it evolving?

Today’s newsletter is brought to you by ESG for In-house - right-sized ESG solutions to meet client and investor expectations.

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:

Is ESG over, or is it evolving? 🤔

 Ursula von der Leyen secured a second term as European Commission president by balancing green policies with economic and security measures 🇪🇺

 74% of public companies plan to invest in sustainability reporting technology and tools over the next year 📈

The Green Impact Exchange (GIX) has filed an application with the SEC to establish the first sustainability-focused stock exchange in the US 🇺🇸

and other news 🌍

THE WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

Illustration by Michael Kennedy / Bloomberg

📈 There’s little doubt it’s a tough time these days for ESG in the US. Once hyped by Wall Street and now attacked by Republicans, the label is being removed from investment products and job titles. Companies have become quieter about climate change to avoid GOP backlash but remain somewhat vocal to avoid alienating blue states and Europe, where ESG is still strong. Some US firms stick with ESG, while others drop it. Jefferies Financial Group now uses “sustainability and transition” instead of ESG. Wellington Management and Lazard Asset Management have cut ESG jobs. Bank of America merged its ESG team with clean energy. Investor support for environmental and social shareholder proposals has declined, and mentions of climate change, as well as DEI, are now much less common on company conference calls. Other headwinds for ESG include a seminal climate rule from the US SEC that’s being challenged in the courts and a slowdown in EV sales. Another big worry: the possibility of a second Trump administration that would be even more hostile to climate initiatives and environmental regulation than the first.

🎬 Last week, FT also released a short film called ‘Who killed the ESG party?’. It features interesting takes from Nicolai Tangen (CEO of Norges Bank Investment Management, which manages the Norwegian oil fund), Desiree Fixler (Former Group Sustainability Officer at DWS), Henry A. Fernandez (CEO of MSCI), Fabiana Fedeli (CIO, Equities and Sustainability at M&G), Tariq Fancy (Former CIO for Sustainable Investing at BlackRock), and others. “ESG investing was until recently one of the hottest buzzwords in global finance. The party was in full swing, the marketing material was everywhere and the money was rolling in. But asset managers have become quieter about their ESG credentials after poor performance, greenwashing scandals, and a political backlash in the US. So who killed the ESG party? This film looks at the suspects” - FT

Why ESG isn’t going away, despite all the noise

Despite all the backlash and political opposition, ESG investing remains integral in dealmaking, driven by financial performance rather than altruism. A Deloitte survey in June showed that all 500 global business leaders consider ESG in acquisitions, with many having defined metrics and some abandoning deals due to ESG concerns. ESG's persistence is reinforced by regulatory pressures, especially in Europe. Firms like KKR reframe ESG as "responsible investment," focusing on initiatives like employee ownership and climate risk management to enhance business sustainability and reduce costs. Another recent Deloitte survey revealed that 74% of public companies plan to invest in sustainability reporting technology and tools over the next year to meet increasing ESG disclosure requirements. The survey, involving 300 executives, highlights the formation of cross-functional ESG teams, with 52% of companies already having such teams and 46% in the process of establishing them. Companies with these teams report significant progress in sustainability goals and preparedness. Despite increased investments, data quality remains the top challenge.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

Photo: Frederick Florin/Agence France-Presse — Getty Images

🇪🇺 Ursula von der Leyen secured a second term as European Commission president by balancing green policies with economic and security measures to appeal to both conservatives and environmentalists. Her strategy involved framing climate actions as economic necessities, similar to Joe Biden's approach in the US. Despite her success, von der Leyen's proposals lack detailed plans, which could lead to political conflicts. Her nebulous language allowed various parties to claim victory, but skepticism remains about the effectiveness and commitment to ambitious climate action. She also pledged to introduce a new "Clean Industrial Deal" to support the EU's industrial decarbonization and competitiveness. This initiative aims to create lead markets for clean technologies and streamline processes. Von der Leyen's first term saw the launch of the European Green Deal, which set ambitious climate goals and introduced significant legislation.

🇺🇸 A US appeals court on Thursday ordered a Texas judge to reconsider his decision upholding a Biden administration rule that permits socially conscious investing by employee retirement plans, following a Supreme Court ruling that eliminated Chevron deference. This rule, effective since February 2023, allows 401(k) and other plans to consider ESG factors as a tiebreaker between financially equal options. The case, brought by 25 Republican-led states and Liberty Energy, challenges the Department of Labor rule, which replaced a Trump-era rule barring non-financial considerations in investments. In other US news, the Biden administration announced $4.3 billion in climate grants for 25 projects aimed at deploying clean energy technology across various sectors. These projects are expected to reduce GHG emissions by up to 150 million tonnes of CO2e by 2030.

📈 The Green Impact Exchange (GIX) has filed an application with the SEC to establish the first sustainability-focused stock exchange in the US. Founded by former NYSE executives, GIX aims to list companies committed to sustainability goals and provide transparency to investors. The exchange will require listed companies to adhere to Green Governance Standards, ensuring accountability and regular public reporting on sustainability metrics. GIX plans to launch within 3-4 months post-SEC approval, aiming to simplify sustainable investments and support the green economy.

WHAT ARE COMPANIES DOING?

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

Photo: Direksiyon

🔌 Starbucks and Mercedes-Benz are collaborating to install high-power EV chargers at 100 Starbucks stores across the US, starting with a 1,400-mile route along Interstate 5 from Washington to California. The initiative aims to integrate EV charging with Starbucks' routine, supporting vehicles with a wide voltage range and contributing to Starbucks' environmental goals.

🐶 UK startup Meatly has become the first company in the world to secure regulatory approval to sell pet food made from cultivated meat. Meatly’s ‘chicken’ product is produced by replicated animal cells and lab-grown pet food is seen as having a lower climate impact compared to traditional pet food. Meatly plans to launch its product this year, focusing on cost reduction and scaling production.

🚜 PepsiCo Europe and Yara launched a long-term partnership to provide EU and UK farmers with low-carbon fertilizers and tools to decarbonize the food value chain. The program will initially focus on potato farms and expand to other crops, targeting around 1,000 farms and 128,000 hectares.

🏢 IHG Hotels & Resorts launched the Low Carbon Pioneers program, featuring hotels that meet sustainability criteria such as energy efficiency and no onsite fossil-fuel combustion. The program supports corporate clients' sustainability goals and includes two levels: "Low Carbon Hotels" and "Low Carbon Ready Hotels." These hotels will feature high-efficiency heat pumps, fully electric kitchens, and will use IHG’s Green Engage platform to track energy data.

🛩️ DHL and Envision Group launched a partnership to advance sustainability in logistics and energy, focusing on sustainable aviation fuel (SAF). Envision will supply SAF to DHL and explore renewable feedstock sources and technology to aid decarbonization in air transport. The partnership also includes green energy solutions and the development of a Net Zero Industrial & Logistic Park to support global carbon neutrality efforts.

EVERYTHING FINANCE

Funding rounds, sustainable finance, acquisitions & private equity deals

⚡️ Blackstone Energy Transition Partners acquired power solutions provider Trystar to support its growth amid the energy transition and AI-driven data center expansion. Trystar, founded in 1991, offers critical power management solutions, including backup power for increased electrification and renewable energy integration. Blackstone plans to invest an estimated $100 billion in energy transition projects over the next decade.

📈 Eurazeo raised €706 million for its inaugural transition infrastructure program. The Eurazeo Transition Infrastructure Fund (ETIF), focused on low-carbon economy infrastructure, has already deployed 60% of its capital across six companies.

🟢 Cloverleaf Infrastructure raised over $300 million to develop low-carbon data center sites across the US, addressing the growing climate impact of data centers, which account for up to 2% of global carbon emissions. The company collaborates with regional utilities and data center operators to provide scalable clean electricity.

⚡️ LevelTen Energy raised $65 million in a Series D funding round to expand its clean energy transaction platform into new markets. The company provides marketplaces and data products for clean energy buyers and sellers.

🟢 Cleantech startup Again raised $43 million in a series A funding round to support its growth and build full-scale decarbonization plants. Again uses fermentation to convert CO2 emissions into valuable chemicals like acetate.

⚡️ Naked Energy, a British solar heat and power company, raised £17 million in Series B funding to expand globally and promote its high energy density solar collectors for decarbonizing heat and power. The company offers products like VirtuPVT and VirtuHOT, which are highly effective in reducing CO2 emissions.

🌳 Earthshot Labs raised $5.5 million in a Series A funding round to expand its platform for nature-based carbon project development and financing. The platform aids in developing and financing restoration and conservation projects, helping developers obtain verified carbon credits and financing.

🟢 3M made a strategic investment in green hydrogen tech company Ohmium International to support the transition to cleaner energy. Ohmium designs and manufactures PEM electrolyzer systems that use renewable energy to produce green hydrogen.

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