What's Happening in Sustainability & ESG (Week Recap 21.05 - 27.05) 🌎

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This week’s read time: 10 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:

• The EU gives final approval to the Net-Zero Industry Act and CSDDD 🇪🇺

• GRI and IFRS collaborate to optimize the use of their respective sustainability reporting standards 📑

• A majority of attorneys expect the US SEC’s new climate disclosure rule to not survive its legal challenges in its current form 🇺🇸

• Google, Meta, Microsoft, and Salesforce launched the Symbiosis Coalition to support the development of the nature-based carbon removal market 🟢

• 80% of companies view sustainability as a potential driver for revenue and profitability: Morgan Stanley survey 📈

• and other news 🌍

THE WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🇪🇺 The EU Council has given the final approval to the Net Zero Industry Act (NZIA), aiming to produce a majority of its clean tech equipment domestically to compete with US and Chinese industries. The act is part of the EU's strategy to lead in reducing GHG emissions and manufacturing the necessary technology. The NZIA sets benchmarks for the EU to produce at least 40% of its annual deployment needs for climate and energy technologies by 2030, and to capture 15% of the global market value for these technologies by 2040.

🇪🇺 The EU Council has also:

• given its final approval to the Corporate Sustainability Due Diligence Directive (CSDDD), which mandates large companies to address their negative impacts on human rights and the environment in their supply chains.

• approved new "Ecodesign" regulations, establishing sustainability requirements for nearly all products across the EU and banning the destruction of unsold textiles and footwear. The regulation also directs the establishment of a new “Digital Product Passport,” aimed at helping consumers and businesses to make informed choices when purchasing products, by providing information about products’ environmental sustainability.

• adopted a regulatory package establishing common market rules for renewable gas, natural gas, and hydrogen. This move aims to advance Europe's shift to renewable and low-carbon gases, support the EU's decarbonization goals, and end reliance on Russian fossil fuels. The regulation mandates national network development plans for electricity, gas, and hydrogen, and includes provisions for phasing out fossil fuels.

• approved a law to impose methane emissions limits on oil and gas imports from 2030, potentially affecting major suppliers such as the US, Algeria, and Russia. The law, which was opposed only by Hungary, will enforce "maximum methane intensity values" on fossil fuels in the European market.

📑 The IFRS Foundation and the Global Reporting Initiative (GRI) have expanded their collaboration to optimize the use of their respective sustainability reporting standards. The aim is to ensure compatibility and interconnectedness of sustainability-related disclosures, reduce the reporting burden on companies, and harmonize sustainability reporting systems internationally. The collaboration will focus on identifying and aligning common disclosures, with an initial methodology pilot building on the GRI’s new biodiversity standard and the ISSB’s project on Biodiversity, Ecosystems, and Ecosystem Services.

🇺🇸 A majority of attorneys expect the US Securities and Exchange Commission's (SEC) new climate-related disclosure rule to not survive its legal challenges in its current form, according to a Bloomberg Law survey. The rule, which requires public companies to disclose climate risks, has faced legal challenges claiming the requirements are too onerous and exceed the SEC's authority. The SEC has paused the rule's implementation pending a court review. Over half of the survey respondents anticipate the rule will only partially survive, with the most significant legal challenges expected for disclosures on GHG emissions and climate-related targets.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🚙 The increase in US tariffs on a variety of Chinese imports will take effect from August 1, the US Trade Representative's office announced. The new measures are expected to affect $18 billion in current imported Chinese goods, while China has vowed to take 'resolute measures' to protect its interests. European trade regulators in Brussels have also said they could levy new tariffs on Chinese EVs based on the results of an investigation into Chinese government subsidies. However, Europe's car giants won't have much time to restructure their operations and product lines to compete with ascendant Chinese automakers, and stiffer tariffs will do little to protect the status quo, industry executives said during a Reuters event. They argue that speed, not size, guarantees survival in the current market. The surge in Chinese exports is forcing European automakers to explore partnerships, pressure suppliers to cut costs and negotiate with unions over the future of plants and jobs. However, reducing labor costs is challenging due to strong unions and political pressures. Carlos Tavares, CEO of the global automaker Stellantis, warns of substantial competition with Chinese rivals in the European EV market, potentially leading to social consequences. He criticizes tariffs on Chinese vehicles, stating they will fuel inflation and not prevent the need for Western automakers to restructure. He also notes that Chinese automakers are on track to sell 1.5 million vehicles in Europe, equivalent to a 10% market share.

📈 A Morgan Stanley survey reveals that 80% of companies view sustainability as a potential driver for revenue and profitability. The survey, which included over 300 public and private companies, found that 85% of respondents see sustainability as a value-creation opportunity. More than 80% of companies anticipate financial benefits from sustainability strategies over the next five years. However, companies also acknowledge potential challenges and costs, with 69% anticipating costs from changing processes and 72% foreseeing higher costs or legal risks from sustainability regulation. The survey also indicates that 92% of companies expect climate change to impact their business models by 2050.

🟢 Countries raised a record $104 billion in 2023 from carbon emissions pricing, but prices remain too low to meet Paris climate accord targets, according to a World Bank report. There are 75 global carbon pricing instruments covering about 24% of global GHG emissions. However, less than 1% of emissions are covered by a direct carbon price within the recommended range to limit temperature rise below 2°C. The EU’s Emissions Trading System is the largest contributor to global carbon revenue.

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WHAT ARE COMPANIES DOING?

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

🤝 Tech giants Google, Meta, Microsoft, and Salesforce have launched the Symbiosis Coalition, a collaboration aimed at supporting the development and growth of the nature-based carbon removal market. The coalition has committed to contract up to 20 million tons of nature-based carbon removal credits, aiming to stimulate the development of high-impact, science-based restoration projects to advance global climate goals. They aim to overcome the challenges by launching an advance market commitment (AMC), signaling demand to suppliers, and following "quality pillars" for procurement.

• Microsoft has also agreed to purchase 1.6 million carbon removal credits from a large, nature-based removal project in Panama. The project, which Microsoft partially finances, aims to remove 3.2 million metric tons of carbon from the atmosphere by planting over 6 million trees in areas impacted by cattle ranching.

• The company signed an additional agreement with energy provider Ørsted to purchase one million tons of carbon removal over ten years from Ørsted’s new bioenergy carbon capture and storage (BECCS) project in Denmark. The project, expected to be operational by 2026, will capture and store approximately 430,000 tons of CO2 annually.

📊 IBM has added AI-powered emissions planning and forecasting capabilities to its ESG data platform, IBM Envizi. The new features aim to help companies guide their emissions reduction goals and meet climate reporting requirements. The new solution integrates Envizi’s ESG data model with IBM’s Planning Analytics suite, enabling businesses to perform complex modeling and forecasting on their ESG data.

🛢️ Shell shareholders rejected a climate resolution by activist group Follow This, which received 18.6% support, down from over 20% last year. The resolution urged Shell to align its carbon emissions reduction targets with the Paris Agreement. Meanwhile, a separate resolution on Shell's climate strategy, proposed by the company's board, received 78.2% support. Shell recently weakened its 2030 carbon reduction target, citing strong gas demand and energy transition uncertainty.

🪧 Climate activists broke into the offices of Europe’s leading asset manager, Amundi, in France, to protest its holdings in oil giant TotalEnergies. The protesters, many of them masked, shouted slogans inside the building and accused TotalEnergies of contributing to global warming and biodiversity loss through its oil and gas activities. Despite the protests, TotalEnergies CEO Patrick Pouyanné stated that new oilfields must be developed to meet global demand, and the company would continue its strategy of developing both fossil fuel and low-carbon energy production. Nearly 80% of shareholders approved the company's climate strategy, and over 75% voted to renew Pouyanné as CEO for three years.

EVERYTHING FINANCE

Funding rounds, sustainable finance, acquisitions & private equity deals

📈 BNP Paribas Asset Management (BNPP AM) has launched a new exchange-traded fund (ETF), the BNP Paribas Easy MSCI ACWI SRI S-Series PAB 5% Capped UCITS ETF. The fund aims to provide investors with exposure to companies with high ESG standards and low, improving GHG emissions.

⚡️ Energy developer Ørsted has received a $680 million investment in tax equity financing from J.P. Morgan to fund new solar and storage projects in Texas and Arizona. This investment, one of the largest of its kind, utilizes a combined production tax credit (PTC) and investment tax credit (ITC) structure, made possible by the Inflation Reduction Act (IRA).

🟢 Investment management firm Eurazeo has launched the Eurazeo Planetary Boundaries Fund (EPBF), aimed at investing in companies focused on ‘reversing or adapting to the overstepping of Planetary Boundaries.’ With a target size of at least €750 million, the fund will invest primarily in small to mid-market European companies across sectors such as agriculture, waste and packaging, water management, low-carbon energy, and transport services.

📈 European sustainable VC firm ETF Partners has raised €285 million for its fourth fund. The firm invests in technology companies addressing global climate challenges. Investments include AIPERIA, a software company for fresh food demand planning, Dexter, an energy AI platform, and Fairly Made, a SaaS for supply chain visibility in the fashion industry.

🛞 Circtec has raised €150 million to build Europe’s largest tire pyrolysis recycling facility in the Netherlands. Circtec's technology transforms waste tires into renewable fuels and circular chemicals. The new plant will be able to process approximately 5% of Europe's annual end-of-life tires and reduce about 3% of the GHG emissions of the Netherlands' chemical industry sector.

♻️ Textile recycling startup Syre (backed by H&M) has raised $100 million in a Series A financing round. Syre aims to support the textile industry's decarbonization and waste reduction efforts, starting with Polyester recycling.

💡 Reactive Technologies, a provider of grid stability solutions, has raised £25 million in a Series D funding round to support global expansion. The company's technology helps grid operators maintain stability and transition to net zero, addressing challenges such as diminishing inertia and system strength.

💧 Clean energy company XGS Energy has raised $20 million to accelerate the commercialization of its water-saving, low-cost geothermal technology. The company's technology harvests heat from a single directional well, using it to heat water which can then be converted to electricity.

🟢 Biotech startup Cellugy has raised $5.3 million in seed funding to scale up the production of its bio-based solution, which replaces fossil-based ingredients in personal care products. The company uses cellulose-producing microorganisms to create a high-purity, crystalline cellulose from sugar, offering a sustainable alternative to petrochemicals in various industries.

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