What's Happening in Sustainability & ESG (Week Recap 27.08 - 02.09) 🌎

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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:

• A decade of progress on corporate climate advocacy - how the business community’s approach to climate action evolved 🟢

• Many US companies are modifying their diversity and inclusion policies amid rising pressure from conservative groups 🇺🇸

• Environmental campaigners filed two lawsuits against the European Commission in the EU’s General Court, challenging its climate policies 🇪🇺

• Texas is sued over anti-ESG law 🇺🇸

• Renewables accounted for over 40% of global electricity generation in 2023 ⚡️

• and other news 🌍

THIS WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🟢 (A Reuters insight) Over the past decade, the business community has evolved significantly in its approach to climate action. In the early 2010s, corporate climate action was largely confined to niche players and sustainability-oriented firms. However, the past decade has seen a surge in the number of mainstream businesses embracing climate action, largely driven by a growing recognition that sustainability is not only a moral imperative but also a strategic necessity for long-term business success.

Major companies, like Google, Apple, Amazon, and other major European and UK corporations, have led the charge by committing to renewable energy and supporting impactful climate legislation. Their actions have helped shift policy landscapes in these regions, showcasing the influential role of the private sector in advancing climate goals and setting examples for sustainable practices. More companies than ever are committing to science-based targets, and integrating climate risks into their core business strategies. They are seeing the benefits of advocating for climate policies, including reducing risk, emissions and costs, improving regulatory certainty, gaining a seat at the policymaking table, creating a level playing field for sectors and competitive advantage for economies.

Yet, for all the progress, there is a notable gap between corporate climate ambition and the actual practice of engaging in coherent policy advocacy. Despite half of the S&P 100 companies in the US having science-based targets, only 19% publicly supported the IRA, the largest climate investment in US history. To enhance climate action, businesses should engage directly with policymakers, leverage their networks, and ensure their lobbying efforts align with their climate goals. They must also reassess their affiliations with trade associations that oppose climate objectives.

To conclude, the evolution of business climate action over the past decade shows that companies are engaging more effectively in developing and driving climate action. However, to meet the scale of the threat posed by climate change, businesses must make the bold decision to speak out, helping to shape the best policies for the broader business community that are necessary for the future of countries and economies.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

⚡️ A BloombergNEF report reveals that zero-carbon technologies accounted for over 40% of global electricity generation in 2023, with renewables like wind and solar making up 17%, and hydroelectric and nuclear power contributing 24%. Fossil fuels produce 57% of global electricity. Renewables, led by solar and wind, comprised over 90% of global energy capacity additions last year, reflecting growing momentum in clean energy investments. Mainland China, a significant contributor, reached its 2030 wind and solar targets six years early. However, current global commitments are still insufficient to meet the Paris Agreement’s 1.5°C target. Despite steady growth, substantial increases in renewable investments are needed to achieve net-zero emissions.

🇪🇺 Environmental campaigners filed two lawsuits against the European Commission in the EU’s General Court, challenging its climate policies. The first lawsuit seeks to tighten the EU’s 2030 emissions rules, arguing that current national limits on GHG emissions for sectors like transport and agriculture are insufficient to meet the Paris Agreement’s goal of limiting global warming to 1.5°C. The second lawsuit aims to remove rules that label certain aviation and maritime investments as climate-friendly, which the campaigners claim amounts to greenwashing. They argue that labeling planes and ships running on fossil fuels as sustainable misleads investors and contradicts the goal of reducing emissions. The European Commission has not yet commented on the lawsuits.

🏦 A review by the US Office of the Comptroller of the Currency (OCC) found that major banks are still in the early stages of assessing and managing climate change risks to their businesses, with considerable work needed in some areas. The review, which included 22 large banks, revealed wide variations in how these institutions incorporate climate risk into strategic planning, internal audits, and risk assessments. Many banks have not yet started using climate scenario analysis, and significant efforts are needed to implement governance frameworks around climate risk. The OCC’s findings highlight gaps in banks’ preparedness to manage climate risks, which some experts argue could jeopardize trillions of dollars in assets. The OCC plans to continue its risk-based supervisory activities to ensure progress in these areas.

🇺🇸 The American Sustainable Business Council filed a lawsuit against Texas, seeking to block Senate Bill 13, a law that prohibits the state from investing in or contracting with businesses perceived as “boycotting” the oil and gas industry. The council argues that this law violates free speech rights by discriminating against businesses that support environmentally-friendly policies and reduced reliance on fossil fuels. Texas, a major oil-producing state, has been actively targeting businesses with ESG policies that it deems unfavorable. The lawsuit names Attorney General Ken Paxton and Comptroller Glenn Hegar as defendants, accusing them of enforcing a law that unfairly discriminates against companies based on their stance on fossil fuels.

WHAT ARE COMPANIES DOING?

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

📑 Ford is revising its diversity and inclusion policies, joining other companies responding to a changing political and legal landscape and pressure from right-wing activists. CEO Jim Farley informed employees that Ford has shifted the focus of its employee resource groups and ended participation in external surveys by the Human Rights Campaign, an LGBTQ+ advocacy group. Ford, which previously highlighted its commitment to LGBTQ+ equality, now emphasizes a balance between diverse employee perspectives and evolving external conditions. Lowe’s has also decided to scale back its LGBTQ+ inclusion efforts. The company announced it would no longer participate in surveys by the Human Rights Campaign, merge its minority employee resource groups into one, and end sponsorship of community events like Pride parades. The decision aligns with a broader trend among companies like Tractor Supply, John Deere, Harley Davidson, and Jack Daniel’s owner Brown-Forman, who have similarly rolled back DEI initiatives.

🧐 Experts are concerned about the influence of Amazon and the Bezos Earth Fund on organizations that set corporate climate standards, such as the Science Based Targets initiative (SBTi). The Bezos Earth Fund, a significant funder of SBTi, and Amazon’s separate climate initiative, which allows unrestricted use of carbon credits, are seen as potentially swaying SBTi’s rules to favor more lenient carbon offsetting practices. This is particularly troubling as companies, including Amazon, face increased emissions from data centers. The UK charity commission is advising SBTi on improving its governance to address these perceived conflicts of interest, while Amazon and the Bezos Earth Fund defend their actions as being in the public interest.

🌳 Meta decided to leave Frontier, a coalition of companies focused on developing markets for carbon removal services, reports Axios. This move highlights how companies are adjusting their strategies in the young carbon removal industry. Meta, a founding member of Frontier, stated that it now prefers to source its own carbon removal deals independently. Frontier, launched in 2022, aims to purchase nearly $1 billion worth of carbon removal services by 2030. So far, it has secured $317 million in contracts for approximately 572,000 tons of CO2 removal. Despite Meta’s departure, Frontier maintains that its existing deals are unaffected and that it remains on track to meet its long-term purchasing goals.

🧱 Lego announced it is on track to replace fossil fuels used in its bricks with renewable and recycled plastic by 2032, following deals to secure long-term supply. Despite testing over 600 materials, the toymaker has struggled to find a fully suitable alternative, now opting to reduce oil content by using certified renewable resin, which costs up to 70% more than fossil-based plastic. The company aims for more than half of its resin to be certified renewable by 2026, increasing from 30% in early 2024.

📦 Nestlé announced a series of paper packaging innovations across brands like Nescafé and Vital Proteins to support its sustainable packaging goals. The company aims to address packaging waste’s environmental impact and reduce carbon emissions, with targets to design 95% of its plastic packaging for recycling and cut virgin plastic use by a third by 2025. The company has begun introducing paper packaging for products with varying packaging needs, including new high-barrier paper packs for Nescafé that reduce waste by 97% and are recyclable. Additionally, Nestlé launched paperboard canisters for Vital Proteins in the US, reducing plastic use by 90%.

🌳 TotalEnergies signed a $100 million deal with Anew Climate and Aurora Sustainable Lands to help preserve US forests, reducing timber harvesting across 300,000 hectares to sequester CO₂ and generate carbon offsets. However, the carbon offset market has faced criticism for failing to deliver promised emissions reductions, and despite these efforts, TotalEnergies continues to expand its oil and gas activities without significant plans to reduce product-related emissions by 2030.

EVERYTHING FINANCE

Sustainable finance, funding rounds, acquisitions & private equity deals

📈 European financial services company SEB launched the SEB Global Sustainable Companies Fund, a new index-linked global fund that exclusively invests in companies classified as “sustainable” while aiming to match the return and risk profile of its benchmark, the MSCI World Net Return Index. The fund’s current carbon intensity is about 50% lower than its benchmark, and it will invest in roughly 500 of the 1,500 companies in developed markets, using a systematic model to maintain alignment with its benchmark.

📈 Sustainability-focused asset management firm Candriam launched the Candriam Equities L ESG Market Neutral Fund, designed to deliver stable, positive returns independent of traditional asset classes by investing in sustainable leaders and shorting less sustainable companies. The fund combines financial and ESG criteria to select long and short positions, starting with the most liquid stocks in global developed markets. Managed by Candriam’s Quantitative Equity team, the fund aims to offer a balanced risk-return profile while promoting social and environmental change. It will be available in several European countries.

📈 Robeco launched the Robeco Climate Equities Indices, a new index family designed to support investments in reducing carbon emissions and mitigating climate change. The indices incorporate Robeco’s proprietary tools and metrics, such as the Climate Traffic Light, SDG Framework, and Climate Beta, which assess company alignment with climate goals and transition risks. The launch includes three indices: the Low-Carbon Climate Leaders Tilt Index, the Paris-Aligned Climate Leaders Tilt Index, and the Climate Leaders Equities Index. Each index targets different investor needs, from low-carbon economy contributions to meeting EU Paris Aligned Benchmarks, providing a nuanced approach to climate investing.

⚡️ Estonian renewable energy producer Sunly secured €300 million in debt financing to accelerate the development of 1.3 gigawatts of solar, wind, and storage capacity across the Baltics and Poland. The funds will support hybrid installations combining wind, solar, and energy storage, enhancing supply stability for industrial clients and boosting regional energy security. The first projects funded will include the 244 MW Risti solar farm in Estonia and four solar projects in Latvia totaling 553 MW.

🌾 Brazil-based agriculture innovator Agrion Agrisolutions received a $50 million investment from the Global Fund for Coral Reefs. The investment will support Agrion’s expansion and development of eco-friendly organo-mineral fertilizers, promoting sustainable agriculture and circular economy practices. Agrion operates industrial plants for organic mineral fertilizers using sugarcane waste products, optimizing costs and generating synergies. Currently, the company produces about 60,000 tons of fertilizers in collaboration with bioenergetics company Aroeira.

⚡️ Last Energy, a micro-nuclear power plant developer, raised $40 million in a Series B funding round, totaling $64 million in capital raised to date. The Washington, D.C.-based company focuses on creating 20 MWe microreactors that are modular, mass-manufacturable, and can be assembled within 24 months. Designed to provide clean energy solutions for heavy industries and data centers, Last Energy has secured agreements for 80 units, including 39 for data center developers, aiming to address rising energy needs and decarbonization goals.

🟢 PuriFire Energy, a Cambridge-based climate startup, secured a £2.7 million (US$3.5 million) seed investment. The company aims to commercialize hydrothermal treatment technologies to produce green hydrogen, biomethanol, and sustainable fuels competitively with fossil fuels. PuriFire’s technology offers a cost-effective solution for producing green methanol without the need for expensive electrolyzers or carbon capture systems, and is particularly appealing for the shipping industry, which is increasingly ordering methanol-powered ships.​

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