What's Happening in Sustainability & ESG (Week Recap 28.05 - 03.06) 🌎

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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:

• The US and other key players try to tackle carbon market flaws, while a new report blasts "junk" offsets 🇺🇸

• More than 20 jurisdictions, representing nearly 55% of the global economy, have adopted ISSB’s standards 🌎

• Over 40% of EU investment funds using ESG or sustainability-related labels may need to change names or sell assets to comply with new anti-greenwashing rules 📈

• Over 70% of M&A leaders have abandoned potential acquisitions due to ESG concerns, according to a Deloitte survey 📈

• The US oil industry continues its consolidation, with ConocoPhillips buying Marathon Oil, and Hess shareholders approving a merger with Chevron 🛢️

• and other news 🌍

THE WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🇺🇸 The US government introduced rules to regulate the use of voluntary carbon credits, aiming to enhance confidence in the emerging market after some offset projects failed to deliver the promised emissions reductions. The principles for responsible participation in offset markets include strict standards for real and quantifiable emissions reductions, monitoring to protect local communities, and urging corporate buyers to prioritize decarbonizing their own supply chains before purchasing credits. The policy also addresses challenges in the unregulated market, such as differentiating between high and low-quality projects due to inconsistent data. The move is seen as a way to channel funds from large companies to climate-impacted communities in poorer countries and as a precursor to a potential transition to mandatory carbon pricing. Currently, Voluntary Carbon Markets (VCMs) are valued at around $2 billion annually, but with the potential to increase significantly with improved market integrity.

Some more news related to carbon markets:

• Mizuho Financial Group and the London Stock Exchange Group (LSEG) also announced a collaboration to support the growth of the carbon credit market and provide clients with access to carbon markets investments and information. This follows LSEG's launch of a VCM designation for entities investing in decarbonization projects. The collaboration will provide Mizuho clients with access to VCM-designated investment funds and companies, and information about carbon credits.

• As key players are making efforts to improve credibility, a new analysis by Corporate Accountability shows that major corporations, including Delta, Gucci, Volkswagen, ExxonMobil, Disney, easyJet, and Nestlé, have invested in carbon offset projects that are likely worthless in offsetting their GHG emissions. The analysis suggests that industry claims about GHG reductions are likely overblown and it also revealed that for 33 of the top 50 corporate buyers, more than a third of their entire offsets portfolio is likely worthless.

🌎 More than 20 jurisdictions, representing nearly 55% of the global economy, have adopted international climate-related disclosure standards set by the International Sustainability Standards Board (ISSB). These jurisdictions include Japan, Singapore, Australia, Canada, Britain, Brazil, Costa Rica, Bolivia, Hong Kong, South Korea, Malaysia, Kenya, Nigeria, China, and the EU. The standards aim to simplify sustainability disclosure and provide consistent, comparable, and decision-useful sustainability information, and the ISSB warns that significant departures from these norms could result in increased compliance costs for international companies.

📑 CDP has launched a new platform to streamline sustainability reporting and align with global standards, including a new questionnaire based on the ISSB climate disclosure standard, IFRS S2. The platform aims to ease the reporting burden on companies, with research indicating that nearly 60% of companies already align with most of the CDP questionnaire. CDP also plans to align with other sustainability reporting standards and has released a standalone questionnaire for SMEs.

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

📈 About 44% of EU investment funds using ESG or sustainability-related labels may need to change names or sell assets to comply with new anti-greenwashing rules, as per a report by Clarity AI. The rules, issued by the European Securities and Markets Authority (ESMA), require funds using sustainability-related terms to meet investment thresholds and follow exclusion criteria for Paris Aligned Benchmarks (PABs). The study found that 44% of the funds breached the PAB exclusion criteria, with fossil fuels being the most common issue.

📈 Over 70% of M&A leaders have abandoned potential acquisitions due to ESG concerns, and a majority would pay more for targets with strong ESG attributes, according to a Deloitte survey. The study surveyed 500 M&A leaders from corporations with at least $500 million in revenue and private equity firms with at least $1 billion in assets. It found that ESG factors are increasingly integrated into the M&A process, impacting target considerations, due diligence, decision-making, and valuation. The survey also revealed an increase in confidence in accurately evaluating a potential acquisition target’s ESG profile, and a growing willingness to pay a premium for assets with a high ESG profile.

🏦 The Science Based Targets initiative (SBTi) is tightening rules for financial institutions to better align their near-term ambitions with global climate goals. The new rules require firms to align their Scope 1 and 2 emissions with efforts to cap global warming at 1.5°C, and their Scope 3 emissions with a target of well below 2°C. Companies will also have to set emissions targets for fossil fuel-related activities and provide more information about their financing to the fossil fuel sector.

🇪🇺 EU countries have unanimously agreed to exit the 1998 Energy Charter Treaty (ECT) due to concerns that it protects fossil fuel investments and hinders climate change efforts. The ECT allows energy companies to sue governments over policies that harm their investments and has been used in recent years to launch billion-dollar lawsuits against measures to restrict fossil fuel projects. The EU argued that the treaty is no longer aligned with the Paris climate agreement and EU energy transition ambitions.

WHAT ARE COMPANIES DOING?

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

📊 HSBC UK has partnered with carbon accounting startup Greenly to provide a carbon calculator for small and medium-sized enterprises (SMEs). The tool helps SMEs measure, assess, and address their carbon footprint. The partnership follows a survey indicating that SMEs face significant barriers to achieving decarbonization progress due to a lack of advice and support. The carbon calculator was piloted with 50 clients last year and is now available through HSBC’s Sustainability Tracker tool.

📑 IFS and PwC UK are collaborating to launch a Sustainability Management Solution on the IFS Cloud platform. This solution aims to help companies meet sustainability disclosure requirements, including the EU's new CSRD regulation. IFS will develop a Sustainability Management module, while PwC will contribute expertise in ESG criteria and the regulatory landscape. The solution will include features such as CSRD metrics, data mapping, approval workflows, target setting, and insights, as well as a library of KPIs.

🛢️ Despite pressure from activist investor groups for more aggressive emissions cuts, Exxon Mobil won the majority of shareholder votes, reelecting all 12 directors. Exxon, which has the weakest emissions reduction targets among oil supermajors, is continuing its lawsuit against activist groups Arjuna Capital and Follow This, aiming to block future resolutions it deems harmful. While some entities support Exxon, others like CalPERS and the New York State Common Retirement Fund opposed the company's board due to its climate policies and the lawsuit's potential threat to shareholder power.

🛢️ ConocoPhillips agreed to acquire Marathon Oil for $22.5 billion, marking another major deal in the energy industry. The all-stock offer includes $5.4 billion of Marathon's debt and is expected to close in Q4 2024. The acquisition, which aligns with the ongoing consolidation trend in the US oil and gas industry, will add over 2 billion barrels of reserves to ConocoPhillips' portfolio. Hess Corp shareholders also approved a $53 billion merger with Chevron, according to preliminary vote results. The merger, which required majority approval, will give Chevron access to oil-rich fields in Guyana. However, the deal is currently under review by the US Federal Trade Commission and has been complicated by an arbitration claim filed by Exxon Mobil and CNOOC.

EVERYTHING FINANCE

Funding rounds, sustainable finance, acquisitions & private equity deals

🚌 Zenobē, an EV fleet and battery storage specialist, secured a £410m finance deal, marking the largest electric bus platform financing in Europe. This, along with its existing £241m EV financing platform, will support the deployment of over 2,000 electric buses in the UK and Ireland by 2026. The company now supports over 75 bus depots globally and has raised over £1 billion in debt since 2019.

🌊 UBS Global Wealth Management and Rockefeller Asset Management launched the UBS Rockefeller Ocean Engagement Fund, a blue economy-focused fund aimed at supporting companies addressing ocean health issues. The fund will comprise around 50 high-conviction stocks, primarily small and mid-cap, with a goal of long-term real returns and positive ocean health impact.

📈 Sustainability-focused private equity investor Lightrock launched its first public equities fund, Lightrock Global Small-Cap strategy, with €400 million of seed capital. The new strategy marks the firm's expansion from private to public equity investing and will focus on investing in listed, global, small-cap companies with strong fundamentals and solid balance sheets.

📈 Clean Energy Ventures (CEV) raised $305 million for its second flagship fund, aiming to mitigate 75 gigatons of GHG emissions by 2050. CEV invests in companies commercializing disruptive, capital-light advanced energy technologies and business models. The firm's investments include mobility, renewable energy, carbon capture utilization and storage, energy storage, and critical minerals.

⚡️ German climate tech startup Cloover raised $114 million in a seed funding round. The company's technology enables smaller firms, which handle most of Europe's renewable installations, to access all parts of the value chain. This allows them to track customers, offer financing, and sell multiple products simultaneously.

🏦 Swedish fintech company Doconomy raised $37 million in a Series B funding round to expand its solutions that promote sustainable consumer choices. Doconomy's tools allow banks to drive climate action by helping users understand the environmental impact of their transactions.

🟢 Sustainable materials startup Claros Technologies raised $22 million in funding to support its technology for destroying PFAS, or "forever chemicals." The company's technology filters PFAS out of systems, concentrates them, and breaks the carbon-fluorine bond in these chemicals, returning the elements to their naturally occurring state.

🏢 Vizcab, a software startup focusing on building decarbonization, raised an additional €4.5 million in its Series A funding round, totaling €9 million. Vizcab's platform calculates the Life Cycle Assessment (LCA) of buildings to reduce carbon impact.

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