What's Happening in Sustainability & ESG (Week Recap 30.04 - 06.05) 🌎

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:

• Comment: ESG has flaws, but it’s the most important change-management exercise of our time 💭

• The EU and IFRS publish interoperability guidance to ease compliance 🇪🇺

• If Trump were to win, an SEC under his administration would likely roll back the new climate disclosure rules 🇺🇸

• The EU consumer authorities initiated action against 20 airlines for misleading greenwashing practices 🛩️

• The UK High Court ruled the government's strategy to achieve net zero emissions by 2050 as unlawful 🇬🇧

• and other news 🌍

THE WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

💭 In the face of scrutiny and criticism, it's crucial to discern between merited and unmerited critiques of ESG. Merited criticisms of ESG highlight issues such as opaque ratings methodologies, conflicts of interest, and the need for greater transparency for ESG rating providers. Addressing unmerited criticisms involves dismantling the perception of the anti-ESG movement that ESG is inherently restrictive. A holistic consideration of ESG provides more information that can benefit both investors and companies. This holistic information can help identify financial, reputational, and compliance risks, which may materialize into adverse impacts for a company, its investors, and for people and the planet.

What we are witnessing now is a gradual shift towards the disaggregation of ESG. Regulations are becoming more targeted – covering human rights, biodiversity, climate change, and more. Data providers are selling fewer ratings and more granular data. This is because investors are becoming more sophisticated and disaggregating ESG themselves, for refined clarity over their portfolios and to meet specific and evolving client needs. While there may be debates about nomenclature, ESG, in some shape or form, is here to stay. Ultimately, the principles of ESG are linked to a company’s operational excellence and its ability to be future-proof in a changing world. It’s a concept that is hard to politicize because it mattered before the Paris Agreement and will continue to do so even after we reach net zero.

🇪🇺 The EU and the global standard setter, IFRS Foundation, have agreed on joint guidance to reduce overlaps in sustainability-related disclosures for companies by publishing the ESRS-ISSB standards interoperability guidance. The document aims to illustrate the alignment between the EU's ESRS and the IFRS’s ISSB standards and to make these two sets of standards "interoperable" to ease compliance. The ISSB also published the IFRS Sustainability Disclosure Taxonomy, a digital tool to help investors analyze sustainability-related financial disclosures and aimed to improve the accessibility and comparability of sustainability-related financial information.

🇺🇸 Staying in the realm of reporting and regulations, CNBC reports that if Trump were to win a second term as President, the SEC under his administration would likely roll back many of the recent environmental rules, including the new climate disclosure rules. The potential rollback is linked to Trump's disapproval of ESG investment standards, and the argument that the climate disclosure requirements cost companies and investors a significant amount of money without providing any benefit.

SPONSORED BY: ClimatEU

MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

🛩️ The European Commission and EU consumer authorities have initiated action against 20 airlines for misleading greenwashing practices, particularly claims about offsetting CO2 emissions through additional fees for climate projects or sustainable aviation fuel. This follows a complaint by the European Consumer Organisation (BEUC) against misleading climate-related claims by several European airlines. The airlines have been asked to align their practices with EU consumer law or face potential enforcement actions.

 🇬🇧The UK High Court has ruled the government's strategy to achieve net zero emissions by 2050 as unlawful for the second time, stating it falls short of legal requirements. The court supported claims that the plan lacked sufficient information on the risk of achieving the required emissions reductions. The government has been ordered to produce a revised climate strategy within 12 months. The ruling follows a prior case brought by environmental and legal campaign groups, who argued the government's strategy failed to detail how climate targets would be achieved.

📈 Global issuance of green, social, sustainability, and sustainability-linked (GSSS) bonds rebounded in Q1 2024, rising 36% to $281 billion, according to Moody’s. Despite this, the share of sustainable bonds in total global bond issuance fell to 12% from 14% in 2023. Green bonds dominated the GSSS market, accounting for 60% of volumes, while sustainability-linked bond issuance declined sharply. Moody's maintained its full-year forecast for GSSS bond issuance at $950 billion for 2024.

📑 According to Workiva's 2024 ESG Practitioner Survey, 83% of companies anticipate challenges in collecting accurate data for the EU’s CSRD, despite 98% being confident in their ESG data accuracy. Despite challenges, 81% of companies not required to comply with the CSRD plan to align their sustainability disclosures with the new regulation. Companies see benefits in improved ESG reporting, with 88% agreeing it gives a competitive advantage and 84% stating it enables better decision-making. Investments in technology for ESG initiatives are expected to increase, with a focus on data compilation, collaboration, analysis, and validation.

WHAT ARE COMPANIES DOING?

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

🟢 Microsoft and Stockholm Exergi have signed a 10-year agreement for the largest-ever carbon removal deal, with Stockholm Exergi providing Microsoft with over 3.3 million metric tons of carbon removal certificates. Stockholm Exergi's facility, which received an environmental permit earlier this year, aims to capture 800,000 tons of CO₂ annually once operational. In other news, Microsoft has also signed a global renewable energy framework agreement with Brookfield, to contribute to its goal of matching its electricity consumption with zero-carbon energy purchases by 2030. The agreement, which aims to decarbonize global energy supplies and reduce carbon emissions, will enable Brookfield to deliver over 10.5 GW of new renewable energy capacity between 2026 and 2030.

🌳 Carbon removal buyer coalition Frontier has facilitated carbon removal agreements worth over $58 million with biomass carbon removal and storage provider Vaulted Deep. The deal, involving corporate buyers such as Stripe, Alphabet, McKinsey, H&M, and JPMorgan Chase, will see Vaulted Deep remove and permanently store more than 152,000 metric tons of CO2 by 2027.

📊 Carbon credit ratings provider Sylvera has launched new tools to help investors discover, compare, and assess carbon reduction projects. The new tools provide an overview of project quality and risk factors, and aim to address the challenges in the unregulated and rapidly growing carbon credit market, such as inconsistent data and project fragmentation.

📊 IBM has expanded its ESG data platform, IBM Envizi, to include features aimed at helping organizations meet the EU's CSRD requirements. IBM Envizi now embeds European Sustainability Reporting Standards (ESRS) questions in its software, automates data collection and management, and allows report-ready data to be extracted in various formats.

EVERYTHING FINANCE

Funding rounds, sustainable finance, acquisitions & private equity deals

🟢 Arbol, a climate risk solutions provider, has secured $60 million in Series B funding. The funding will enhance Arbol's ability to tackle climate-related insured losses, particularly in the wake of a year marked by unprecedented climate events. Arbol's parametric insurance delivers payouts based on predefined climate data triggers, replacing time-consuming manual damage assessments.

📡 Infrastructure sustainability-focused startup AiDash has raised $58.5 million in a Series C funding round. The company uses satellite analytics and AI to help infrastructure industries improve climate resilience and sustainability.

🟢 Estonia-based Stargate Hydrogen has raised €42 million in seed funding to advance its green energy technology. The company has developed a catalyst that enhances electrolysis efficiency and reduces costs, aiming to lower the cost of green hydrogen to €1 per kilogram.

📊 Carbonfact, a carbon management software startup, has raised $15 million to support its solutions for automating environmental data collection and reporting in the fashion industry. The company's software connects to IT systems, cleans and analyzes data, and uses machine learning to fill in gaps and provide reliable footprint calculations.

📈 Goldman Sachs Asset Management is set to acquire UK-based environmental risk reduction specialist Adler & Allan from Sun European Partners. Adler & Allan provides services to help organizations manage environmental risks and maintain their infrastructure.

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