What's Happening in Sustainability & ESG (Week Recap 30.07 - 05.08) 🌎

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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:

• Around a third of carbon credits fail the new benchmark test 🌍

• IASB proposes illustrative examples to improve reporting of climate-related and other uncertainties in financial statements 📑

• Moody's reports that despite a sharp decline in Q2 2024, sustainable bond issuance could reach $1 trillion by year-end 📈

• GRI and TNFD released a joint interoperability mapping resource to make reporting on biodiversity easier 📑

• and other news 🌍

THE WEEK’S TOP NEWS

Regulatory Oversight & Industry Insights

🌍 Around a third of existing carbon credits have failed to meet the criteria for a new standard that aims to serve as the global benchmark for the voluntary carbon market, its board said on Tuesday. All the credits that fell short of the benchmark in the latest assessment were linked to renewable energy. The Integrity Council for the Voluntary Carbon Market (ICVCM), an independent governance body, has sought to address integrity concerns by launching Core Carbon Principle (CCP) standards and is assessing the validity of projects. The ICVCM said eight renewable power methodologies, which cover around 236 million unretired, or unused carbon credits making up 32% of the market, had failed to meet the requirements of its standard on additionality grounds. Additionality is a measure of whether the project needed revenue from carbon credits sales to go ahead. If the project would have gone ahead regardless, then the argument that it has led emissions to be avoided, and should therefore be credited, is undermined. Amy Merrill, CEO of the ICVCM said renewable projects could still be part of the voluntary carbon market and that new methodologies can be submitted for consideration.

In related news, the Science Based Targets initiative (SBTi) released research indicating its new corporate climate standard may not allow carbon credits to offset value chain emissions. This marks a shift from earlier plans to use carbon credits, which caused controversy within SBTi. Founded in 2015, SBTi aims to establish science-based environmental targets as corporate practice. It defines best practices, aids companies in setting targets, and validates their emissions reductions. Currently, there are 5,500 companies with validated SBTi targets and over 3,000 companies with net-zero commitments. Following the release of the papers, Alberto Carrillo Pineda, Chief Technical Officer at SBTi said: “The outputs released are a critical step in understanding how the SBTi can develop a more sophisticated approach to scope 3 to help more businesses set targets. The SBTi believes that direct decarbonization must remain the priority for corporate climate action and looks forward to the extensive public consultation on the draft Corporate Net-Zero Standard.”

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MORE INTERESTING NEWS

Latest developments, reports, insights, and trends

📑 The International Accounting Standards Board (IASB) published a consultation document, proposing eight examples to illustrate how companies apply IFRS Accounting Standards when reporting the effects of climate-related and other uncertainties in their financial statements. These examples, developed in response to investor concerns, focus on materiality judgements, disclosures about assumptions, estimation uncertainties, and information disaggregation. The initiative aims to enhance transparency and align financial statements with sustainability disclosures, continuing IASB's efforts to improve climate-related reporting.

📑 The Global Reporting Initiative (GRI) and the Taskforce on Nature-related Financial Disclosures (TNFD) released a joint interoperability mapping resource to help companies report on nature-related and biodiversity risks using both GRI Standards and TNFD recommendations, avoiding double reporting. This guide aligns the two standards by incorporating consistent concepts, definitions, and metrics, facilitating streamlined and transparent reporting. The collaboration aims to support organizations in managing and disclosing their nature-related dependencies and impacts effectively.

📈 Moody's reports that despite a sharp decline in Q2 2024, sustainable bond issuance could reach $1 trillion by year-end. The market saw $234 billion in Q2, down 20% year-over-year, with a first-half total of $534 billion. Green bonds led the market, though Asia Pacific volumes dropped significantly. Social bond volumes fell 10%, while sustainable bonds rose 8%. Sustainability-linked bonds continued to decline due to investor scrutiny. Challenges include fewer new issuers and regulatory scrutiny, but new ICMA guidelines may provide clarity. Moody's forecasts $950 billion in issuance for 2024, with $1 trillion possible.

🇺🇸 The US House Judiciary Committee, led by Republican Chair Jim Jordan, demanded over 130 investors explain their ESG goals, scrutinizing initiatives like Climate Action 100+ for potential antitrust violations. This partisan issue reflects broader political divides, with Republicans concerned about job losses in the fossil fuel industry. Despite producing extensive documents, climate-focused groups like Ceres argue the committee's actions aim to deter ESG participation. No antitrust lawsuits have been filed, but the committee's actions have influenced some asset managers to leave climate coalitions. A Biden administration rule supporting ESG investing is still under litigation.

🇳🇿 New Zealand's government is reversing several environmental policies to boost the economy, including lifting bans on oil and gas exploration and delaying agricultural emissions pricing. This shift aims to support an economy with low growth and a significant current account deficit. While these changes are welcomed by farmers and some industries, environmentalists criticize them as shortsighted and harmful to long-term sustainability. The government insists it will meet climate targets through a cost-effective approach, but concerns remain about reputational and financial risks if targets are not met.

WHAT ARE COMPANIES DOING?

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

🟢 Masdar and TotalEnergies agreed to develop a green hydrogen to methanol to sustainable aviation fuel (SAF) project in Abu Dhabi, aimed at decarbonizing sectors like aviation and maritime. The project will use green hydrogen from renewable energy and capture CO₂ from industrial sources. Masdar, which aims to achieve 100 GW of renewable energy capacity and produce 1 million tonnes of green hydrogen by 2030, recently raised $1 billion in a green bond offering to support new renewable projects.

🟢 Deutsche Bank launched a sustainability-linked payables finance program for BASF in Asia, focusing on China, to encourage suppliers to adopt sustainable practices. Suppliers' sustainability performance will be assessed by EcoVadis, with better ratings leading to preferential interest rates. The initiative aims to deepen BASF's collaboration with suppliers and optimize supply chains, aligning with Deutsche Bank's sustainable finance goals of enabling €500 billion in sustainable financing and investments by 2025.

🛩️ Air New Zealand removed its 2030 carbon intensity reduction target and withdrew from the SBTi due to challenges in fleet renewal and SAF availability. Despite these setbacks, the airline declared that it remains committed to its "Flight NZ0" initiative and its 2050 net zero carbon emissions goal. Meanwhile, JetBlue entered a new supply agreement with World Fuel Services for up to 5 million gallons of SAF for use at New York’s JFK airport, starting in late 2024. The agreement involves blended SAF produced by Valero and Darling Ingredients, with an initial delivery of at least 1 million gallons of neat SAF.

📊 ISS ESG launched a new Industry Average Emission Intensity Data Set to help banks and insurance companies comply with climate reporting requirements like the EU’s CSRD and EBA Pillar 3 ESG Disclosures. This tool enables the estimation of emissions for non-listed companies and SMEs, supporting banks in managing large portfolios with scarce data. The data set follows PCAF recommendations and includes NACE and GICS industry classifications. ISS ESG also plans further updates to its Climate Solutions to assist financial institutions with various climate-related disclosure requirements.

EVERYTHING FINANCE

Funding rounds, sustainable finance, acquisitions & private equity deals

📈 Bill Gates-backed Breakthrough Energy Ventures raised $839 million for its third flagship climate fund, making it the largest climate fund raised this year. Founded in 2015, Breakthrough focuses solely on climate investments and has become a leading early-stage investor. Despite the risks associated with early-stage climate investing, such as long exit timelines and significant capital requirements, LPs remain optimistic about the sector. Breakthrough has successfully invested in several prominent climate startups, including Boston Metal, Redwood Materials, and Pivot Bio.

⚡️ Goldman Sachs Asset Management's Goldman Sachs Alternatives invested $440 million in renewable power company BrightNight to support its independent power producer (IPP) business model and expand its utility-scale portfolio in the US. BrightNight, founded in 2019, focuses on large-scale hybrid renewable projects and uses AI-based software to optimize operations.

📈 M&G plc’s impact investing unit, responsAbility Investments, raised over $200 million for its Asia climate investment strategy, including a $100 million investment from M&G’s Life business. Launched in November 2023, the strategy aims to reduce CO₂ in Asia by investing in low-emission technologies. The fund uses a blended finance structure to attract private capital for high-risk climate projects, focusing on sectors like renewable energy and electric mobility.

👕 Fashion-tech startup unspun raised $32 million in a Series B funding round to scale its zero-waste, emissions-reducing 3D weaving technology, Vega. The technology aims to address the fashion industry's significant climate impact by enabling almost zero-waste, on-demand, local manufacturing, reducing emissions, energy demand, and water consumption.

🟢 Graphyte, a leader in the durable carbon removal industry based in Pine Bluff, Arkansas, raised $30 million in a Series A funding round. The funds will accelerate the deployment of Graphyte's Carbon Casting technology, enabling the launch of four additional carbon removal facilities by 2026, aiming to remove over 5 million tCO₂/year by 2030.

📊 CBRE acquired Singapore-based sustainability advisory firm Paia Consulting to enhance its sustainability services for occupier and investor clients. Founded in 2002, Paia specializes in ESG risk assessment and sustainable solutions across Southeast Asia. The acquisition aims to expand CBRE's ESG services, including ESG training, green finance advisory, and carbon reporting.

⚡️ Accenture acquired Spanish engineering and consulting firm Boslan to enhance its capabilities in net zero infrastructure projects. Boslan, founded in 2000 and based in Bilbao, specializes in large-scale infrastructure projects such as wind farms, solar plants, and hydrogen infrastructure. With over 1,000 professionals across multiple countries, Boslan offers services including feasibility studies, project planning, and fieldwork supervision.

🟢 Woodside Energy acquired a Texas-based low-carbon ammonia plant from OCI Global for $2.35 billion to meet the growing industrial demand for clean fuels. The project, located in Beaumont, Texas, aims to abate significant CO₂ emissions and serve both domestic and international markets. OCI will manage the construction and startup until the project is fully operational.

📑 Mitsubishi UFJ Financial Group (MUFG) introduced a new Sustainable Finance Framework to fund environmental and social projects through Green, Social, and Sustainability bonds and loans. The framework specifies eligible projects in green and social categories, such as green buildings and renewable energy, and excludes financing for fossil fuels, defense, and other non-sustainable sectors.

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