Sustainability Newsletter #38
#Figure of the month - €4.1 trillion
The circular economy, a €4.1 trillion opportunity?
The 'circular economy' has become one of the most used phrases in business. It refers to all the work involved in recycling, reducing waste and creating new sustainable jobs. The World Economic Forum cites figures from the consultancy firm Accenture, which says the job of introducing such changes could represent a market worth €4.1 trillion between now and 2030. The International Labour Office estimates that transitioning to a circular economy could create six million jobs worldwide as companies get to grips with replacing traditional ways of making money by “extracting, making, using and disposing”. Circularity also brings with it the promise of efficiency. Accenture predicts that carmakers taking a circular approach to manufacturing could enjoy a 150% boost in profits.
Every year in Europe, eleven million cars end their life and the auto industry dumps massive amounts of waste, toxic chemicals and metals into landfills. Yet 85% of the materials used to make cars can be recycled. In France, the auto giant Renault has recently presented its last factory named “Refactory” as the first European circular economy site dedicated to mobility. It launched the project two years ago and hopes it will generate 200 million euros in turnover by 2025. To federate an ecosystem around its brand, the group has just launched a start-up hub dedicated to the circular economy in order to combine knowledge and innovation.
Trend and Initiative
Investors want to accelerate the feminization of French corporate management
The 30% Club France has published its second annual report. This club, created in November 2020 by six asset managers, aims to promote better gender diversity within the management teams of SBF 120 companies. Even though it seems that most companies are convinced of the interest of promoting diversity in their management bodies, actions are still hard to be observed.
According to this report, SBF 120 companies have an average rate of only 27% of women at the highest management levels. For Marie-Sybille Connan, President of the 30% France Club, seventeen companies have already reached 40% and are pulling the group up. These include Schneider, Legrand, Dassault and Bolloré. On the other hand, fifty-five companies still have less than 30% of women on their board of directors. Worse, eleven companies have less than 15% women on the board. The hoped-for goal is to reach 30% by 2025. However, it is not certain that this will be the case when such a measure of feminization (the Rixain law) will be made compulsory only by 2027. In the United States, the Harward Business Review reports that in 2022, 45% of the new board members of the largest US companies (Fortune 500) were women. This jump has improved gender parity and reached 30% of women on the boards of the Fortune 500 companies.
Davos World Economic Forum: key take-aways on sustainability
Against the backdrop of a ground war in Europe, the threat of recession, and evolving globalization, the World Economic Forum’s annual meeting in the Swiss mountain town of Davos came to a close on Friday 20th January. This year’s event was the largest in history, convening a record number of leaders from governments, businesses, and civil society. The main take-aways on sustainability are presented below:
The world needs a unified approach to sustainability, economic, and health-related challenges. The Microsoft CEO Satya Nadella has highlighted how tech has enabled us to make rapid progress on global issues, such as climate change, health care and education. He stressed that the public and private sector must work together if we are to create an inclusive society where no one is left behind.
Urgent action is needed to tackle the climate crisis. To make improvement in carbon emissions, leaders must balance the energy transition and energy resilience. Efforts on CEO green pledges and climate financing appeared sluggish. Political leaders like Kier Starmer railed against new oil investments and Pakistani climate minister Sherry Rehman pushed for loss and damage funding. On the outside, Greta Thunberg and activists called on the energy industry to stop hijacking the transition to clean power.
Global companies are finding that inclusion is helping them tap underserved markets, giving them a competitive edge. A work on inclusive reporting named “ESG and Disability Data: A call for inclusive reporting” developed by Allianz and London Stock Exchange Group has been presented during the forum. Disability inclusion appears strikingly absent from standardized key performance indicators through which organizations measure their impact, performance, and the value they bring to society.
Companies’ pension funds face rising pressure to offer ESG retirement options
Corporate retirement plans are heavily invested in the fossil fuel industry. However, that could start to change this year as a new US rule comes online and employee pressure builds for more climate-friendly option. Started in January, a Department of Labor rule will take effect that explicitly allows fiduciaries to consider climate change and other environmental, social, and governance (ESG) factors in the selection of corporate-sponsored retirement plans.
Nevertheless, ESG criteria in investment have already been the subject of much controversy in the United States. While the Biden administration is encouraging more responsible investment initiatives, the reaction of Republicans is feared. Indeed, some companies have already been boycotted for their use of environmental, social and governance (ESG) factors in their investment strategy. Last year, Florida Governor Ron DeSantis, a rising star in the Republican Party, withdrew $2 billion in public assets from BlackRock because of its adherence to ESG values.
Source: Business Time
Society and Planet
Major aid plan for the development of clean technologies launched by the European Commission
The European Commission has announced a vast plan to support the development of clean technologies, a direct response to the protectionist measures of the American Inflation Reduction Act. These measures mark a radical change in the approach to international trade relations. Repeated crises and the disruption of global supply chains are pushing states to try to ensure their economic sovereignty, even if it means breaking the rules of free trade. Ursula von der Leyen, the President of the European Commission, detailed to global leaders in Davos the strategy she intends to deploy facing the American Inflation Reduction Act (IRA), which provides for nearly $370 billion in subsidies for green technologies.
"We will propose a new regulation for a low-emission industry. The aim will be to focus investment on strategic projects" in the wind and solar sectors, heat pumps, clean hydrogen and energy storage. And "to simplify and accelerate the authorization procedures for new clean technology production sites," she explained.
Nevertheless, the fight against climate change is by definition a global issue that requires global cooperation. "If we focus only on the impact of industrialized countries and don't think about emerging markets, we are all ruined," warned Kristalina Georgieva, managing director of the International Monetary Fund (IMF) at the World Economic Forum. "The key issue is not China first, America first, or Europe first. The key issue is climate first," said French Economy Minister Bruno Le Maire.
Activists sue French food firm Danone over use of plastics
- Company : DANONE SA
- Sector : Food & Beverages
- Clover rating : 8/10
Danone, the French yoghurt and bottled water company, is sued by three environmental groups who accuse it of failing to sufficiently reduce its plastic footprint. Indeed, the French 2017 “duty of vigilance” law makes it mandatory to carry out monitoring of human rights and environmental concerns within large French companies and their supply chains. Danone was named, alongside Coca-Cola, PepsiCo, and Nestlé, as one of the world’s top 10 plastic polluters, according to a brand audit in December.
In a statement, Danone rejected the accusation. “We are very surprised by this accusation, which we strongly refute. Danone has long been recognized as a pioneer in environmental risk management, and we remain fully committed and determined to act responsibly.” The group added “We are implementing a comprehensive framework of actions aimed at reducing the use of plastic, developing reuse, strengthening collection and recycling schemes, and developing alternative materials. We have already made significant progress on each of these fronts, particularly on plastic reduction, with, for example, a decrease of 12% at global level (60,000 tons in absolute) between 2018 and 2021.”
Holcim granted €328 million by EU for building materials decarbonization projects
- Company : HOLCIM AG
- Sector : STEEL, CONSTRUCTION MATERIALS, OTHER METALS AND MINING
- Clover rating : 0/10
Leading building materials company Holcim announced in January that it has been granted €328 million for decarbonization projects through the European Union Innovation Fund. The EU Innovation Fund is one of the world’s largest funding programs for the demonstration of innovative low-carbon technologies. The European Commission announced last year that it will invest an additional €3 billion in cleantech projects through the fund.
Building materials companies are coming increasingly in focus in the fight against climate change, due to the carbon intensity of their primary products. Cement production, an ingredient in concrete, accounts for approximately 8% of global carbon dioxide emissions, with over 900 kg of CO2 emissions generated for every 1000 kg of material produced.
According to Holcim, the funding will be used to accelerate development of two of its carbon capture utilization and storage (CCUS) projects in Germany and Poland. The projects are part of the company’s carbon improvement roadmap, which includes plans for more than 50 CCUS projects worldwide. The company has recently announced several initiatives aimed at utilizing captured carbon for cement production, including a partnership with energy company Eni, and an investment in Blue Planet Systems, a provider of technology to sequester carbon emissions into aggregate.
Deere & Co. will allow US farmers to repair their own equipment
- Company : DEERE & CO.
- Sector : Capital Goods
- Clover rating : 7/10
The American Farm Bureau Federation and machinery manufacturer Deere & Co (DE.N) signed a memorandum of understanding on January 8th that ensures farmers have the right to repair their own farm equipment or go to an independent technician, rather than requiring the use of authorized parts and service centers. Users will have access to official diagnostics, manuals, tools and training. Deere will let owners disable electronic locks, and won't bar people from legally obtaining repair resources even if the company no longer offers them. The pact is characterized as a "voluntary" private arrangement. However, it comes alongside mounting political pressure that effectively gave John Deere little choice but to improve repairability. President Biden ordered the Federal Trade Commission to draft right to repair regulation in 2021, while states like New York have passed their own (sometimes weakened) legislation. If Deere doesn't act, it risks legal battles that could limit where and how it does business in the country.
As it stands, the farm equipment maker isn't alone in responding to government action. Apple, Google, Samsung and other tech brands now have do-it-yourself repair programs in place. Microsoft will offer Surface parts to users later this year.
Earth’s ozone layer recovers as airborne chemicals decline
The Earth’s protective layer is on track to recover within four decades as damaging airborne chemicals are phased out, helping to shield humans from the sun’s rays and limit global warming, an UN-backed scientific panel said.
Scientists first identified a hole in the ozone layer, which helps filter out ultraviolet rays, in 1985. A rare international agreement was reached in 1987 to phase out gases including chlorofluorocarbons (CFCs), which were used in products such as air conditioners, refrigerators and deodorants but were breaking down ozone in the upper atmosphere. A 2016 update to the so-called Montreal Protocol also phased out hydrofluorocarbons (HFCs), which do not directly deplete ozone but have a strong climate change effect. Since the chemicals were banned, there has been a “notable recovery” in the upper layer of the stratosphere, according to the report by the Scientific Assessment Panel to the Montreal Protocol, which is updated every four years. The HFC phase-out has also avoided an estimated 0.5C of warming by 2100.
“Our success in phasing out ozone-eating chemicals shows us what can and must be done—as a matter of urgency—to transition away from fossil fuels, reduce greenhouse gases and so limit temperature increase” said Professor Petteri Taalas, Secretary-General of the World Meteorological Organization. If current policies remain in place, the ozone layer is expected to recover to 1980 levels — before the appearance of the hole — by around 2066 over the Antarctic, by 2045 over the Arctic and by 2040 for the rest of the world.
Carbon dioxyde removal (CDR) objectives from industry groups and companies, under 3 different methods: Direct Air Carbon Capture and Storage (DACCS), Biochar and Bio-energy with Carbon Capture and Storage (BECCS).
Innovation in CO2 removal is active and growing
Recent studies show that global governments are generally investing more in sustainable and responsible research and development (R&D), including via direct CO2 removal funding that totaled approximately $4.1 billion in investment between 2010 and 2022. The proposed U.S. Direct Air Capture (DAC) demonstration centers account for the vast majority of traceable public funding in 2022 ($3.5 billion).
Innovation in CO2 removal is also being transformed into intellectual property as well as new business models for companies. CO2 removal patents have increased in number and diversified in technological focus over the past 15 years, with a large and growing share in China. In 2018 - the latest year of complete application data - China accounted for more than one-third of all patents on CO2 removal topics.
CO2 removal projects totaled about $200 million between 2020 and 2022. The vast majority of announced projects focus on direct air carbon capture and storage (DACCS,) biochar, and bioenergy with carbon capture and storage (BECCS), which are the most prevalent methods today. Many companies and industry groups have made ambitious announcements about their carbon dioxide removal objectives. Nevertheless, the ambitions of the current industry are still five times smaller than the total market potential, which represents a source of future opportunities.
Source: Carbon Brief
Do not hesitate to contact your dedicated Relationship Manager should you need any more requirements.
This material was produced by BNP Paribas (Suisse) SA. The information and opinions expressed in this document are entirely those of the author hereof, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, and are subject to change without notice. No representation or warranty, express or implied, is made that such information, opinions and projections are accurate or complete and they should not be relied upon as such. Neither BNP Paribas (Suisse) SA nor any person connected with it accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this document. This document does not constitute or form part of an offer document or any offer or invitation to finance. This material shall not constitute an offer or solicitation in any state or jurisdiction in which such an offer or solicitation is not authorized or to any other person to whom it is unlawful to make such offer, solicitation or sale. It is not, and under no circumstances is it to be construed as, a prospectus or advertisement, and the information contained in this material is not, and under no circumstances is it to be construed as, a public offering of any type. In making an investment decision, individuals must rely on their own examination of the terms of any potential financing proposal, including the merits and risks involved.
The Bank or the group to which it belongs, or its employees/directors may hold or have held positions or an interest in the products mentioned, or have acted as a “market maker” for these products and may be connected with the companies involved and/or their directors and furnish them with various services.
No representations or warranties of any kind are intended or should be inferred with respect to the economic return from any investment in any, financial product and/or services described herein. Nothing contained herein should be construed as constituting legal, tax or any financial advice. Individuals should consult their own professional advisors as to the legal, tax, financial or other matters relevant to the suitability of any of the financial products and services described herein.