Sustainability Newsletter #45

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#Figure of the month - 9/10

More than 9 out of 10 executives plan to increase ESG spending this year

A large majority of executives expect to significantly increase their spending this year on ESG data, according to a new survey by Bloomberg and consulting firm Adox Research. For their study, Bloomberg and Adox surveyed over 100 portfolio managers, climate risk executives, and data management executives across North America, Europe, the UK and Asia Pacific. The survey found that 92% of executives are projecting increasing their spending on ESG data by at least +10% year-over-year, including 18% who expect ESG data spending to grow by +50% in 2023.

While some firms feel ahead in ESG capabilities, others admit to being behind. However, all executives agree that ESG data is important for keeping pace with peers, gaining a competitive advantage, and complying with regulations. Furthermore, data quality and coverage also appear as key criteria for selecting ESG data providers. The survey also examined the challenges the executives faced in managing ESG data, with constantly evolving and new ESG data content cited as the most challenging aspect of their firms’ data management.

Sources : Bloomberg, ESG Today


Trends and Initiatives

Startups are inventing cooling clothes for a hotter future

Every morning, thousands of construction workers in Qatar start their day by soaking their uniforms in water. The two-minute ritual kickstarts an important process: although temperatures hover around 48°C, the new uniforms can cool workers’ skin down to 8°C for over 7 hours. This new generation of uniforms has been marketed by British startup Techniche which uses its new Hyperkewl Plus technology associated with a polymer material. Constructed from an outer layer of specially designed mesh, plus a waterproof inside layer, the suits absorb and remove heat through evaporation.

In addition to being dangerous to human health, extreme heat also affects the economic productivity. In 2021, heat exposure nixed 470 million potential labor hours globally in agriculture, construction, manufacturing and the service industry, according to data compiled by The Lancet. In the US, President Joe Biden has said heat waves cost the country $100 billion annually.

Therefore, Techniche UK isn’t alone in seeing opportunity in apparel designed to beat the heat. With 2023 on track to be the hottest year on record, a number of startups are exploring new technologies and textiles for keeping people cool. In the US, work is underway to commercialize wearable technology that mimics air-conditioning, while scientists in China are working on highly reflective fabric. One truth remains certain, learning about heat protection will become a lifesaver in the future.

Sources : Bloomberg, TechNiche


Sustainable Finance

EU adopts rules requiring product emissions reporting for new import carbon tax

In August, the European Commission announced the adoption of reporting rules for importers of products under the Carbon Border Adjustment Mechanism (CBAM), the EU’s new carbon tax on imported goods, aimed at equalizing the carbon price paid by European producers with those outside the EU. The main purpose of CBAM, adopted by the EU earlier this year, is to avoid “carbon leakage,” a situation in which companies relocate production of emissions intensive goods to countries with less stringent environmental and climate policies.

The CBAM is part of the EU’s internal cap and trade carbon pricing mechanism. In the future, companies importing products into the EU will therefore have to purchase CBAM certificates to offset the carbon price difference. The new rules will require companies to begin collecting data on the embedded emissions of imported products in October 2023, with reporting beginning by the end of January 2024. In a transition phase, CBAM will initially apply to specific products from carbon intensive sectors, including iron and steel, cement, fertilizers, aluminum, electricity and hydrogen.

Sources : ESG Today, Business Review


Society and Planet

Artificial intelligence steps into lower carbon footprint of buildings

For the world to meet its CO2 emissions targets by 2050, the International Energy Agency says the energy of our buildings needs to decline by around 35% by 2030. As governments are introducing increasingly stringent energy codes for commercial spaces, developers and construction companies are still working to improve the energy efficiency of buildings.

The giant Jones Lang LaSalle Inc (JLL), which manages billions of square meters of commercial real estate around the world, has decided to bet on Artificial Intelligence (AI) to deal with these new challenges. “We want to make every building out there as smart as it can be,” said Ramya Ravichandar, JLL Technologies’s vice president. However, she also added “If you can’t measure what matters, you can’t make the change.” Therefore, the company has recently made a string of investments on AI systems aiming to cut CO2 emissions. The project is expected to be profitable as eco-friendly buildings charge higher rents and are on the market for less time. JLL says it expects 56% of organizations to pay a premium for sustainable spaces by 2025.

Although AI has big potential to cut the emissions of buildings, it depends on the data it learns from. However, today only 10% to 15% of buildings have the equipment or systems in place to gather the data needed to support AI. Therefore, companies like Siemens decided to leverage AI to compare buildings and predict potential energy savings after an upgrade to an intelligent energy management system.

Sources : Wall Street Journal, Forbes


Company news

Aramco targeted in UN Human rights probe tied to climate

-          Company : SAUDI ARAMCO 

-          Sector : Energy

-          Clover rating : Not rated 

Saudi Aramco is being investigated by the United Nations for possible human rights violations tied to fossil-fuel induced climate change. The company has been informed by the UN’s human rights and transnational corporations working group that it is looking into allegations that Aramco’s operations “appear to be contrary to the goals, obligations and commitments under the Paris Agreement on climate change” and are “adversely impacting the promotion and protection of human rights in the context of climate change” according to a letter published in August.

The probe follows a 2021 request to the UN Special Procedures human rights system by the environmental advocacy group ClientEarth to investigate Aramco. The nonprofit is targeting the Saudi oil company because it is the world biggest fossil-fuel producer and “the largest single corporate emitter of greenhouse gas leading to climate change” according ClientEarth.

Sources : Bloomberg, Novethic


Siemens enters U.S. solar inverter market

-          Company : SIEMENS AG  

-          Sector : Capital Goods

-          Clover rating : 6/10 

In August, Siemens announced that it will begin manufacturing solar inverters in the U.S. which will help meet growing demand for American-made renewable energy component. The solar components will be produced at a facility owned and operated by Siemens’ manufacturing partner Sanmina in Kenosha, Wisconsin. The announcement comes a year after the signing of the Inflation Reduction Act by President Biden, which includes the U.S.’ largest ever set of climate-focused investments. The Act allocates nearly $370 billion to areas including renewable energy and industrial decarbonization solutions.

Inverters are a key piece of equipment in solar systems, which convert direct current electricity (DC) generated by solar panels into alternating current (AC) electricity used by electrical grids. According to Siemens, the inverters will be used for community and utility-scale solar developers and infrastructure providers. Production at the facility is anticipated to begin in early 2024, and to scale up to a capacity of 800 MW per year.

Sources : Reuters, ESG Today,


Kraft Heinz announces goal to reduce the use of virgin plastic globally by 20% by 2030

-          Company : KRAFT HEINZ CO 

-          Sector : Food, Beverage & Tobacco

-          Clover rating : 4/10 

Global Food and beverage company Kraft Heinz announced a new commitment to cut the use of virgin plastic by 20% in its global packaging portfolio, as part of the company’s efforts to reduce its use of fossil fuels and adopt more sustainable packaging options. Virgin plastics are plastic materials that have not yet been used or processed into finished products. It is a plastic produced directly from petrochemical raw materials, without having been recycled from existing plastic.

The company estimated that achieving its new goal will reduce its use of virgin plastic by approximately £100 million. In parallel, Kraft Heinz highlighted a series of actions aimed at increasing recycled content and utilizing alternatives to plastic. Recently, the company has launched an eco-friendly multipack paperboard sleeve to replace plastic shrink-wrap. This launch aims to replace nearly 15% of PET rigid plastic packaging in the US by 2025. Moreover, Kraft Heinz is working on a joint project with Pulpex to develop a paper-based bottle made from wood pulp for HEINZ Tomato Ketchup.

Sources : ESG News, ESG Today



Institutional investors' commitment to a low-carbon economy accelerates

The 4th edition of the ESG Survey, carried out by BNP Paribas in conjunction with Global Markets, Financial Institutions Coverage and Securities Services, this year covered almost 420 investors and expanded its scope to include Scandinavian countries, Private Equity and Hedge Funds. Building on previous editions, the BNP Paribas ESG Survey 2023 examines institutional investors' progress in sustainable development through 3 reports to be published separately by the end of 2023. The 1st report, published in August, focuses on ESG data and reporting, the 2nd will examine "net zero" targets, and the 3rd will look at the integration of ESG expertise into operations. The main findings of this first report are summarized below:

  1. Low-carbon transition strategies are gathering pace, despite pressure on investors' public commitments linked to "net zero" targets: 41% of respondents say that commitment to "net zero" is a current priority within their organization.
  2. Impact investing is gaining in importance: with 54% of respondents planning to use it in the next 2 years (compared with 45% today), impact investing is becoming the most popular ESG approach worldwide.
  3. ESG expertise is now integrated into investment operations: 51% of respondents stated that their organization integrates ESG expertise and data into its portfolio management and investment decisions.
  4. Data quality remains the main obstacle to ESG investment: 71% of respondents say that inconsistent and insufficient ESG data is a significant barrier to ESG adoption (+17 points vs. 2021).
  5. Regulatory and reputational risks are driving factors: respondents are very keen to assess the financial materiality of regulatory and reputational risks.

This first report also highlights a common desire for more data on biodiversity, as well as the importance of active shareholding as a key ESG objective over the next 2 years. From "why" to "how", integrating ESG expertise into operations has become a key challenge for institutional investors.

Sources : BNP ParibasBoursier




BRICS countries fossil fuel production

The BRICS is going to change the power balance in the global energy market. BRICS, with Brazil, Russia, India, China, and South Africa, will have Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates as its new members, which will be effective from January 2024. Recent analysis published by VisualCapitalist reports that once the BRICS expands with 6 new member nations to its ranks, it will control nearly half of the world’s oil production (43%). Moreover, BRICS will possess significant iron ore, coal, and bauxite sectors let alone the key role they have in the world's agriculture.

Therefore, developed nations, typically the G7, rely to a great extent on trade with them and also on co-ordination on such issues as climate change and environmental issues. In terms of oil reserves, the group will also control nearly half of the world’s total, 719.5 billion barrels out of 1.6 trillion. If Venezuela, which has also recently applied for membership, is accepted into its ranks, the group’s control will be even greater – around 65.4%. In comparison, the G7 group of leading economies, the US, UK, Germany, Italy, Canada, France, and Japan, controls only 3.9% of known crude reserves. Analysts note that energy constitutes a big driver of this economic dominance and that the expansion of BRICS to the Gulf countries is likely to weaken the US global dominance. 

Source : AGEFI


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