Divestments, Economics of Biodiversity, Climate Moonshots, and Paris

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Here are 5 ESG insights you might have missed this week:

The Dasgupta Review: Economics of Biodiversity-

• The UK Government has issued a report from the Independent Review on the Economics of Biodiversity led by Professor Sir Partha Dasgupta.
• The landmark report says GDP should be ditched as a measure of wealth and nature valued to protect wildlife and humans.
• About half of global GDP – some $44 trillion – depends on nature. Biodiversity, the report says, enables nature to be “productive, resilient, and adaptable.”
• Dasgupta calls for an accounting system that values natural assets on par with produced capital and human capital.
• The Dasgupta review concludes: “To detach nature from economic reasoning is to imply that we consider ourselves to be external to nature. The fault is not in economics; it lies in the way we have chosen to practice it. Transformative change is possible – we and our descendants deserve nothing less.”
• Source: https://www.gov.uk/government/publications/final-report-the-economics-of-biodiversity-the-dasgupta-review & https://www.theguardian.com/environment/2021/feb/02/economics-of-biodiversity-review-what-are-the-recommendations

Norweigan Wealth Fund Withdraws from Oil Sector-

• New CEO focuses on sustainable investing and orders asset managers to find investment opportunities in renewable infrastructure.
• The world’s largest sovereign wealth fund announced it had sold its entire portfolio of companies focused on oil exploration and production by the end of 2020.
• Trond Grande, the fund’s deputy CEO, spoke after the fund revealed a $10bn loss on oil and gas holdings in 2020 that had been valued at more than $40bn at the start of the year.
• Overall, 2020 was one of the fund’s best years ever, with the total portfolio generating $123bn in returns, buoyed in particular by its holdings of tech stocks.
• Source: https://www.businesslive.co.za/amp/bd/companies/2021-01-29-norway-wealth-fund-withdraws-from-oil-sector/

The U.S. Rejoined the Paris Agreement. Now Comes the Hard Part-

• Four years of inaction mean the country is far behind on the commitments required by the climate agreement. The Biden administration will need to take bold actions to keep the U.S. on track.
• While the new administration can accomplish several things directly, it’s also important for Congress to pass new laws.
• Here are a few of the key policies that the government could pursue: 100% clean power by 2035, scaling up electric cars, retrofit buildings, R&D for hard-to-decarbonize industries.
• “Rejoining is just the threshold,” says Rachel Cleetus, the policy director for the climate and energy program at the Union of Concerned Scientists. “We need to do a lot more to show the world that the U.S. is going to do its fair share.”
• Source: https://www.fastcompany.com/90596791/the-u-s-rejoined-the-paris-agreement-now-comes-the-hard-part

The ESG Investor’s Dilemma: to Engage or Divest?-

• Asset managers are debating whether it is time to get tough with problem companies.
• Seen historically as a pressure tactic reserved for students and religious investors, divestment has become an issue that the world’s biggest asset managers can no longer ignore.
• But divestment comes at a cost. Investors might lose out on juicy returns in legal and profitable — albeit controversial — companies. They also lose their voice as partial owners of a company when they sell their stakes.
• In a 2020 paper on the debate over engagement versus divestment, a trio of professors at the Universities of Trento, Harvard and Chicago found that exiting is less effective than engagement in pushing companies to act in a socially responsible manner. There is no guarantee that a divestment will achieve a desired social goal, while consistent badgering can.
• Source: https://www.ft.com/content/814cbd2c-00db-41b7-91af-28435301a8a2

Microsoft's Path to Carbon Negative – a Progress Report on our Climate ‘Moonshot’-

• Microsoft emerges as a major customer for captured carbon.
• The software giant paid an average of $20 per ton for up 1.3 million metric tons of carbon removal last year, making it one of the market’s largest purchasers. The carbon credits will help the company make progress on its ambitious goal to be carbon negative by 2035 and to eliminate by 2050 all the carbon it has emitted since it was founded in 1975.
• "This includes a commitment to combine carbon reduction with carbon removal, so the second doesn’t become an excuse to avoid the first. That’s what we’ve worked to do by reducing our own emissions and embarking on carbon removal. It’s imperative that we move away from paying for carbon avoidance and focus on paying for carbon removal."
• Increasingly, investors and shareholders are asking for or even demanding this type of change. As BlackRock CEO Larry Fink put it this past week, “We know that climate risk is investment risk. But we also believe the climate transition presents a historic investment opportunity.”
• Source: https://blogs.microsoft.com/blog/2021/01/28/one-year-later-the-path-to-carbon-negative-a-progress-report-on-our-climate-moonshot/ & https://impactalpha.com/microsoft-emerges-as-a-major-customer-for-captured-carbon/

One more thing: from Corporate Knights - The world's 100 most sustainable companies. After screening companies for gross revenues in excess of USD 1 billion (FY 2018), their methodology has several KPIs, including: resource management, financial management, employee management, and clean revenue.

Find the ranking here- https://www.corporateknights.com/reports/2021-global-100/2021-global-100-ranking-16115328/

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