ESG & Sustainability Newsletter 12/23

In this edition

1. News from the financial services and insurance sector

2. News around the world – What’s new?

3. White papers, studies and articles

4. Let’s get personal – WIACONs short interview

1. News from the financial services and insurance sector

These are the most sustainable insurers in the M&M rating

Morgen & Morgen has published a rating on ESG in the insurance sector. M&M awarded 5 stars to 16 of the 46 insurance companies analysed. The most positive ratings were achieved in the area of governance in particular, based on the publicly available information provided by the insurers. M&M assesses the ESG information mainly in terms of transparency and has applied its own criteria scheme for this. Quality requirements that go beyond the reporting obligation were not assessed.

Read more:

How car tyres threaten the rainforest

The tropical forests are in danger, partly because more and more rubber is needed for tyre production. Around 90 % of the tyres grown come from South East Asia. The main countries of cultivation are Thailand, Indonesia, Vietnam and India. Since 1993, around 4 million hectares of rainforest (primary forest) have been destroyed for rubber plantations, with around 85% of production being carried out by small farmers, usually with less than 2 hectares of land. Rubber is used in around 40,000 products, such as water hoses, rubber gloves, floor coverings and much more.

Around 70 % of the global harvest goes into the production of tyres. The rubber content of a car tyre is around 40 %, whereby this is a mix of natural rubber and synthetic rubber and varies between different tyre manufacturers. Around 1.7 billion tyres are sold every year. This means that one in four people buys a tyre every year. Stacked on top of each other, that would make a tower as tall as the moon. The film "How car tyres threaten the rainforest" shows the connections, effects and possible solutions.

Read more:

ESG funds with 5 trillion dollars increase investments in oil and gas

ESG is becoming increasingly important in politics and for companies. Even the European Central Bank (ECB) is urging banks to orientate themselves more towards ESG principles, particularly in their lending. The ECB is currently being given extended powers in this area.

Some banks, such as ING Germany, admit that they are now rejecting corporate customers who do not make sufficient efforts to implement ecological concepts. However, recent information shows that the investment industry, which positions itself as ESG-orientated, is increasingly investing in the oil and gas sectors.

Read more:

2. News around the world – What’s new?

Sustainability: ESG reporting too complex for SMEs

The EU Sustainability Reporting Directive (CSRD) requires companies to regularly publish environmental, social and governance information from 2024 (listed companies) or 2025 (smaller companies with 250+ employees or €40+ million turnover). Despite the importance of sustainability for 83 per cent of small and medium-sized enterprises (SMEs) surveyed worldwide, many are struggling to prepare for the requirements. According to a study by Sage, ICC and PwC, only 13 per cent of SMEs in Germany publicly comment on environmental impacts, although 40 per cent believe that sustainability reporting would improve their reputation. The challenge is to measure and communicate progress.

Read more:

EFRAG and GRI work together to develop standards for sustainability reporting

EFRAG and GRI have announced their second co-operation agreement to deepen their collaboration on sustainability reporting. The partnership includes the development of reporting standards and training. As part of this agreement, a GRI-ESRS Interoperability Index has been introduced to show the relationship between the disclosure requirements of the European Sustainability Reporting Standards (ESRS) and the GRI Standards. This avoids "double reporting" for companies that report according to both systems. The CSRD, expected from early 2024, will increase the number of companies required to report on sustainability-related aspects from 12,000 to over 50,000 and introduce stricter requirements for environmental, human rights and social reporting. The GRI Standards are leading the way in global sustainability reporting.

Read more:

Industry reacts with restraint to EU law on critical raw materials

The recently adopted EU law on critical raw materials shortens the approval periods for mining and recycling projects in order to reduce the EU's dependence on China. Despite industry support, there are concerns about the lack of investment support and unfavourable economic conditions. The law aims to extract 10% of minerals in the EU by 2030 and process 40%, with a recycling rate of 25%. Industry criticism emphasises regulatory hurdles such as energy costs and environmental regulations, while the USA is praised for its clear investment incentives. The industry is calling for sustainable mining investment and a return to the mining industry. Critics emphasise that despite positive aspects of the law, more needs to be done to meet EU Green Deal targets and argue for a long-term European Critical Minerals Fund to promote investment in Europe.

Read more:

Microsoft signs one of the largest contracts ever to remove 1.5 million tonnes of carbon from nature

Microsoft and Brazilian start-up Mombak have announced one of the world's largest contracts for the purchase of carbon credits from natural sources. Mombak will provide Microsoft with up to 1.5 million carbon credits from reforestation projects in the Amazon region of Brazil. The Brazilian company is focussing on sequestering carbon through large-scale reforestation of degraded pastureland with native tree species. The measures are intended to reverse biodiversity loss, improve water catchment areas and create social jobs in local communities. The agreement enables the reforestation of around 25 degraded areas in the Brazilian Amazon biome, with over 30 million trees from over 100 native species, including endangered species.

Read more:

CSDDD: Council and Parliament reach agreement to protect the environment and human rights

European legislators have reached a provisional agreement on the Corporate Sustainability Due Diligence Directive (CSDDD). The aim is to strengthen the protection of the environment and human rights worldwide. Large companies with more than 500 employees and a global net turnover of more than 150 million euros will be obliged to consider actual and potential negative impacts on human rights and the environment in their activities, subsidiaries and business partners. The directive will also apply to non-EU companies if they have a net turnover of more than 150 million euros in the EU within three years. The European Commission will have to publish a list of such companies. The next step will be adoption and approval by the European legislative bodies.

Read more:

Three companies supplying solar panels to the British Army are linked to claims of forced labour for Uyghurs; including comments from the companies

On 3 December 2023, it was reported that the British Army is using solar panels from companies believed to be heavily involved in Chinese forced labour. Production in Xinjiang is linked to the alleged exploitation of Uyghur Muslims. The Ministry of Defence named JA Solar, Trina and Qcells as suppliers of solar panels in its response to a Freedom of Information request. A report by Sheffield Hallam University attests to these companies' allegedly very high level of involvement in Xinjiang. Although JA Solar and Qcells are said to have promised measures against forced labour, Trina remained silent. Experts emphasise the lack of transparency in the supply chain. Allegedly state-sponsored programmes are forcing minorities in Xinjiang to produce solar cell components. Solar companies are said to have taken steps in recent years to cut their ties with Xinjiang and improve supply chain monitoring.

Read more:

3. White papers, studies and articles

ESAs propose changes to sustainability disclosures for the financial sector

On 4 December 2023, the three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) published their final report amending the draft regulatory technical standards (RTS) of the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR).

The ESAs propose adding new social indicators and streamlining the framework for disclosure of the main negative environmental and social impacts of investment decisions. The ESAs also propose new product disclosures relating to greenhouse gas emission reduction targets. In addition, the ESAs propose further technical revisions to the SFDR Delegated Regulation.

Read more:

Why it is so difficult to consume sustainably

Almost everyone has been caught out at some point: despite the desire to live more sustainably, people often opt for less sustainable products. The technical term for this phenomenon is the attitude-behaviour gap. It describes the discrepancy between one's own attitude and actual behaviour.

This discrepancy is particularly strong in Germany. This is shown by the Circular Economy Study by Kleinanzeigen. It found that even two thirds (65 per cent) of people with a positive environmental attitude only behave in an environmentally conscious manner occasionally, rarely or never.

Read more:

A new dilemma: regulation or sustainable development?

Guidelines such as the CSRD are driving the sustainable transformation. In this column, Alexander Kraemer reports on why sustainability managers are struggling between regulatory requirements and sustainable development. He reports on the fact that, despite their important remit, sustainability managers are repeatedly faced with a problem: The constantly growing regulatory framework. The smaller the company, the more difficult it becomes. At a medium-sized German company with just under 1,500 employees, there are hardly any resources for more people in sustainability management.

Read more:

4. Let’s get personal – WIACONs short interview

To gain an insight into how sustainability and the climate crisis affect WIACONers in their everyday lives, we asked the following question:

Where did sustainability, ESG or the climate crisis (or the absence of sustainability, ESG) play a role for you this month (privately or professionally)?

In our last edition for this year, Daniela Markworth-Schr?der, Senior Consultant at WIACON, talks about heating as a homeowner and points out interesting questions that homeowners should ask themselves about sustainable heating in winter.

Daniela Markworth-Schr?der: "Heating becomes an issue for me as a homeowner, especially in the colder months. Until now, I always thought I was doing well when it came to heating. When we bought the house, it already had a gas connection. I have underfloor heating throughout the house and a soapstone stove, which I can use to heat up with wood if necessary. I buy my firewood every year from a regional wood supplier who reforests his deforested areas. So I thought that I was being sustainable when it came to heating with wood. Last year, many neighbours suddenly bought a lot more firewood because of the gas crisis. I asked myself, if this is already so noticeable in our neighbourhood, what does it look like in Germany as a whole? Where is all the wood coming from? The trees can't grow back that quickly. Not forgetting the homeowners who use pellet heating. Where do the quantities of pellets come from? Are there really so many leftovers and waste from forestry?

During my research, I stumbled across topics such as "many billions of euros are earned every year with illegally felled trees" or that "testing companies certify the sustainability and legality of forestry companies with a seal of quality, even though they cut their wood in protected areas or use the wrong permits". The more I looked into the subject, the more I realised that my way of heating is not as sustainable. Since then, I've used wood less often, preferring to use three logs instead of five, and some thick socks and a cardigan can sometimes do the trick."*

*translated from German to English

Did you know…?

Sustainable heating: advantages and disadvantages of possible heating systems

Geothermal heat

The brine-to-water heat pump is regarded as a flagship innovation for sustainable heating. Installed underground, it utilises the ambient temperature of the deep layers of earth as a heat source.

Pro: No CO2 emissions after the heat pump is installed

Cons: Complex installation, high power consumption, high purchase costs (approx. 12,000 - 25,000 euros)

Tip: Electricity consumption can be made sustainable with a photovoltaic system

Source: https://praxistipps.focus.de/beste-heizung-der-zukunft-technologien-im-ueberblick_116448 , https://praxistipps.focus.de/nachhaltig-heizen-vor-und-nachteile-moeglicher-heizsysteme_136562

Air-to-water heat pump

The air-to-water heat pump is a more cost-effective alternative to the brine-to-water heat pump. Here, the ambient air is used as the heat source rather than geothermal heat. The costs are lower due to the above-ground installation.

Pro: No climate-damaging gases are emitted, lower costs

Cons: Compared to the brine-to-water heat pump, it is somewhat less efficient, high power consumption

Tip: Here too, electricity consumption can be made more sustainable with a photovoltaic system

Source: https://praxistipps.focus.de/nachhaltig-heizen-vor-und-nachteile-moeglicher-heizsysteme_136562

Electric heating

Electric heating is powered by electricity.

Pro: Low purchase costs

Cons: High operating costs

Tip: To be able to heat sustainably with an electric heater, it should be operated with pure green electricity

Source: https://praxistipps.focus.de/nachhaltig-heizen-vor-und-nachteile-moeglicher-heizsysteme_136562

Pellets

Older heating systems can be converted from heating oil to wood pellets. This can (at first glance) save CO2.

Pro: Simple conversion of old heating systems, wood from ecological sources can be a sustainable alternative to heating oil

Cons: In addition to the CO2 emissions caused by burning, CO2 is also produced during the production of the pellets. This results in an additional 23 grams of CO2 per kWh.

Source: https://praxistipps.focus.de/nachhaltig-heizen-vor-und-nachteile-moeglicher-heizsysteme_136562

Green gas

Green gas produces fewer CO2 emissions than heating with oil, but CO2 emissions are still high. Some companies therefore offer compensation through reforestation.

Pro: If the compensation measures are successful, green gas can become lower in CO2 emissions

Cons: Reforestation projects (to achieve climate neutrality) are often not successful, large amounts of CO2 are produced when natural gas is burned, the production of plants for biogas plants requires a lot of agricultural land

Source:?https://praxistipps.focus.de/nachhaltig-heizen-vor-und-nachteile-moeglicher-heizsysteme_136562

This is how "sustainable" wood pellets are

Although wood biomass is categorised as "renewable", it should not be forgotten that large areas of forest are cleared for the production of wood pellets. Contrary to what some pellet companies claim, wood leftovers are not used exclusively for the production of pellets. In the long term, biodiversity and the climate suffer as a result.

Source: https://blogs.nabu.de/holzpellet-industrie/ , https://www.br.de/nachrichten/deutschland-welt/verheizte-waelder-das-grosse-geschaeft-mit-brennholz-und-pellets,TO06ALQ