Future in Sight, the Re:Co Newsletter | January 2023
Re:Co | B Corp Certified
Connect the dots between Sustainability and Value Creation
Happy New Year to all and welcome to the January issue of the Future in Sight newsletter. We’re setting our sights high for an exciting year of driving sustainability results in private markets. In this month’s edition, we capture a few of the things you might have missed at the end of 2022 as well as some of the emerging stories from this month.
We’re also on the road quite a bit in the next few months, and our team is looking forward to joining the dialogue on ESG at a number of upcoming events. In February, our COO & Head of Client Solutions, Eric Bloom, is joining a panel entitled “ESG: What Really Matters?” at the?RealDeals Mid-Market Conference?in London. And in March, our CEO, Jennifer Wilson, is moderating a panel on avoiding greenwashing in private markets at the?Responsible Investment Forum?in New York. It would be great to see you at either of these events – please reach out if you’ll be there and we’ll arrange a meeting.
Our team continues to grow as well: Our CTO, Lee Brooks, is in the process of hiring a Software Engineer. If you know of any stellar candidates for the role excited about using their skills to enable clients to shine on ESG, please pass along?the job posting?and get in touch with us.
World Economic Forum Addresses ESG… But Largely Avoids Use of the Term
Thousands of business and political leaders descend on Davos, Switzerland for the annual?World Economic Forum (WEF)?this week. With ESG concepts taking center stage in corporate and financial settings in recent years, it should come as no surprise that they have permeated the event’s sessions and publications, such as this year’s excellent edition of the?WEF Global Risks Report?that was recently released. That report highlights failures to address climate change, stewardship of natural resources, and the cost-of-living crisis as among the most pronounced risks among the report’s survey respondents – some of the very themes that ESG aims to address.
Despite this, a scan of the WEF agenda features the term “ESG” just once, while other associated terms such as climate, equity, and transition appear dozens of times. This subtle approach to the language around ESG concepts suggests that, while the concepts themselves remain top-of-mind for business and political decision-makers, many still shy away from the term itself.
ISSB to Incorporate Nature into Disclosure Standards
At the?UN Biodiversity conference (also known as COP15)?held in Montreal in December 2022,?International Sustainability Standards Board (ISSB)?chair Emmanuel Faber stated that sustainability is “inextricably” linked to nature. Nature-related themes will likely figure prominently in the organization’s standards when they are released later in 2023;?the ISSB is reportedly moving fast to finish the standards. Whereas ESG-driven environmental disclosures to date have been heavily weighted toward climate and carbon emissions, Faber’s statement indicates that nature and biodiversity factors will emerge as important topics in environmental disclosure going forward.
The ISSB is relying on the work of the?Task Force on Nature-Related Financial Disclosures (TNFD)?to inform standards development, which will require reporting companies to measure and disclose the environmental “pressures” of their operations. This focus on nature builds on previous motions by the ISSB, such as?the vote to prioritize Scope 3 emissions back in October, as well as other statements on human rights, human capital, water, and deforestation, that bring the standard into clearer focus.
Validity of Carbon Offsets under the Microscope Again Following Investigation
A joint investigation by the Guardian, Die Zeit, and Source Material?into Shell’s use of over USD$450 million worth of carbon offsets as a core part of its climate strategy found that over 90% of their rainforest offset credits are likely to be “phantom credits” that do not contribute meaningfully to carbon reduction. At issue is that carbon reduction products verified by Verra (the leading offset standard in the USD$2 billion offsets market) only deliver 10% or less of the reductions claimed, according to the investigators’ review of satellite images and other data sources.
Nature-based carbon offsets have faced broad questions in recent years regarding their ability to deliver promised climate benefits, with critics pointing to a lack of transparency into projects as well as shortcomings in their long-term durability, among other issues, and many would-be buyers have turned toward carbon removal technologies that address those issues more readily. The investigation also serves as a reminder that companies engaging in decarbonization must futureproof their programs by starting with meaningful carbon reductions in their operations before considering carbon offsets.
领英推荐
Re:Co’s free white paper,?Pioneering ESG Measurement: Principles for Setting Metrics for Private Equity Firms and Portfolio Companies, offers insights on best practices in setting ESG metrics that simplify the process and ensure meaningful action in the long term.
Click the image at left to download a free copy of the white paper.
What We’re Reading
EU to Implement Carbon Border Tax Scheme?– In case you missed it before the holiday break, the Carbon Border Adjustment Mechanism, which members of European Parliament agreed on in December, aims to bolster Europe’s decarbonization efforts by adding a tax to certain products manufactured outside the bloc, with an initial focus on raw materials and electricity.
BlackRock Chief States that ESG Inflows Exceeded Outflows in 2022 Despite Backlash in U.S.?– Although a handful of U.S. states have indicated that they plan to remove funds from investors that engage in ESG, BlackRock chief, Larry Fink, who has been an evangelist for ESG, stated in Davos that inflows in 2022 were $230 billion, dwarfing the estimated $4 billion of ESG-related outflows, demonstrating the broad support for BlackRock’s ESG-focused strategy despite pockets of resistance.
Federal Reserve Bank of the U.S. Presses Large Banks to Investigate Climate Risk?– Although Fed chair Jerome Powell has made it clear he does not see his role as setting major climate policy for U.S. banks, the Fed has initiated a process of requiring six large U.S. banks – Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo – to undergo assessments aimed at highlighting climate-related transition and physical risks they face.
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Written by?Eric Bloom?// Artwork by?Harriet Richardson