Shifting Winds

As the weather shifts, the global regulatory push towards more transparency in corporate reporting is gathering steam. Canada is pushing forward regulation of emission reductions from fossil fuel producers.

However, with the new administration in the U.S., talk of rollbacks on Sustainability legislation and grants, and COP 29 pushing ahead, we sit at an interesting crossroads with push and pull from both sides.

Environmental

E.U. cutting

Net GHG emissions across the E.U. fell by 8% in 2023, a 5% increase in reductions from 2022. The top achievement is the 24% year-on-year reduction in emissions from electricity production and heating, driven primarily by renewable energy increases in wind and solar energy.

The information produced by the Commission's 2024 climate action progress report highlights the progress made towards the emission reduction targets, alongside key achievements related to climate change.

Social

Governance

EUDR Delay!

The Deforestation regulation has been delayed by one year thanks to a vote in the E.U. Parliament. The law ensuring that products imported or exported from the E.U. don't contribute to deforestation has been pushed back primarily by pressures from large companies and international attention.

Canadian Regulatory Cap

The government has released a set of new drafts to cap GHG emissions in the country's oil and gas sector.

Controversially, while this initially targets emissions, the government has stated that the new regulation has been designed to allow for continued growth and increased oil and gas production.

However, since the sector is the largest employer in Canada, this is to be expected, as it supports around 400,000 jobs.

This regulation is still in the early consultation phase and is awaiting feedback from consultants, businesses, and the general marketplace. The final regulation is set to be published in 2025.

We'll have to see if this holds, but it is symptomatic of the current market conditions.

E.U. Sustainable Investment Product Labels

A new appointee to the European Commission has stated that SFDR could more effectively address greenwashing risk by altering and introducing a labelling regime that communicates the sustainability attributes of investment products.

The findings from the review conducted in 2023 show that SFDR is being used as a tool for de facto sustainability quality labels and marketing instead of its intended classification guidance for investors.

A radical regulation shift has continually been discussed - however, this looks to be the incumbent's new concrete direction.

IAASB Setting Standards

The board has announced the publication of its finalised ISSA 5000, which is targeted to establish a new standard for sustainability assurance.

This is because many of the Sustainability regulations coming into play, namely ISSB, GRI, CSRD, and so on, require all data to be assured and an audibility trail to be followable. The notability of its applicability to single and double materiality assessments is particularly evident.

Energy

Corporate

Mizuho Investing in Nature

The Tokyo bank has acquired a minority equity stake in climate and nature-based solutions from Pollination, supporting a new strategic partnership between the firms. The partnership aims to support the bank's clients in implementing decarbonisation initiatives.

Founded in 2019, Pollination works with financial institutions and large corporate entities to implement net zero and nature-positive strategies.

Benz Sharpening Bets

The luxury car maker recently announced updates to its sustainability targets and strategy. The firm's focus now shifts towards Decarbonisation, Resource Use and circularity, Employees, Human Rights, Digital Trust, and Traffic Safety.

Each target area involves specific indicators, which the organisation continuously reviews and considers for incorporation in the company's annual sustainability report.

Additionally, the firm has pledged to invest over 2 billion Euros in employee training by 2030.

Technology

Electric Aircraft Take-off

BETA Technologies announced it had raised $318 million to pursue the development, production, certification, and commercialisation of its electric-powered aircraft, charging systems, and growing infrastructure network.

Capable of flying 250 nautical miles on a single charge, carrying up to six people or supporting 1,500 pounds.

Fidelity Management & Research, TPG Rise Climate, and United Therapeutics have all invested in this recent round of funding. The firm has raised over $1 billion in equity capital to date, even with the German air taxi maker Lilium filing for insolvency.

Thoughts

Major nations in the E.U. are struggling politically, a definite shift is coming from the U.S., and economic constraints are affecting the rest of the world, even as Western markets head for all-time highs.

If you were looking for a market with the most promising Sustainability outlook regarding equities and performance, infrastructure and energy firms in and around the APAC region would be your best bet, having the goldilocks effect of political support and funding alongside abundant growth prospects. Compared to Western counterparts for the next 12 months, at least, that's where my portfolio would be focused.