Sustainability & ESG insights February '23: Green Deals and The Need for Climate Transition Plans

??Via this monthly newsletter, we'll share more knowledge and content about what's arguably the most important domain of our generation: Sustainability and ESG. The goal is to inspire and share insights so each and everyone of us can make a difference in the Environmental, Social and Governance domain we call Sustainability.

Valuable ESG and Sustainability news of February '23

??In this months’ newsletter: 

• EU launches Green Deal Industrial Plan;
• Why your company may soon be hiring an ‘ESG controller’
• Less than 1% of companies have credible climate transition plans;
• WBCSD’s New Report: Net Zero Buildings - Halving construction emissions;
• Top Climate tech acquirers made up of energy companies & private equity;
• The World’s Largest Investor warns Directors to Tackle Climate Change or be Voted out;
• EU Lawmakers Approve Deal to Ban Combustion-Engine Cars by 2035;
• Evaluation Criteria Framework for ESG & Sustainability Software;
• US Department of Energy Announces $2.5 Billion to Cut Pollution;
• And more…

WBCSD’s New Report: Net Zero Buildings - Halving construction emissions today.

In February, WBCSD – World Business Council for Sustainable Development released their new report "Net Zero Buildings - Halving construction emissions today." This report highlights that we need to cut emissions in half in the built environment by 2030, and then outlines practical steps that could be taken to do so. From the Executive Summary here are key takeaways:

??Data is key and will drive informed calculation, analysis, and consistent reporting as an enabler of the highest impact;

?? Companies must quickly gain the confidence to treat carbon like money, setting clear budgetary targets;

?? Early well-informed thinking is essential to gain the highest reduction potential;

?? A systemic approach is required as there is no single solution;

?? Collaborative engagement of the entire value chain is the only way we will gain the required reductions;

??Urgent and decisive action is essential as for the build environment 2030 is today.

? See the link below for a summary.

EU launches Green Deal Industrial Plan

As shared by ESGToday.com, the European Commission today announced the launch of its Green Deal Industrial Plan, a series of strategies and initiatives aimed at enhancing the competitiveness of Europe's net zero industries, and supporting the EU’s transition to climate neutrality. The announcement follows the recent launch of the U.S. Inflation Reduction Act, providing nearly $370 billion to U.S. renewable energy and industrial decarbonization initiatives, and comes as global competition heats up between countries looking to establish themselves as centers for innovation and production for the rapidly emerging cleantech and energy transition sectors.

Top Climate tech acquirers made up of energy companies and private equity firms

As shared by Kim Zou from CTVC, the company analyzed climate tech exit trends since 2016 since not much information was available, despite the $100B deployed into climate tech in the last 3 years.

Key Highlights:

?? 289 climate tech companies exited via M&A, SPAC, and IPO since 2020 amounting to $400B in total disclosed enterprise value (only 150 were disclosed)

?? Of the 289, only a handful (6% of total) reached the public markets through the traditional IPO route, including Rivian's $66B debut leading the pack. Since IPOs in many ways represent the gold standard, this indicates still-nascent exit outcomes for climate tech.

?? Zooming into M&A land, energy corporate and private equity buyer interest has picked up, fueled by low-carbon mandates and policy tailwinds. Corporate M&A activity targeted the themes of 1) renewables 2) EV charging and more recently 3) RNG.

Read more via the link below.

The World’s Largest Investor warns Directors to Tackle Climate Change or be Voted out.

? The growing pressure to provide ESG transparency comes from everywhere: legislation, customers, partners, employees, and also investors. Here's a great example by the world's largest investor:

?? Norway’s $1.3 trillion sovereign wealth fund, Norges Bank Investment Management, has warned company directors to take more specific actions on climate change or risk being voted out.

?? The fund holds stakes in around 9,100 companies worldwide, owning 1.4% of all listed stocks and controls an average of 1.3% of 9,338 companies across 70 countries. Large holdings include Apple, Nestlé, Microsoft and Samsung Electronics.

"Currently only 17% of the more than 9000 companies that the fund invests in had set clear science-based net zero targets”, and the fund is actively “pushing” the remaining 83% to act fast to set their targets, according to Carine Smith Ihenacho, Chief Governance and Compliance Officer. The fund was getting ready to vote against 80 company boards due to their failure to set or hit environmental or social targets.

And this goes beyond the E from ESG and climate change...According to Reuters in December of 2022, the fund had told the companies it invests in to boost the number of women on their boards and to consider setting targets if below 30% of their directors are female.

Read more via the link.

Why your company may soon be hiring an ‘ESG controller’

As shared by Sheryl Estrada via Fortune.com, some major companies aren’t waiting until the passage of the U.S. Securities and Exchange Commission’s proposed climate-risk disclosure rule to add the right finance talent for ESG reporting. They’re creating new roles.

The role of ESG controller is different from sustainability officers because ESG controllers can bring the “experience and diligence that the company has developed around financial information to non-financial disclosures,” according to a recent report by Wes Bricker, PwC vice chair and U.S. Trust Solutions co-leader. 

The SEC’s proposal would require public companies to disclose greenhouse gas emissions (Scope 1, 2, and 3), along with a financial statement portion that addresses the impact of climate-related risks and opportunities.

Less than 1% of companies have credible climate transition plans according to CDP.

Of the 18,600 companies which provided information to CDP, less than one in 200 companies disclosed information against 21 key indicators that CDP includes in a questionnaire which represents a credible climate transition plan. This means of 18,600 only 81 companies - a mere 0.4% - were able to disclose against key indicators and prove that their climate transition plans are credible. While the number of organizations reporting to CDP has been rising rapidly, increasing by more than 40% in 2022, this 81 organizations is actually a decrease from the 153 companies that provided a credible climate plan the year before. 

“The need for companies to develop a credible climate transition plan is not an additional element but an essential part of any future planning. Companies must evidence they are forward planning in order for us to avert the worst impacts of climate change and to send the correct signals to capital markets that they will remain profitable’. Amir Sokolowski, Global Director, Climate at CDP

IFRS Sustainability and Climate Reporting Standards to Take Effect in 2024

The International Financial Reporting Standards Foundations’ (IFRS Foundation) new global sustainability and climate disclosure standards will be effective as of January 2024, according to an announcement today by the IFRS’s International Sustainability Standards Board (ISSB).

The new reporting standards are expected to be released by the end of Q2 2023, with companies beginning to issue disclosures against the standards in 2025. The ISSB said that the decision to set the 2024 effective date answered “strong demand from investors for companies globally to disclose comprehensive, consistent and comparable sustainability-related information.”

EU Lawmakers Approve Deal to Ban Combustion-Engine Cars by 2035

In February, the European Parliament formally approved a new law that will effectively ban the sale of new combustion engine cars in the European Union as of 2035. This new law has been approved in hopes to combat climate change and accelerate the shift from petrol and diesel cars to electric.

This law requires that carmakers reach a net zero target by 2035, this is a 100% cut in CO2 emissions from new cars sold. With this language in place it will make it impossible to sell new fossil fuel powered vehicles in the EU.  On top of eliminating the sale of combustion engine cars, the law also set a 55% cut in CO2 emissions for new cars sold from 2030 versus the 2021 levels. This is a much higher reduction goal compared to the current target of a 37.5% cut in CO2 emissions.

Massachusetts has First Ever Climate Chief

In Boston Massachusetts, on the first day of her administration, Governor Maura Healey signed an executive order to create the position of Climate Chief, and in the same executive order, created an Office of Climate Innovation and Resilience within the Governor’s Office. This brand new role of Climate Chief has been filled by Melissa Hoffer. This is a huge accomplishment as Massachusetts is the first state in the United States to create such a role.

“The climate crisis is Massachusetts’ greatest challenge, but there is enormous opportunity in our response… I’m filing this Executive Order today, on the first full day of the Healey-Driscoll Administration, because we have no time to delay. It’s essential that we begin coordinating our climate policy across all state agencies and all communities in Massachusetts so that we can make the progress we so urgently need and drive our clean energy economy.” - Governor Healey.

“The establishment of the Climate Chief and the Office of Climate Innovation and Resilience is critical to Massachusetts’ future… Climate change impacts all aspects of our lives, and it’s essential that we are coordinating our response across the entire government and the entire state. The action Governor Healey is taking today is putting Massachusetts on the path to a better, healthier, more equitable future.” - Climate Chief Melissa Hoffer.

ESG Is Going to Have a Rocky 2023. Sustainability Will Be Just Fine.

Insightful perspective by Andrew Winston via a column in MIT Sloan Review…

If 2021 was the year ESG became mainstream in the financial world, then 2022 was the year things got bumpier. And everything around ESG points to 2023 being even more intense.

Before diving into why, let’s define terms. ESG is not sustainability. ESG — the acronym stands for environmental, social, and governance — has been mostly focused on screening companies as investments, largely by understanding how a business is affected by environmental and social issues (with an additional focus on whether a company has good governance in place to manage those risks and pressures). Sustainability is a much broader idea, focusing on a company’s role in society, how it creates value by managing its environmental and social impacts (both positive and negative), and how its actions affect a wide range of stakeholders.

Read more via the link below.

Department of Energy Announces $2.5 Billion to Cut Pollution and Deliver Economic Benefits to Communities Across the Nation

The Biden-Harris Administration, through the U.S. Department of Energy (DOE), announced $2.52 billion in funding for two carbon management programs to catalyze investments in transformative carbon capture systems and carbon transport and storage technologies. Funded by President Biden’s Bipartisan Infrastructure Law, the two programs—Carbon Capture Large-Scale Pilots and Carbon Capture Demonstration Projects Program—aim to significantly reduce carbon dioxide emissions from electricity generation and hard-to-abate industrial operations, an effort critical to addressing the climate crisis and meeting the President’s goal of a net-zero emissions economy by 2050.

Evaluation Criteria Framework for ESG & Sustainability Software

? Sustaira released an insightful Evaluation Framework for ESG & Sustainability Software, consisting of over 60 criteria in 3 segments:

1. Functional Criteria and Capabilities

2. Technical Criteria and Capabilities

3. Organizational Criteria and Capabilities

? To enable Sustainability, ESG, Finance and IT leaders to make an informed decision on which software and platform to adopt for their Sustainability and ESG needs, Sustaira shares the common Evaluation Criteria.

? The core challenge for many organizations to comply with rapidly changing ESG regulations and stakeholders’ requirements, is that their ESG and sustainability data is siloed and disparate, both internally and externally. This results in manual, error prone processes, thus leading to inefficient reporting and disclosures. These challenges compound into an inability to gather real time ESG insights, turn data into measurable actions, and demonstrate positive impact.

? As a result, the need for agile ESG software in this domain is rapidly accelerating and organizations are left with a decision to make. To help address this, Sustaira has released a valuable ESG & Sustainability Software Evaluation Criteria based on:

? Hundreds of conversations with ESG and Sustainability leaders

? Research published by analysts such as Gartner, Forrester and Verdantix

? A powerful network of ESG and Sustainability consultants

? Hands-on and direct customer experiences and use cases

? High-quality expertise in software solutions, such as Siemens low-code platform Mendix

?? Learn more about this Evaluation Framework for ESG Software via the link below.

??Of course there are many more insightful articles, so please share your thoughts and recommendations in the comments below.

??As always, we're open to feedback. If you have any ideas of content or want to collaborate, kindly do reach out. Please also like, share and subscribe so we can truly make this impactful.