NGOs

Global government representatives, climate activists and business leaders will meet later this month at the United Nations’ 28th annual Conference of the Parties, also known as COP28. There they will take stock of progress in the fight to reduce the impacts of climate change and will negotiate further action.

Every inhabited continent in 2023 experienced extreme weather events driven or exacerbated by climate change. Flooding in Libya took the lives of an estimated 4,000 people and displaced another 40,000. The world’s hottest July on record2 brought deadly heatwaves to parts of North America, Southern Europe and China. Wildfires burned more than 45 million acres in Canada alone.

These events and others underscore the threat of climate change and the urgency of efforts to limit global warming to 1.5 degrees Celsius above preindustrial temperatures. Such efforts got a boost in mid-November, when the United States and China agreed to work toward tripling global renewable energy capacity by 2030, using the increase to displace fossil fuels and setting reduction targets for all greenhouse gases, not just carbon dioxide. Yet headwinds remain, including COP countries’ ongoing incentivization of fossil fuel extraction and the rollback of some energy transition policies. The discussions at COP28 will demonstrate whether participants’ commitment to addressing climate change and vision for the path forward match the urgency of the moment.

This conference comes at a key moment for Canada, as our country looks to accelerate the decarbonization of its industrial- and materials-heavy economy. Along with other investors, we will be watching closely to see how similar developed countries are approaching the challenge and the implications for policy in Canada.

Many heads of government who previously attended the annual conference will be sitting out COP28, including Canadian Prime Minister Justin Trudeau. While their absence may lower the profile of this year’s meeting, it also may afford participants greater opportunity to hash out solutions without the distraction of photo ops and political performances.

COP28 will cover a lot of ground in two weeks. Here are the topics we’re keeping an eye on:

• The first Global Stocktake
• Progress toward a new collective quantified goal (NCQG)
• Plans and policies for decarbonization
• Just transition
• Loose ends from COP27

• COP28 started with a bang, then settled into humdrum as far-reaching issues go slow, leaving much to do in the final week
• Operationalising the Loss & Damage Fund is a key win, but finance continues to dog other issues, including the stocktake
• Various declarations were unveiled, but implementation is key; focus now turns to negotiating a phase down or out

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

One aim: COP28 started in Dubai with the aim of keeping the 1.5°C target alive. Some 84,000 delegates are registered to attend the summit - either to negotiate, participate in side-events, join declarations, make pledges, or show support.

One surprise: The COP28 Presidency put the operationalisation of the L&D fund to a vote on the first day and immediately pledged USD100m to the fund. Other Parties followed suite; it is difficult to track, but the total comes to USD726m (according to the COP28 Presidency), with major contributions from Germany, France, Italy, and the UK. However, it is a far cry from what is required (by several orders of magnitude) as finance remains a point of contention across many other issues.

One controversy: It was widely reported (firstly in The Guardian) that the COP28 President questioned the science and what fossil fuels mean for 1.5°C. This angered many vulnerable groups, with many (IPCC) scientists vocal about the necessity of a fossil fuel phase out for 1.5°C. We consider the remarks as unguarded, but in our view, the real test is whether an ambitious outcome is achieved in line with science.

MSCI ESG: Powering up Energy Storage (Blogpost)

If the world is to scale up its adoption of variable energy sources like solar and wind at a net-zero-aligned pace, the demand for grid-scale battery storage may need to increase 35-fold between 2022 and 2030 to nearly 1 terawatt hour.

Companies involved in advancing battery storage solutions span several industries, from chemicals and electronics to vertically integrated electric vehicle (EV) manufacturers. Other than the established EV battery players — such as Samsung SDI Co. Ltd. or LG Chem Ltd. — a cluster of other chemical and electronics companies scored highly in terms of the quality and quantity of energy-storage-related patents.

Whether these companies are revenue-generating already or yet to commercialize their research and development results (as measured by energy storage revenue involvement and patent scores), they present different ways of supporting the electrification of transportation and the power sector.

WHEB: Three reasons why SDR really matters

Almost a year after the second consultation period closed and two years since the original discussion paper, the Financial Conduct Authority has finally published its ‘Sustainability Disclosure Requirements and investment labels’ policy statement.

In this article Seb Beloe explains why these new regulations really do matter for sustainability investing.

In November Putnam Investments published their Engagement and Stewardship Report, this covers key areas of their activities including:

• 2023 in review 
• Engagement approach, and engagement through our investment process
• Thematic engagement approach 
• Stewardship through the proxy voting program 

Download the full report here 

In October Putnam Investments also published their 5th annual assessment of sustainability strategies' and impact for Putnam sustainable leaders and Putnam sustainable futures, this report covers:

• Investment process and engagement 
• Portfolio analysis and ESG metrics 
• Investment themes and impact investment 

Download the full report here 

Just as the materials we used to build society changed throughout prehistory – transitions we now use to define the Stone, Bronze, and Iron Ages – we are now in the midst of yet another materials transition. Only this time, the change we need lies not only in what materials we extract, but also how we extract them.

To transform our economy into one that is circular, lean, inclusive, and clean (CLIC®), we must render our Energy and Land & Oceans systems sustainable with environmentally and socially friendly technologies. In turn, then, we must transform a third system – Materials – to deliver less of the commodities we use to power our WILD economy and more of the transition materials we need to build a CLIC® economy.

Transition materials will be particularly important to transforming our fossil-fuel Energy system into one that produces primarily low- or zero-carbon power. These transition materials include mined minerals such as lithium for batteries, silicon for solar panels, neodymium and dysprosium for wind turbine magnets, and uranium and zirconium for nuclear power plants...

...Given these challenges, investors have a vital role to play in securing the supply and stabilising the prices of transition minerals while incentivising sustainable mining projects. However, given the long lead times and challenges that could arise along the way, investors will need to exercise long-term, strategic thinking to ensure that the project they’re investing in is viable, adheres to all environmental and social regulatory requirements, and exhibits meaningful innovation and progress around sustainability. At the same time, investing in projects designed to expand production at existing mines while making them more sustainable will go a long way towards reducing or avoiding any supply shortfalls.

450 million years ago, Earth experienced its first Mass Extinction event. As intense glaciation led to rapid global cooling, 86% of all species disappeared. There have been four more Mass Extinction events since, two caused by global cooling and two by global warming. The last – at the end of the Cretaceous period 65 million years ago – killed off the dinosaurs.

Many scientists believe we are now in a sixth Mass Extinction, the only one to be caused not by natural phenomena, but by humans. One million species of plants and animals face extinction, many within decades, as their habitats are degraded or destroyed, and as man-made global warming makes their natural territories uninhabitable. We are losing species hundreds or even thousands of times faster than the natural rate of loss.

With over half of the world's GDP reliant on nature and its ecosystems services2, this accelerating loss of biodiversity is an economic time-bomb. Now the investment community is taking note. Increasingly, nature is being seen as an asset class in itself, and new 'biodiversity funds' are emerging, offering investors the chance to realise returns while restoring nature and protecting our threatened biodiversity...

...For investors, this is creating a new opportunity to invest in nature itself. Though still in their infancy – biodiversity funds hold assets worth USD 1.6 billion as compared with USD 350 billion of assets held in more established 'climate funds'. However, as they enter the investment mainstream, their on-the-ground impact will come under increasing scrutiny.

In 2020, global sustainable investments reached a combined value of USD 35.3 trillion. Following a 15% increase in just two years, sustainable investments now account for more than a third of all global assets under management.

This growth has been driven, in part, by regulations requiring businesses to cut their emissions. The EU’s Emissions Trading Scheme, for instance, charges firms for every tonne of CO2 they emit. With these charges set to rise, firms that fail to decarbonise will, eventually, be priced out of the market. Those businesses quickest to adapt will gain a competitive edge.

Sustainable investing often focusses on these early movers, the so-called ‘best-in-class’ when it comes to cutting emissions. Or on the ‘solutions providers’, those producing innovative new technologies – such as high-capacity batteries – that can help firms across multiple sectors to decarbonise. Other sustainable funds take an exclusionary approach, avoiding carbon-heavy sectors altogether.

Common to all approaches is a focus on emissions and climate. Until recently, little attention has been paid to nature as an investment asset – now this is changing...

...For investors, degraded industrial croplands and deforested landscapes will become tangible assets. Both land values and profitability will rise as a regenerative approach to farming rejuvenates soils and restores ecosystems to health. 

• HSBC's monthly compendium of ESG news, research and events
• ESG news: European hydrogen; annual emissions gap report; Canada carbon capture; Brazil renewable energy
• ESG research: COP28; the future of food; Asia energy transition; board expertise; Australia & Singapore standards

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

• The landscape for employee benefit packages is changing as social movements and economic events alter employee needs and preferences
• And while employee benefits are not new, they are evolving into a true tool with which to attract, retain and engage employees, and strengthen company culture
• An effective benefit package requires careful consideration of company commitments, employee needs and strategic objectives

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

Klement on Investing: We’ve got bigger fish to fry… (Blog)

For the last two years, rising inflation, the war in Ukraine, and higher wage growth have put many businesses in a bind. While they were working towards improving the sustainability of their business and adopting new ESG regulations, they suddenly had to face much more immediate pressures on their profitability. To me, it seems as if ESG topics have taken a bit of a backseat while companies have bigger fish to fry. This is not just an understandable development; it is also something that can be observed more broadly. But it is something that allows investors to differentiate between short-term and long-term oriented management.

A team of researchers from Bath, UK, and St. Gallen, Switzerland, examined the efforts of company management on advancing their ESG credentials while facing competitive pressures. The basic result was that companies that operate in an environment where their domestic markets face higher competitive pressures and lower margins tend to spend fewer resources on ESG.

In making the trade-off between focusing on their operational challenges in the short-term and investing in ESG measures that may improve performance in the long-term, they prefer short-term operational measures and those ESG measures that require less investment of time, money, and other resources.

New InfluenceMap research finds that corporate net zero or similar targets are rarely matched by support for government climate policy, with 58% of almost 300 companies from the Forbes 2,000 found to be at risk of “net zero greenwash” due to their policy engagement. Using the UN High-Level Expert Group (HLEG) 'Integrity Matters' guidance on lobbying as a benchmark, this report considers a company to be at risk of "net zero greenwash" due to its policy engagement if it has announced a net zero or similar target but is not sufficiently supportive of policy to deliver the Paris Agreement according to InfluenceMap’s world-leading LobbyMap platform. The assessment of policy engagement includes both the company's own engagement and that of its industry associations.

The 2022 UN HLEG ‘Integrity Matters’ report provides a “roadmap to prevent net zero from being undermined by false claims, ambiguity and ‘greenwash.’” It recommends actions for non-state actors to credibly demonstrate alignment with net zero by 2050, including aligning policy engagement, clearly stating that “non-state actors cannot lobby to undermine ambitious government climate policies either directly or through trade associations or other bodies." This report focuses only on the net zero action recommendation on climate policy engagement; other recommendations made by the UN, such as scaling up renewable energy, are not included in the analysis of “net zero greenwash.”

GSIA: Global Sustainable Investment Review 

In November 2023, the Global Sustainable Investment Alliance (GSIA) published the sixth edition of the biennial Global Sustainable Investment Review (GSIR), finding that US$30.3 trillion is invested in sustainable assets globally.

Key takeaways:

• Regulators are forcing companies to shift from intent to action on key ESG issues. Consequently, companies will likely implement more transparent and ambitious ESG policies and practices, particularly in Europe.
• How companies report on their sustainability activities, notably on social issues, will provide a clearer framework for investors to assess risks and opportunities.
• These developments present exciting opportunities for investors to integrate material ESG factors and benefit from themes aligned to the transition to a sustainable economy.

The Coller FAIRR Protein Producer Index was established in 2018 to address the knowledge gap in the environmental, social and governance (ESG) risks associated with the food sector. Recognition of its value has increasingly grown, as has its impact in driving engagement with leading protein producers and supporting investors in the sector. The Index assesses 60 of the largest listed global meat, dairy and aquaculture companies on ten ESG factors. This report focuses on four topics that are increasingly attracting the most significant interest from stakeholders of all types, including companies, investors and policymakers:

• SBTi FLAG: more accountability for land-intensive companies

• Circularity: going further than footprints

• Antibiotics and animal welfare: a vital link

• Human capital risks: mounting pressure to demonstrate transparency and equitability

'COP28 brings together global decision makers to shape climate policy. We summarise some of the key reports influencing debate.'

The global transition to renewable energy sources has witnessed significant progress in recent years, with the percentage of renewables in global electricity generation surging from 19.8 percent in 2010 to a notable 30 percent in 2022.

This substantial growth in renewable energy capacity has become a driving force behind the escalating climate ambitions of corporations worldwide. As of October 2023, 985 out of the world's largest 2,000 publicly traded companies have pledged to achieve net-zero emissions goals, indicative of their commitment to addressing the climate crisis.

'Investing in sustainable indices is an opportunity for Asset Owners to align with sustainable principles without sacrificing return, or taking on more exposure to risk. Sustainable indices are usually based on a parent index, for example MSCI World is a parent index for a number of different ESG indexes, such as MSCI World ESG Screened Index and MSCI World ESG Universal Index. 

The MSCI ESG and Climate indices are designed to support investors seeking to align their benchmarks with sustainable objectives, split between screening indices (MSCI World ESG Screen Index), integration indexes (MSCI World ESG Universal Index), and target indexes (MSCI World Paris climate Aligned Index). 

Most sustainable indices have historically shown that they are resistant to market downturns, whilst not compromising on returns. Asset Owners do not need to stray from principles of sustainable investing, even during times of a challenging environment. When comparing sustainable indices against their parent benchmark over the past 10 years, we found that 
performance was imperceptibly different when compared to that of the parent benchmark, yet the daily variance was relatively small.'

Ending deforestation is essential to achieving net zero targets and mitigating the worst impacts of climate change. Yet agricultural commodity production continues to drive forest loss at an alarming rate. Investors are looking for companies to mitigate these and other risks, including new global regulations, by incorporating comprehensive, time-bound no-deforestation policies in their transition plans. 

To assess the efforts of some of the world’s largest companies to eliminate deforestation from their supply chain at a foundational level, Ceres developed the Deforestation Scorecard, simply asking: Does the company have a robust no-deforestation policy? 

Key findings of 53 companies:  

1. Most companies assessed have a no-deforestation policy, but only 18 companies have a company-wide, no-deforestation policy that covers all the commodities subject to new European Union regulation.  
2. Only four have policies that cover their full supply chains and all their sourcing regions, exposing them to reputational and market risks.  
3. Most companies have specified a target date by when they intend to fully implement their no-deforestation policies. But only eight of these company policies are ambitious enough to meet the recommended 2025 no-deforestation target date.  
4. Only five include a cutoff date that prohibits commodities from being produced on land that was deforested after 2020. A 2020 cutoff date is necessary for compliance with the new EU regulations and removes the incentive for continued deforestation. 

Now in its 19th edition, this report uses publicly reported data to compare the emissions performance of the 100 largest power producers in the United States. These producers own more than 3,800 power plants and account for approximately 80% of the sector’s electric generation and reported air emissions. 

The global transition to a low-carbon economy will provide banks with an enormous commercial opportunity, as borrowers seek new financing for sustainability and climate solutions.  

In 2022, for the first time ever, companies raised more money in the debt markets for climate-friendly projects than fossil fuel projects, with banks earning estimated $3.3 billion in fees on $580 billion of green financings, exceeding the $2.5 billion of fees generated from raising debt for fossil fuel companies.

And that was before the Inflation Reduction Act, with its combination of tax credits designed to spur consumer demand and corporate investment in clean technologies, had begun to have an impact. Around $350 billion in new capital investments in clean energy have been announced since the law passed in August 2022--and some estimates suggest the law will unleash as much as $11 trillion of investments by 2050. 

The goal of this guide is to help U.S. banks, credit unions, and minority depository institutions position themselves to take full advantage of this unprecedented commercial opportunity.  

Using the framework of an opportunity ladder, this report lays out specific examples of innovative financial products and services, as well as a description of the infrastructure and internal resources financial institutions will need to unlock them.  

Regardless of where banks are on the opportunity ladder, this guide is designed to help them engage existing borrowers, onboard new clients, and drive revenue growth. 

From using food additives like seaweed that reduce how much methane cattle produce to breeding perennial rice that isn’t grown in water and grows back each year, food companies are developing and deploying innovative approaches to slashing agriculture’s greenhouse gas emissions. This innovation is critical for the food sector’s climate transition as raising animals and growing crops is responsible for up to 35% of human-produced emissions.   

In a new report, Cultivating Innovation: Practical Solutions for Companies to Reduce Agricultural Emissions, Ceres lays out both the emerging and the ready-to-deploy technologies and approaches that are the future of a low-carbon, sustainable food system.  

The report helps investors and companies understand the emerging solutions to reduce the main sources of agricultural emissions. By spurring innovation of new solutions while also incentivizing the adoption of existing practices, food companies have a key role to play in the sector-wide transition to a decarbonized economy. 

Carbon allowances are emerging as a fascinating new asset class. As Europe’s carbon market matures, it is starting to display distinct equity market correlations.

Should it be free for companies to pollute as much as they want? Ask any economist and the answer will be a resounding no. Corporate decision making should face a carbon price that fully includes the social cost of their behavior. In Europe, at least, that has meant putting in place ambitious policies to reach emission reduction targets. Such proposals to tackle climate change remain controversial among U.S. policymakers, though California and several other US states operate their own carbon markets.[1] Still, Europe offers a fascinating test case on how carbon taxes and carbon markets use market forces to lead to reallocate resources in society so as to lessen pollution.

There are now 73 carbon tax and carbon market policies around the world, creating a price that encourages companies to cut emissions. Such policies cover ~23% of global emissions, a significant increase from ten years ago when only 7% of emissions faced a price on carbon. However, for most of these policies, the carbon price is far too low to reach emission reduction targets.[2] Expanding the coverage and strength of carbon price policies is an objective supported by many companies and investors.

The growth of the ETS market has caught the eye of investors, turning carbon into a new asset class. Our Chart of the Week shows that correlations of EU carbon allowances with European equities (as measured by the MSCI European Union index) have grown tighter over time.

The oil and gas sector has been strongly outperforming the alternative energy sector. There are many reasons for that. Higher interest expenditure is one of them.

Can there actually be a more attractive sector? Insatiable demand, intense desire socially and from political leaders, tax and other incentives, and, last but not least, high barriers to entry given the high level of innovation required and the benefit of big economies of scale? We are talking about alternative energies. But the attractiveness of the sector is certainly not evident at present in its results. On both sides of the Atlantic, companies connected to alternative energies have regularly been among the most negative outliers. The profit warnings have not stopped for some time. Supply chain problems, cost inflation and higher interest costs are the main reasons given for the sometimes glaring earnings misses.

Aren't all sectors facing these problems? As our Chart of the Week shows, alternative energies have been hit particularly hard. Relative to the overall market, they have been performing disappointingly since early 2021. And since the beginning of this year, their woes have worsened. Is the problem the sector's high level of capital intensity? One argument against this is the very strong performance of the oil sector, which the chart also shows. So let's start from the beginning.

In the face of increasing climate and environmental concerns, many companies in the energy sector are investing in renewable energy to improve their carbon footprint and provide more clean energy to their customers. Wind and solar energy have become increasingly competitive with traditional energy sources, such as coal and natural gas, in recent years.This had made them an attractive investment for companies looking to reduce their dependence on fossil fuels. But unfortunately, that doesn't mean everything is encouraging for investors...

This report:

• Describes the Company’s responsible investment approach, which incorporates its Environmental, Social & Governance (ESG) Charter;
• Presents key responsible investment objectives and performance, describes our targets for the future, and tracks progress towards these; and
• To the extent possible, the description of progress against the ESG commitments of the Company on page 7, together with the ESG performance data throughout, are presented as at, or for the year to, 31 December 2022

Kroger have released their 2023 ESG Report covering key areas including:

• People - advancing Food Access, Health & Safety, and creating a more Just & inclusive Economy
• Planet - addressing climate impacts and supporting resource conservation by eliminating food and operational waste, increasing efficiency across our company and boosting the sustainability and resilience of our supply chain.

Yum! Brands: Global Citizenship & Sustainability Report 2022

Yum! Brands Inc have released their 2022 Global Citizenship & Sustainability Report, they cover key areas including:

• People - employees, franchisees, suppliers; social impact, community impact
• Food - food safety, balanced choices, animal welfare, limiting antibiotic use
• Planet - less carbon, deforestation, better packaging, water security

In the third edition of its Social and Environmental Responsibility Report, LVMH details the strategy deployed in 2022 and the Group’s many corporate responsibility initiatives. Beyond its financial performance, LVMH also reports on its commitments to society, the environment and culture.

Portfolio diversification is a basic building block of modern portfolio theory and practice for investors in traditional asset classes and real assets alike. Combining uncorrelated assets in a portfolio increases expected returns without additional risk, thereby improving portfolio efficiency—making higher returns achievable at every risk level.

In this paper, we explore the primary sources of diversification in natural capital investments, focusing on geography, market, and crop/species. We highlight risks with potential for mitigation through diversification and examine individual strategies for achieving meaningful diversification. Finally, at the portfolio level, we provide quantitative examples of how diversification can reduce risk and improve the expected performance of natural capital portfolios.

• Scope 3 disclosure rate: Construction > Transport OEMs > Capital Goods; Scope 3 emissions larger than Scope 1 and 2
• A combination of more regulations and changing consumer demand is creating opportunities for first movers in Scope 3
• We present six Scope 3 case studies: Caterpillar, CSCI, Hyundai Motor, Keppel, Longi Green and Weichai

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

Diala Hawila, Knowledge Policy and Finance Centre programme officer at International Renewable Energy Agency, speaks with Katerina Atkins, programme coordinator at OMFIF, about the energy transition investment required under the 1.5°C scenarios, geographical aspects and key financing tools.

They both discuss the importance of innovative instruments for under-invested countries, the need to expand the definition of risk in energy asset investments and the urgency of international collaboration for a more equitable and global distribution of clean energy funding. Diala shares her expectations for the upcoming COP28, highlighting exciting opportunities arising from transition to a more sustainable future.

It’s the first formal stocktake of how seriously the world is taking measures to combat climate change. So, will the upcoming COP28 summit in Dubai yield any concrete results?

Summary

• COP28 provides stocktake of progress in meeting the Paris Agreement
• Climate fund and transition finance on agenda for summit in UAE
• Phasing out of fossil fuels and impact of nature also take center stage

Transition finance is a particularly challenging concept to move from idea to reality. In contrast to sustainability, which has been defined in taxonomies, there are far more pieces in the puzzle when creating transition finance. It is made up of more discrete thresholds when evaluating and assessing credible transition thresholds. The Climate Bonds Initiative has compared a range of transition guidance methodologies and created a mapping of the issues covered or omitted from each guidance, some related to transition finance and others focused on corporate transition planning.

As an example, evaluating the Paris alignment of emissions targets is a critical part of most transition guidance, especially the inclusion of short- and medium-term targets and alignment of emissions metrics against credible science-based pathways. However, there is substantial variation around the inclusion of interim emissions targets, the inclusion of scope 3 emissions, identification of primary metrics among those available, and timeframes for aligning with science-based pathways.

The consequence of the misalignment between different guidance on transition finance is important because it creates a barrier for companies and financial institutions to contribute to an important, difficult aspect of the decarbonization process. There are much more clearly defined definitions about what activities are most sustainable (‘dark green’ in classification terminology) in that they provide a climate solution that is needed to achieve the Paris Agreement targets. There are also clear, although not always unambiguous, definitions around economic activities that are incompatible with the global transition.

The gap between these two ends of the spectrum is not entirely included in the ‘transition’ category. Companies that are not working on transition or those that are not doing so in a systematic and credible way may not be incompatible with the climate transition, but they would not be included in the transition category. Clear guidance on transition plans and transition finance provides a way to separate out companies involved in the transition from those that are not ‘dark green’ but describe in general terms their interest in sustainability while not being able to meet transition criteria.

For a financial institution, especially one operating in emerging & developing economies where ‘dark green’ assets are relatively scarce, there is a tension in its sustainability efforts related to climate change. On the one hand, investors may be looking at the share of activities a bank finances that align with a regional or national taxonomy, or its progress in bringing down reported financed emissions.

Transition finance may not contribute to either of these objectives because most corporate transition occurs far from the thresholds for ‘green’ activities. In many cases, expanding finance to a corporate customer beginning a transition process may counterintuitively increase financed emissions if it includes high-emitting assets in a bank’s portfolio rather than a not ‘dark green’ but more modest emitter without transition plans.

When financial institutions are confronted with the choice to pursue ‘paper decarbonization’ of their financing portfolio by dropping high-emitting customers, or transition finance that brings financing of more high-emitting companies onto their balance sheet, they have to walk a tightrope. They will face pressure from business, government or labor groups to support a Just Transition by continuing to provide finance to high-emitting businesses.

They will face investors who have quantitative targets for emissions that may have binary ‘invest/divest’ screens based on reported financed emissions per $1 million of balance sheet assets. They will also face regulators concerned about the quality of banks’ evaluation of climate and environmental risks who may view slip-ups, in the words of Frank Elderson at the ECB, as calling into question “the fitness and propriety of those in charge of establishing and steering banks’ practices”.

There is no easy way out of this situation, whether that is to only finance green activities or to ignore climate-related risks. The only realistic way is to finance assets that start by smoothing the path for offering ‘green’ finance for those that qualify. With other financing provided, every bank should be able to evaluate how much the direct and indirect emissions risks of different activities have salience for likelihood of on-time repayment, and transparently set priorities between mitigating climate risk to the bank from an individual counterparty and contributing to an economy-wide decarbonization that meets stakeholder expectations for a Just Transition.

There are trade-offs between these outcomes. More finance for green projects may mean more constrained lending to higher-emitting companies. More transparency about financing provided to companies with transition plans may mean more stringent disclosures required of customers. A focus on credible, transparent transition plans may make it harder for companies with fewer resources to develop a transition plan to access finance.

Each individual bank doesn’t have to carry the weight of these issues all on its own, because there are substantial efforts to improve definitions of what ‘credibility’ in a transition plan looks like. Regulators are also increasing the minimum expected in terms of climate-related risk evaluation. And investors will also likely improve their ability to ‘look beyond’ customer Scope 1 and Scope 2 financed emissions metrics as a sole source of truth on a bank’s climate-related risk.

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Banks play a critical role in mobilising green finance, but efforts to redirect financing away from polluting activities remain insufficient. Meanwhile, regulatory pressure is intensifying as claims of greenwashing mount. Banks’ green finance targets and disclosures have not benefited from the same level of scrutiny as carbon-related ones, and guidance remains limited in this area. This makes the direction of travel difficult to gauge. Emerging research suggests that most banks are not allocating enough financing to green activities relative to their financing of fossil fuels. Various greenwashing cases have put banks’ sustainability claims under the spotlight, and regulatory pressure is intensifying through the roll-out of taxonomies and reporting requirements. Banks must adjust swiftly to this environment and ensure their green finance targets and disclosures are sufficiently robust and transparent.

ShareAction assessed how the 20 largest listed European banks – including those headquartered in the EU, the UK, Norway, and Switzerland – set green finance targets and report on green financing. Our analysis focuses on banking activities and excludes asset management (see Methodology). We show that banks’ green finance targets and disclosures are not fit for purpose and could lead to misleading claims. 

Climate change is likely to be the defining topic of this century. In this report, we assess the potential effects of climate change on the global economy, as new evidence suggests that GDP impacts could be much larger than thought. We examine what can be done by looking at the response in terms of the scale, type and distribution of investment needed to reduce emissions and transform the global economy, and the impact this could have on the world. We consider this within each of HSBC's nine themes and how they interact with climate change; together, they will all make an important contribution to the low-carbon economic change and transformation that is already underway across the world.

The impact of rising global temperatures is already becoming abundantly clear after living through record-breaking global heat in 2023, and the increased frequency and severity of extreme weather events, such as heat waves, flooding and wildfires, can have huge social and macroeconomic implications.

But all is not lost. There are many reasons to be optimistic that the world can act in ways that reduce the immense risks from higher global temperatures, in particular, temperature rises over 1.5°C, a level climate scientists say increases the risks of very disruptive and possibly irreversible climate changes. There are many things that can be done now to substantially reduce emissions and the risks of extreme and irreversible climate impacts hitting societies and economies.

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

Klement on Investing: I didn’t know that did you?

Despite global consensus on the need to decisively tackle deforestation, conversion and associated human rights abuses - including to achieve vital climate and nature targets - these continue unchecked. Progress in some places is eclipsed by ongoing global impacts. We are operating on borrowed time.

Following our baseline assessment of more than 550 financial institutions last year, Global Canopy has this year undertaken a full and detailed stocktake of action on deforestation by more than 700 financial institutions that have strong net-zero commitments as part of GFANZ or related groups.

Assessing against best practice, our Deforestation Action Tracker finds that the sector is largely failing to act. 75% (536) of the financial institutions assessed still do not have a public deforestation policy, and just 10% (69) have a deforestation policy in place for all highest risk commodities. This shows a slight improvement on the baseline conducted in 2022, but far slower than the pace of action needed.

Financial institutions are therefore exposed to the growing regulatory, reporting and compliance risks around deforestation. Most are also misaligned with the urgent priority given to deforestation by the GFANZ leadership, which is also embedded in GFANZ transition guidance.

A new psychological contract is transforming the modern workplace, highlighted by an increase in collective actions and changing employee expectations.

A central feature of the employment relationship is the set of expectations that employers and workers have of one another. Sometimes less visible are the expectations that workers have of their employers. It’s all part of a psychological contract between employers and their workers. We are currently undergoing a fundamental change in the core foundation of the existing psychological contract—one that is likely to have material implications for investors. 

Irrespective of industry, workers and their employers operate within the context of a general psychological contract—informal, implicit, trust-based agreements about reciprocal commitments and expectations. Although they’re stable in the short run, these unwritten contracts evolve and shift over decades. 

Traditionally, psychological contracts have been internally focused. Employers were willing to offer their employees job security, competitive pay and mobility within the firm in exchange for effort, commitment and company loyalty. 

Owing to competitive pressures, psychological contracts in the developed world began to change in the late 1990s. In an effort to adapt to changing employer needs, the terms of the psychological contract were revised to include providing transferable job skills and real-world experience in exchange for effort and employee engagement. 

In the coming years, AB believe investors will need to reconsider how companies address employment and labor relations. Traditionally, firms have managed their workforces with an eye toward company-specific concerns. But as employees become more vocal in their expectations, investors should expect the line between external public relations and internal labor relations to become hazier. 

Across the global economy, there is an urgent need to tackle unsustainable patterns of consumption. The planet’s capacity to support human consumption is finite, and a recent assessment reveals serious imminent threats to multiple physical and biological systems that are key to human well-being. Consumption practices must change for this pressure to ease.

There is broad global agreement on the need for action. ‘Ensuring sustainable consumption choices’ is Target 16 of the Global Biodiversity Framework (GBF) agreed under the United Nations Convention on Biological Diversity (CBD), a treaty to which 196 states are party...

...The holistic measure provided by GEIC data – accessible online through the Commodity Footprints dashboard – offers a starting point for governments in assessing their trade-related consumption footprints. As a hotspotting tool, it highlights agricultural commodities and producing countries of particular interest, and reveals trends in their significance over time.

Used in combination with other data sources, such as industry disclosure, this can guide and support investment in more detailed assessments , deeper engagement by policymakers with key sectors, and the design of consumer-focused campaigns and interventions.

The Powering Progress: Batteries for Discoms report explores the market opportunity for front-of-meter BESS within India, with an emphasis on the power distribution sector and distribution companies (Discoms). Distribution-located storage (DLS) can contribute to the duties of Discoms by providing benefits in terms of distribution system capacity deferral at the substation level, particularly in dense urban areas experiencing peak load increases where there is limited space to expand the physical footprint of the distribution system. DLS can also meet Discoms’ portfolio needs by providing resource adequacy value and minimizing Deviation Settlement Mechanism penalties and voltage support. BESS can meet grid balancing needs by participating in wholesale markets such as energy arbitrage and ancillary services.

At present, many of these value streams are not fully monetizable. While the long-term value propositions could be favorable to a Discom investing in DLS (as compared with other alternatives that may increase overall system costs), the inability to accurately assess future revenue streams is inhibiting project approval...

...To ensure rapid deployment of battery storage to meet system needs as costs decline, it is essential that stakeholders, including Discoms and regulators, are informed of BESS value and have strategies to effectively procure and utilize storage technologies.

The magic word these days for investors seems to be ‘transition’. How we travel, rather than arrive, has become the principle definition for the success of all overarching sustainability topics. ESG momentum depends on it – so are we actually getting there?

Summary

• Positive change is expected when investing in negative impact companies
• There is an overlap between sustainable and transition investments
• Transition at portfolio level does not always equal transition at company level

What does it take for a business to tell its sustainability story effectively? Who does it well? The Investis Digital (IDX) Sustainability 100 has all the answers.

Our report ranks the Top 100 global leaders who use digital most effectively to build their sustainability reputations. We’ve used our proprietary Connect.IQ methodology to evaluate hundreds of leading global corporate websites against 50 different sustainability-focused criteria. Ranking them based on the transparency, leadership, and connectivity that they demonstrate with digital content, we developed The Sustainability 100.

Highlights

44.3% Women in senior leadership, FY22: 42.4%

17,673 Hays’ employee volunteering hours, FY22: 9,433 hours

16,778 CO2e tonnes (Our scope 1, 2 and Business travel scope 3 GHG emissions)

Robeco: 2024 Outlook: Exit stage right for Goldilocks

Robeco’s new one-year outlook warns that the ‘Goldilocks’ scenario of a soft landing for the global economy faces increasing headwinds. 

For the second year, the outlook has been split into two parts:

• the first looking at the likely economic conditions facing investors, and
• the second reviewing the sustainable investing landscape.

The macro part says that the Goldilocks concept is indeed a fairy tale, with four major macro factors to contend with in the new year, led by the ‘swansong for immaculate disinflation’.

Sustainable investing also faces continued headwinds next year, though five key regulations including US and EU climate directives will boost the style in 2024, the outlook says.

... and - in the longer term - structural trends led by client and societal demand are set to make sustainable investing simply unstoppable.

Water is a critical natural resource, a global public good, and an essential service. Water security is central for countries to achieve long-term development objectives in the current context of climate change, including protecting infrastructure assets, safeguarding agricultural production, producing sustainable energy, and protecting vulnerable populations.

However, water resources are under severe stress and water services delivery is deficient due to underinvestment in the sector. Current levels of global investment in water are inadequate to meet the water sustainable development goals (SDGs) and address climate impacts. Large, coordinated flows of public, concessional, and private capital are needed to compensate for decades of underinvestment in the water sector, and to meet present and future challenges.

Governments have a leading role to play in establishing the enabling conditions and necessary reforms to facilitate a greater flow of public and private finance for required water sector investments. International financial institutions and multilateral development banks need to support these efforts, together with other stakeholders, at the country level. The private sector, in addition to being a key user of water resources and a beneficiary of water services, has an important role to play in providing financing, innovative approaches, and expertise, as well as absorbing risk, with aligned incentives for achieving targets and efficiency levels.

The World Bank Group recognizes the water-climate-food-energy nexus and the importance of a water secure world for all. The World Bank Group’s scaling up finance for water strategic framework outlines actions and priorities for national governments, the World Bank Group, and other development partners to improve the planning and mobilization of funding and financing for water sector investments, and to promote efficiency in spending. It aims to do so by optimizing the contributions of the public and private sectors and facilitating greater engagement of the private sector in the provision of capital, innovation, and expertise.

The framework focuses on these priorities: 

• Creating the enabling conditions for scaling up finance through reforms and regulations, sector restructuring, capacity building, and incentives. 
• Mobilizing private sector participation through concessions, BOTs (Build-Operate-Transfer), performance based contracts, and other instruments to improve operational efficiency and financial viability.
• Diversifying and expanding the range of financial solutions available to each country depending on its context, covering commercial debt, bonds, microfinance, public-private partnerships, and equity instruments. 
• Advancing climate action through water projects that help build resilience and adapt to and mitigate the effects of climate change. 

See here for more information

Since the publication of their 2022 report on greenwashing, RepRisk have experienced a surge of interest from clients, partners, and researchers in the identification and measurement of greenwashing risk. With another year’s worth of ESG risk incident data, RepRisk return to the analysis to see how the landscape has evolved.

The scope has been extended to include social washing – a practice not currently as prominent as greenwashing, yet equally present. Most notably, in the data, social issues are, more often than not, inextricable from environmental ones – making a case for evaluating ESG as a holistic, interconnected topic.

The resulting analysis indicates that a growing number of both public and private companies have been linked to Misleading communication around environmental issues. Greenwashing risk has accelerated in Europe and the Americas, with the Banking and Financial Services sectors particularly exposed.

• In the past year (September 2022 – September 2023), one in every four climate-related ESG risk incidents was tied to greenwashing, an increase from one in five in the last report.
• The Banks and Financial Services sectors saw a 70% increase in the number of climate-related greenwashing incidents in the past year, compared to the year prior.
• For many, the practices go hand-in-hand, with nearly one in three public companies linked to greenwashing also associated with social washing.

The pervasiveness of greenwashing and social washing across regions and sectors presents risks for companies, employees, and communities. Misleading communication around environmental and social topics not only impedes progress towards collective goals, but also damages trust with consumers and investors. To identify and prevent Misleading communication around sustainability in compliance with emerging regulations, high-quality outside-in data that goes beyond company self-reporting is essential.

See here for more information and to access the report

Chapter 1 assesses that risks to global growth are skewed to the downside, similar to the assessment in the April 2023 Global Financial Stability Report. Cracks in the financial system may turn into worrisome fault lines should a soft landing of the global economy hoped for by market participants does not materialize.

Chapter 2 homes in on the global banking system, providing a fresh assessment of vulnerabilities in a higher-for-longer environment, using an enhanced global stress test and a set of newly developed market-based indicators. In response to the vulnerabilities that are uncovered, enhancements to supervisory practices and tightening of regulatory standards are proposed.

Chapter 3 notes that a broad mix of policies is required to unlock the private capital necessary to cover climate mitigation investment needs in emerging market and developing economies.

See here to download the full report, executive summary, foreword and watch the Press conference

The 2023 Interconnected Disaster Risks report analyses six key risks with approaching tipping points: the accelerating extinctions of species, the depletion of groundwater resources, the retreat of mountain glaciers, the growing number of places facing uninhabitable temperatures, the rise in uninsurability and the growing amount of space debris. These tipping points are representative of globally relevant trends pushing our socioecological systems to the brink. They represent a diverse selection across thematic categories worldwide to better explore the consequences of their global interconnectivity for both the changing risk landscape and the possible solutions.

The six risk tipping points are introduced in Chapter 2 in individual fact sheets that show the overarching risk to certain systems these tipping points represent, outlining the points when the systems tip and what impacts we might see now and in the future. The six fact sheets also show the interconnectivity between these tipping points, highlighting how risks across systems are intertwined. The concept of “risk tipping points” is further outlined in Chapter 3, explaining their similarities and differences with other types of tipping points, along with definitions and the methodology for tipping point selection. Chapter 4 discusses the interconnectivity of these tipping points, from their root causes and drivers to their similar trajectories in the future if we do not start to make better choices. Chapter 5 outlines different paths for either adapting to or avoiding risk tipping point impacts, by moving away from our current thinking around solutions for isolated problems and towards transformative change and a more resilient future.

The World Energy Outlook 2023 provides in-depth analysis and strategic insights into every aspect of the global energy system. Against a backdrop of geopolitical tensions and fragile energy markets, this year’s report explores how structural shifts in economies and in energy use are shifting the way that the world meets rising demand for energy.

This Outlook assesses the evolving nature of energy security fifty years after the foundation of the IEA. It also examines what needs to happen at the COP28 climate conference in Dubai to keep the door open for the 1.5 °C goal. And, as it does every year, the Outlook examines the implications of today's energy trends in key areas including investment, trade flows, electrification and energy access.

This flagship publication of the International Energy Agency is the energy world’s most authoritative source of analysis and projections. Published each year since 1998, its objective data and dispassionate analysis provide critical insights into global energy supply and demand in different scenarios and the implications for energy security, climate change goals and economic development.

At Digby Wells Environmental, we are passionate about what we do and are extremely fortunate to be able to Make A Difference in the lives of our colleagues, our clients, the communities we work in and the environment.

We are seeking a highly motivated, ambitious and resourceful individual to drive our Biodiversity and Business programme of work at Digby Wells Environmental. This role requires you to understand corporate-nature linkages and the resulting business case for biodiversity. The successful candidate will be passionate about the interface between business and biodiversity and the mainstreaming or integration of biodiversity into business.

You will be self-motivated and display a strong work ethic. You will have excellent writing and public speaking skills and display the ability to effectively communicate technical concepts to technical and non-technical audiences. You will be expected to deliver high quality deliverables within short and pressurized timeframes.

• The preparation of high-quality proposals and client deliverables in the business and biodiversity field.

• Holding workshops with senior executives and helping them understand the business case for biodiversity protection, conservation and restoration.

• Identification and pursuit of opportunities to win additional work in the business and biodiversity field.

• Development and maintenance of your knowledge of emerging issues in the biodiversity and business field.

• Share your knowledge of emerging issues in the business and biodiversity field with your colleagues.

Skills

• Excellent report writing and oral communication skills.

• Strong prioritization and organisational skills

• Good networking and collaborating skills

• Excellent spoken and written English

• Passionate, self-motivated and driven

• Efficient

• Flexible and adaptable

• Pragmatic

• Embraces learning

• Willingness to travel to remote international locations

Qualifications:

• A post-graduate degree in an environment-related subject

Work Experience

• 5 – 7 years working experience conducting specialists studies

• Professional registration would be beneficial. (e.g. Pr.Sci.Nat. with SACNASP).

• A valid driver’s license would be an advantage.

At Digby Wells Environmental, we are passionate about what we do and are extremely fortunate to be able to Make a Difference in the lives of our colleagues, our clients, the communities we work in and the environment.

We are looking for someone who will be responsible for reporting sustainability related activities and helping our clients respond to and develop strategies to manage issues across the ESG agenda. This will include aligning client’s sustainability reporting requirements with industry best practices in terms of frameworks, data collection and assurance to meet the Client’s sustainability targets and ambitions. You must have a proven track record of producing high value sustainability reports, ideally within ‘the resources sectors.

● Producing Sustainability reports and disclosures that showcase clients’ work in a compelling way, while also ticking the boxes for GRI or SASB compliance.

● Compiling annual responses to investor questionnaires such as CDP and DJSI and providing clients with guidance to improve their scores and their practice.

● Reviewing, benchmarking, and developing policies against industry and best practice.

● Assessing client’s current sustainability performance and working with key stakeholders to identify, prioritize and strategically manage key sustainability issues.

● Developing climate risk management and mitigation strategies, including Science based targets and TCFD aligned reporting and guidance.

● Developing Modern Slavery Statement and strategies.

● Identifying and tracking ESG and sustainability trends, best practices, frameworks, and standards and communicating those relevant to internal and external stakeholders and using information to develop new services and client offering.

● Forming and maintaining a network of relationships to support sustainability efforts.

● Ensuring appropriate controls and measurement systems are in place for clients to support and maintain sustainability reporting integrity and assurance.

● Monitoring the latest trends from ESG rating agencies and recommend courses of action to improve client scores and address gaps.

● Networking and growing strong relationships with clients and other partners in the market.

● Working closely with various specialists to implement strategies and annual environmental and social performance for clients.

● Assisting with the drafting of our client’s strategic position and narratives on sustainability issues.

● Carry out field work under strenuous conditions.

Qualifications:

● Post graduate degree preferably in Environmental Sciences, Sustainability or Financial Communications.

● Project Management Certificate would be beneficial.

• Experience in copy/writing or editing would be beneficial.

Work Experience

● Seven or more years relevant experience in sustainability consulting or similar.

Other Requirements

● Deep understanding of responsible investment, sustainability emerging topics, the latest energy industry trends, strategies, and technologies.

● Knowledge of Sustainability/ESG rating agencies, frameworks, and databases.

● Expert in technical sustainability data, calculation methodologies and limitations.

● Establish credibility and effectively interact with clients, including all levels of senior leadership.

● Self-motivated, autonomous with a can-do attitude.

● Demonstrable mastery in extensive use of Microsoft Excel, PowerPoint, and experience developing market research and business cases for new strategies

Other Requirements 

● Excellent verbal communication skills to build and maintain relationships with Senior executives.

● A flair for writing; you will enjoy transforming information and data into compelling copy and infographics.

● Strong project management skills: you will be developing sustainability reports from start to finish, working with clients until they are perfect.

● A working knowledge of; TCFD recommendations, GRI Standards, SASB, the Principles of Responsible Investment (PRI), the Voluntary Principles on Security and Human Rights, and the Sustainable Development Goals (SDGs).

● A willingness to travel.

● Experience in the mining sector is preferable

● A flexible, pragmatic, and innovative approach project development and delivery.

● Fluency in English is essential, working knowledge of another language particularly French or Spanish would be advantageous.

At Digby Wells Environmental, we are passionate about what we do and to Make A Difference in the lives of our colleagues, our clients, the communities we work in, and the environment.

As a Principal Sustainability Reporting Consultant, you will be a key contributor to our mission, to move us from the world we live to world we seek. You will work with clients to produce compelling sustainability reports and strategies, that tell the client’s sustainability story, and tick the boxes for reporting requirements and guidelines.

●Excellent writing skills to communicate clearly including the ability to create clear, concise and compelling sustainability reports

●Extensive knowledge of ESG reporting frameworks (i.e. GRI, SASB, UN Global Compact), industry specific sustainability challenges and emerging trends

●Strong analytical skills to assess ESG data and metrics, identifying trends, risks and opportunities

●Strong client and stakeholder communication skills including influencing, negotiating, presenting and relationship management

●Robust project management, and able to run with a project from proposal to publication, and ensuring projects are delivered on time and in budget

●Flexible – able to see where help is needed and support colleagues as necessary.

●Curious mindset to learning and development, client relationship and contributing to the ESG team’s growth – a self-starter and motivator

●Comfortable juggling a variety of tasks in a dynamic, fast – paced operational environment

As an experienced Principal ESG Consultant your main responsibilities would be:

●Developing compelling sustainability reports that tell clients sustainability story while also ensuring alignment with the appropriate ESG disclosure standards

●Delivering comprehensive ESG materiality assessment processes (including impact, finance and double materiality) tailored to each client’s unique needs

●Leading stakeholder engagement exercises including conducting interviews, surveys and workshops to gather valuable input for sustainability report and materiality processes

●Analyzing ESG data and to identify trends, risks and opportunities relevant to each client

●Collaborating with clients to integrate material ESG issues into their corporate strategies

●Acting as the client lead for key projects, building and maintaining strong client relationships

●Staying up to date with evolving ESG regulations and industry best?

●Mentoring and guide junior consultants, providing leadership and expertise in Sustainability Reporting

Skills

•Proven track record of successfully managing and delivering complex ESG reports.

•Ability to establish and maintain strong client relationships

Qualifications

•Post graduate degree preferably in Environmental Sciences, Sustainability or Financial Communications.

•Project Management Certificate would be beneficial.

•At least 5 years’ experience in copywriting or editing for publication.

•Proficiency in adapting writing for audience.

Work Experience

•10 or more years relevant experience in sustainability consulting or similar. Experience and knowledge of the resources industry (mining sector, oil and gas and renewables) would be helpful.

Other

•Prepared to obtain vaccinations that may be required by clients and for travel purposes.

•Prepared to undergo a Pre-Employment Medical Assessment.

JobPost: S&P Global - Senior Analyst - Sustainability Research (London, Madrid | CloseDate: Unknown)

JobPost: MSCI - APAC ESG & Climate Marketing Intern (Hong Kong | CloseDate: Unknown)

JobPost: PRI - Director - India, Middle East & Africa (IMEA), RI Ecosystems (Hybrid/Dubai | Closing: 8:00pm, 1st Jan 2024 GMT)

JobPost: S&P Global - Senior Analyst | S&P Global Sustainable1 Research & Methodology Team (London | CloseDate: Unknown)

JobPost: M&G - Senior Business Analyst - ESG (Edinburgh | CloseDate: Unknown)

JobPost: M&G - ESG Manager (London | CloseDate: Unknown)

JobPost: Fitch Group - Regional CSR Lead, Fitch Community, APAC (Central HK | CloseDate: Unknown)

JobPost: La Banque Postale - SRI Analyst - Energy Transition & Institutional Studies Specialist (M/F) (CloseDate: Unknown)

JobPost: S&P Global - Sustainability Research Associate (Madrid | CloseDate: Unknown)

JobPost: S&P Global - ESG Solutions Associate (Japan | CloseDate: Unknown)

JobPost: ISS ESG - Research Analyst (Temporary) - Environmental & Social (Rockville | CloseDate: Unknown)