Sustainability & ESG insights September'23: Big SEC fines and the urgent need for ESG data and software (2024)

💡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 every one of us can make a difference in the Environmental, Social and Governance domain we call Sustainability.

Valuable ESG and Sustainability news of September '23

🌲In this months’ newsletter:

* UN report warns: Window to reach climate goals ‘rapidly closing’

* Over 90% of Executives plan to Increase spending on ESG Data this year

* Data quality biggest challenge to ESG investing

* Only 1 in 4 companies very confident in meeting ESG reporting requirements

* Evaluation Criteria Framework for ESG & Sustainability Software

* SEC lawyers subpoena fund managers of ESG disclosures

* SEC fines Deutsche Bank Subsidiary DWS $19m

* EU to ban greenwashing

* California Lawmakers pass bill requiring companies to disclose ESG data

* And more…

Window to reach climate goals ‘rapidly closing’, UN report warns

The world is not on track to meet the long-term goals set out in the Paris Agreement for limiting global temperature rise, a major UN report warned in September, calling for a commitment to decisive action.

Simon Stiell, Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC) which issued the report, called for “greater ambition and accelerating action”.

“I urge governments to carefully study the findings of the report and ultimately understand what it means for them and the ambitious action they must take next. It is the same for businesses, communities and other key stakeholders.”

The report summarizes 17 key findings from technical deliberations in 2022 and 2023 on the implementation status of the Paris Agreement on climate change and its long-term goals, based on the best scientific information.

The Agreement committed all countries to limit temperature rises as close as possible to 1.5°C above pre-industrial levels.

It found that in all areas, ranging from mitigating climate change impacts to addressing loss and damage, “much more needs to be done”.

“While there are well-known gaps, the technical findings highlighted existing and emerging opportunities and creative solutions to bridge these gaps,” UNFCCC said.

Good practices and proposals to accelerate implementation, action and support, are highlighted in all areas.

For the complete report see link below:

Over 90% of Executives Plan to Increase Spending on ESG Data this Year: Bloomberg

As shared by Bloomberg and ESGToday, more than 90% of executives are expecting to meaningfully increase their spending this year on ESG data, with the vast majority believing that ESG data investment is required to keep pace with competitors or to develop a competitive advantage, according to a new survey by business and financial markets information service provider Bloomberg and capital markets consulting and research firm Adox Research.

For the study, Bloomberg and Adox surveyed over 100 portfolio managers, climate risk executives, and data management executives across North America, Europe, the UK and Asia Pacific.

The survey found that 92% of executives are projecting increasing their spending on ESG data by at least 10% year-over-year, including more than half that expect to increase spending by at least 20%, and 18% who expect ESG data spending to grow by 50% or more this year.

The plans to increase spending comes as most executives view ESG data as a key competitive factor, with 45% of respondents reporting that access to ESG data is “table stakes” to keeping up with competitors’ capabilities, and 44% saying that ESG data is critical to their firms’ competitive differentiation. An additional 10% reported that their organizations use ESG data primarily for regulatory compliance, and only 1% said that ESG data was not very important for their product or marketing strategy.

Interestingly, nearly two thirds (64%) of respondents to the survey reported that they considered themselves to be ahead of their competitors in terms of ESG capabilities, while 28% saw themselves as behind.

Leila Sadiq , Global Head of Enterprise Data Content at Bloomberg, said:

“Once categorized as an alternative data source, ESG data has quickly become integral to the value financial firms deliver to their clients. Executives are making significant strategic investments in ESG data acquisition and management to differentiate themselves and meet client and regulatory demand.”

Read more about this via the link below:

Data quality biggest challenge to ESG investing, BNP Paribas finds

The quality of ESG data remains a major headache for investors as they try to incorporate sustainability issues into their decision-making, according to a new survey by BNP Paribas.

The poll of 420 investors, covering asset owners and managers, hedge funds and private equity firms, finds that 71 percent view ‘inconsistent and incomplete’ data as the biggest barrier to ESG investing.

Data issues rank ahead of other challenges, such as greenwashing (cited by 61 percent of respondents) and reconciling ESG investing with fiduciary duties (53 percent).

BNP Paribas says investors have different ideas on how to manage inconsistent ESG data, with some viewing it as an ‘inevitable but manageable’ problem. The report quotes one ESG specialist from a US pension fund, who says investors should go direct to companies to get the data they need.

‘The way to get around inconsistent data is to engage,’ says the specialist. ‘As a very large asset owner, we are not doing our job if we cannot get company X on the phone to give us some more clarity on an issue.’

But other respondents point to significant issues that arise from a lack of data quality, such as the inability to create bespoke benchmarks.

According to the research, 89 percent of respondents say ‘commitment toward net-zero’ is either a current priority or will be within two years. When the same survey was carried out two years ago, 18 percent said they had a net-zero commitment and 33 percent were considering one.

‘Our latest survey demonstrates that since 2017, institutional investors have been transitioning from asking ‘why’ about integrating ESG to focusing on the ‘how’ of implementation,’ Sophie Devillers , Head of sustainable finance for securities services at BNP Paribas, says in a statement.

More information via the link below:

Evaluation Criteria Framework for ESG & Sustainability Software

Sustainability and ESG solutions provider, Sustaira released an insightful evaluation framework for ESG & Sustainability Software, consisting of 60+ criteria. With a growing demand for organizations to aggregate, track, measure, and disclose ESG and Sustainability data, combined with the challenges of doing so, organizations are seeking guidance on where to start. 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 that are considered and is guiding organizations through how to look at the ESG domain challenges and what to look for in solutions, going beyond software.

Sustaira has segmented the evaluation criteria into three main groups that consist of various subcategories. Those main groups are:

* Functional Criteria and Capabilities

* Technical Criteria and Capabilities

* Organizational Criteria and Capabilities

Functional Criteria and Capabilities are the considerations an organization makes regarding features and functionality in the ESG solution itself. This includes topics such as ESG Goals & KPI Tracking, carbon accounting methodologies and calculations, dashboard and visualizations, (Co)creation of completely new ESG apps, including Excel migrations, and many more.

Technical criteria and capabilities are considerations regarding technical specifications within the solution itself. This includes topics such as integration capabilities, tiered user access, integration and architecture, and more!

Organizational criteria and capabilities are considerations regarding the solution provider and its ecosystem. Considerations such as market approach, certifications, pricing and product vision are all included.

These evaluation criteria are essential to making an informed decision and a key tool to use when evaluating and comparing solutions

Read more and download the Evaluation Criteria Framework for ESG & Sustainability Software for free:

Heirloom and Microsoft sign one of the largest permanent CO2 removal deals to-date

The purchase unlocks key project financing mechanism to dramatically scale and reduce the cost of Heirloom’s Direct Air Capture facilities

Microsoft has signed a long term contract to purchase up to 315,000 metric tons of CO2 removal over a multi-year period from Heirloom – a Direct Air Capture company that harnesses the natural properties of limestone to remove CO2 from the atmosphere – in one of the largest carbon dioxide removal deals to-date.

Read more via the below:

Africa’s Vast Solar and Mineral Resources at Risk of Being Left Untapped, IEA Warns

Energy investment in Africa needs to more than double by the end of the decade if the continent is to meet its energy and climate goals. However, high costs are putting off much-needed investment in the region’s plentiful clean-energy resources and huge reserves of critical minerals, the International Energy Agency said.

“African countries have huge energy potential, including a spectacular range and quality of renewable-energy resources,” said Fatih Birol , executive director of the Paris-based agency in a report published jointly with the African Development Bank on Wednesday. “But these riches are largely untapped and they will remain so without greatly improved access to capital.”

Africa is home to more than half of the world’s best solar resources as well as possessing great potential for hydroelectric and wind-power projects, according to the IEA. It is also uniquely placed to contribute to industries behind the transition away from fossil fuels. It accounts for 80% of the world’s platinum reserves, half of all cobalt reserves, and 40% of manganese reserves, all of which are expected to be crucial to technologies such as autocatalysts and electric batteries, the agency said.

SEC lawyers subpoena fund managers over ESG disclosures

As shared by the Financial Times, the US Securities and Exchange Commission enforcement division has sent document requests, including subpoenas, to several asset managers relating to their environmental, social and governance investment marketing this year, lawyers said, suggesting a potential crackdown looming for the sustainable fund world. Among the SEC’s areas of inquiry are conventional investment funds that have repurposed themselves as ESG funds, the asset management industry lawyers said. Also in focus are cases where funds offered in the US and Europe may share strategies, holdings or portfolio managers but offer differing amounts of information on either side of the Atlantic.

The inquiries come after the SEC enforcement division in March 2021 formed a task force to hunt for misconduct in climate and ESG investment disclosures. While it settled ESG cases against companies and asset managers including Goldman Sachs and BNY Mellon in 2022, none have been filed so far this year. That may change as new investigations proceed, lawyers said. Last month the German asset manager DWS disclosed it had set aside €21mn to settle an “ESG investigation” from the SEC and other regulators.

For more information see link below:

California Lawmakers Pass Bill Requiring Companies to Disclose Full Value Chain Emissions

A new proposed California law that could require most large U.S. companies to disclose their full value chain greenhouse gas (GHG) emissions passed the state’s Assembly, with lawmakers on Monday passing the bill in a 41-20 vote, marking a major step towards the establishment of the mandatory emissions reporting bill into law.

The bill will now return to the Senate, where it already passed in May, and from there to the desk of Governor Newsom for a final decision on its passage into law. The bill is similar to one introduced in California last year that passed in the state Senate, but was one vote short of passing on the Assembly.

The legislation would require companies with revenues greater than $1 billion that do business in California to report annually on their emissions from all scopes, including direct emissions (Scope 1), emissions from purchase and use of electricity (Scope 2), and indirect emissions, including those associated with supply chains, business travel, employee commuting, procurement, waste, and water usage (Scope 3).

Disclosure obligations would begin in 2026 for Scope 1 and 2 emissions, and in 2027 for Scope 3 emissions, with measurement and reporting to be performed according to the Greenhouse Gas Protocol standards. The law would also require companies to obtain third party assurance for their emissions reporting, starting with a limited assurance level beginning in 2026 for Scope 1 and 2 emissions, and at a more stringent reasonable assurance level in 2030, and at a limited assurance level for Scope 3 in 2030.

Read more via the links below:

EU to ban greenwashing and improve consumer information on product durability

* Generic environmental claims and other misleading marketing tricks will be banned

* Ban will also apply to commercial communications about goods that contain a design feature introduced to limit product durability

* Only sustainability labels based on approved certification schemes or established by public authorities will be allowed

* Guarantee information to be more visible and a new guarantee extension label to be introduced

Parliament and Council have reached a provisional agreement on new rules to ban misleading advertisem*nts and provide consumers with better product information.

The agreement updates the existing EU list of banned commercial practices and adds to it several problematic marketing habits related to greenwashing and early obsolescence of goods. The aim of the new rules is to protect consumers from misleading practices and help them make better purchasing choices.

What will be banned?

Negotiators from Parliament and Council agreed to proscribe the following:

* Generic environmental claims, e.g. “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco”, without proof of recognised excellent environmental performance relevant to the claim;

* Commercial communications about a good with a feature that limits its durability if information is available on the feature and its effects on the durability;

* Claims based on emissions offsetting schemes that a product has neutral, reduced or positive impact on the environment;

* Sustainability labels not based on approved certification schemes or established by public authorities;

* Durability claims in terms of usage time or intensity under normal conditions, if not proven;

* Prompting the consumer to replace consumables, such as printer ink cartridges, earlier than strictly necessary;

* Presenting software updates as necessary even if they only enhance functionality features;

* Presenting goods as repairable when they are not.

Africa Carbon Markets Initiative Draws Hundreds of Millions of Dollars in Pledges

- The ACMI has drawn hundreds of millions of dollars in pledges from governments, businesses, and financial institutions.

- The UAE has committed to buying $450 million of carbon credits from the ACMI.

- African governments see carbon credits as a way to mobilize climate finance.

- Many African campaigners are skeptical of carbon credits, saying they could be used to legitimize continued pollution.

- Carbon markets are a controversial tool, but they could be a valuable way to raise money for climate action.

The Africa Carbon Markets Initiative (ACMI) has drawn hundreds of millions of dollars in pledges from governments, businesses, and financial institutions, as African leaders seek to mobilize climate finance for the continent.

“We must see in green growth not just a climate imperative but also a fountain of multi-billion dollar economic opportunities that Africa and the world is primed to capitalise,”

said Kenyan President William Ruto.

The ACMI aims to boost Africa’s carbon credit production 19-fold by 2030. Carbon credits are tradable certificates that represent the reduction of one metric ton of carbon dioxide or equivalent greenhouse gas emissions. They can be used by companies and governments to offset their emissions.

Read more via the link below:

Article: Fast fashion firms prepare for EU crackdown on waste mountain

Summary:

* EU to make companies tackle millions of tonnes of waste

* Inditex invests 3.5 million euros in Spain garment reuse

* Large scale textile recycling faces big challenges

Less than a quarter of Europe's 5.2 million tonnes of clothing waste is recycled and millions of tonnes end up as landfill every year, the European Commission said in July.

Precise data on the growth of clothing waste is scarce but collection for recycling and reuse increased gradually in several European countries from around 2010, a 2021 EU report said.

Fast fashion, or making and selling cheap clothes with a short lifespan, is "highly unsustainable", the Commission said in July. The textile industry is a major contributor to climate change and environmental damage, it noted.

According to United Nations trade data, the EU exported 1.4 million tonnes of used textiles in 2022, more than twice as much as in 2000. Not all those clothes get reused, and exports of used clothes from Europe to Africa can lead to pollution when clothes that can't be resold end up in dumps, the EU has said.

Proposed European Commission rules seek to clamp down on unscrupulous operators that export damaged items destined for dumps, and would require countries to demonstrate their ability to manage the material sustainably.

Moda Re said it aims to reduce the volume of clothes it sends to Africa.

Only 8% of the donations are currently resold at Moda Re's second-hand shops, the method widely seen as the more efficient way of reusing old clothes. A similar amount ends up as European landfill.

The company aims to double the amount it resells by expanding to 300 second-hand shops in Spain over the next three years from just over 100 presently, it told Reuters.

Company Responsibility

As well as the efforts by Inditex, Puma has partnerships with garment collecting and sorting companies I:CO in Germany, Texaid in Switzerland and Vestisolidale in Italy.

Adidas , Bestseller, and H&M have invested in Finnish start-up Infinited Fiber Company, which manufactures fiber out of textile waste, cardboard and paper.

The Commission's legislative push includes rules to make retailers contribute to the cost of collecting used clothes for reuse and recycling.

Under the proposed rules, retailers would pay a fee of roughly 12 euro cents per item for each garment sold in the bloc, with higher rates for garments that are harder to recycle, the Commission estimated in July.

As in Spain, textile waste associations would be set up in each country. In France this system has already been in place since 2008 under an organization called Refashion.

Reuters asked ten leading fashion companies including Adidas, H&M, and Primark how the fees would hit their profitability. None provided an estimate. All said they hoped the fees would be the same across the EU.

"It's a tsunami of legislation," said Mauro Scalia , director of sustainable businesses at EURATEX.

Read more via:

SEC Fines Deutsche Bank Subsidiary DWS $19 Million Following Greenwashing Investigation

The U.S. Securities and Exchange Commission (SEC) announced on Monday that it has charged Deutsche Bank’s investment arm DWS, one of the largest asset managers in Europe, over misleading statements the firm made regarding its ESG investment process.

DWS has agreed to a $19 million fine to settle the charges, marking the largest-ever greenwashing penalty imposed on an asset manager by the SEC.

The SEC announcement follows a 2-year investigation by the Commission, which was initiated after DWS’ former sustainability chief Desiree Fixler reportedly alleged that the firm misrepresented in its annual report the extent to which assets were invested using ESG integration in the investment process. Fixler was fired from DWS in March 2021 immediately prior to the release of the firm’s annual report.

In June 2022, German authorities raided the Frankfurt offices of Deutsche Bank and DWS following media reports that DWS overstated the green or sustainability-related aspects of financial products, and following examination of evidence leading to suspicion of “prospectus fraud.” DWS CEO Asoka Woehrmann resigned the following day.

According to a statement released by the SEC, the Commission found that DWS “made materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations for ESG integrated products,” and that the firm failed to integrate aspects of its global ESG integration policy as marketed to clients. The SEC added that DWS failed to implement policies that would have ensured that its public statements about its ESG integrated products were accurate.

More information via the link below:

Only 1 in 4 Companies Very Confident in Meeting ESG Reporting Requirements: KPMG Survey

Companies increasingly expect their ESG strategies to contribute to positively to business and financial outcomes, in areas ranging from M&A and new product opportunities to talent and customer retention, although many executives are concerned about keeping up with complex and changing sustainability regulatory requirements, with only around a quarter reporting confidence in meeting ESG reporting requirements across several jurisdictions, according to a new survey released by professional services firm KPMG.

For the study, the “KPMG U.S. ESG Survey,” KPMG surveyed more than 200 business leaders with responsibility for aspects of their companies’ ESG strategy, at companies with more than $1 billion in revenue across multiple industries.

While 92% of those surveyed were at companies headquartered in North America, 67% said that they will be required to report on ESG in 3 or 4 jurisdictions.

The survey indicated that business leaders see an increasing connection between their sustainability and corporate strategies, with 43% of respondents reporting that their companies’ business and environmental goals are now more closely aligned than they were 5 years ago.

This result is particularly strong among larger companies (10,000+ employees), at 66%.

For more information see link below:

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