\\ Weekly Insights \\

The common thought for nearly 20 years is that if companies committed to measuring and reporting publicly on their sustainability performance, four things would happen:

1. Individual companies’ social, environmental, and governance (ESG) performance would improve (because what gets measured gets managed).

2. A link tying companies with better sustainability records to better equity returns would emerge.

3. Investors and consumers would reward companies with strong sustainability performance—and put pressure on those that lagged.

4. Ways to measure social and environmental impact would become more rigorous, accurate, and widely accepted.

However has this actually been the case? Harvard Business Review published an interesting piece titled Overselling Sustainability Reporting. It critiques that even though the measurement of sustainability data has increased hundredfold since 2011, C02 emissions have risen and has the gap between executive pay and the median worker. It is an interesting take emphasizing that reporting alone does not ensure environmental and social improvement - though it also doesn’t hurt it. However, the world of ESG reporting from 2011 is already drastically different from what it is becoming in 2021 and beyond. We have now seen the shortcomings where companies could hide in sustainability reports only highlighting where they are strong. Today the growing consensus around industry standards is beginning to solve the comparability problem between companies. Will a single standard allow sustainability reporting to deliver on its promises?

**Check out this week’s report highlight, it showcases the ESG regulatory environment across different regions and is one I really enjoyed**

\\ Nossa News \\

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\\ Companies Making Statements \\

• DHL - Commits €7 Billion to Sustainable Supply Chain, Links Exec Comp to ESG. 

\\ Top Stories \\

Corporate greenwashing is all the rage. How can we stop it? 

The proliferation of corporate decarbonization plans and sustainability initiatives has now reached an impressive crescendo. But regrettably, the same can also be said of greenwashing, which is when a business presents itself as environmentally friendly in an attempt to obscure its past or current practices that are harmful to the environment. Oil giant Chevron is a case in point. Unconvinced by the company’s clean-energy claims, NGOs have filed a complaint with the Federal Trade Commission, accusing the firm of “egregiously misleading consumers.”

Fortune. 

Goldman Sachs Says Humans Beat Algorithms When It Comes to ESG

Goldman Sachs Group Inc. has found that successful sustainable investment decisions require a human touch that algorithms have so far been unable to match. In Copenhagen, where Goldman is expanding to grab more of the cash-rich Nordic asset management market, smart environmental, social and governance investing calls are key to winning business. And as Nordic countries blaze a trail in all things ESG, whatever works in the region is likely to become a template for other parts of the world.

Bloomberg

The UN-backed Principles for Responsible Investment has launched a three-year strategy that aims to raise the bar for signatories as the influential body steps up its drive to develop a sustainable global financial system. The ambitious 2021–24 Strategic Plan will strengthen the connection between financial risks and their impact in the real economy as sustainable financing continues to move into the mainstream. The PRI has 3,600 signatories, managing more than US$100trn in assets, which represents more than half of the world’s institutionally managed funds, and the strategy is the second launched under its 10-year Blueprint for Responsible Investment.

Three young investors hit on climate change as the core mission, and ran with it. As it was closing on €53 million ($63.3 million) last year, the firm also made its first investments in Phytoform, a London headquartered company creating new crops using computational biology and synbio; Patch, a San Francisco-based carbon-offsetting platform that finances both traditional and frontier “carbon sequestration” methods; and 20tree.ai, an Amsterdam-based startup using machine learning and satellite data to understand trees to lower the risk of forest fires and power outages. Now they’ve raised another €34 million and seven more investments on their path to doing between 30 and 35 deals.

\\ Weekly Report Feature \\

In this paper, we travel around the world (alas only digitally and in fewer than 80 days) and highlight key developments in sustainability regulation. We compare the evolution in regulation to that of the sustainable investment funds market. Different regions take different approaches, with some emphasising regulation and some leaving it to the market to grow more organically. 

What does it take to build a sustainable finance plan?

1. Taxonomy. This has become a widely-used term for a classification framework which defines what activities and projects are sustainable. The definition (currently) tends to centre around environmental sustainability and especially which activities can help tackle climate change. The intention behind having a taxonomy is to achieve a common understanding and reference point for everyone in the market, including regulators, and to avoid greenwashing. 

2. Corporate reporting. Companies reporting on the sustainability of their activities in corporate accounts is another key component as this is needed for the market to easily locate which activities contribute towards (environmental) sustainability. The Task Force on Climate-related Financial Disclosures (TCFD) is the most commonly referred environmental framework and large listed companies tend to be the first ones to be targeted for such reporting. 

3. Integration of sustainability risks. Including sustainability (environmental or social) in risk management and internal operations is increasingly seen as the minimum threshold for financial services firms. In some cases, this is seen as a lever to raise awareness rather than to force a specific behaviour. 

4. Sustainability bonds. There is a strong focus on capital markets and promoting forms of financing that target sustainability outcomes directly. The most common reference point is developing a green bond issuance framework, where the proceeds are supposed to go straight into projects that can help tackle climate change. Some policies go even further by adding specific incentives for companies to issue a green or sustainable bond rather than a traditional one.
    

Prevalence of ESG strategies by market:

Read the full report. 

\\ Leading Across ESG \\

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