EU Taxonomy Developments and the EU’s Renewed Sustainable Finance Strategy
On July 6th, the European Commission published its Strategy for Financing the Transition to a Sustainable Economy, the successor of the EU’s Sustainable Finance Action Plan, which launched in 2018. The strategy focuses on transforming the financial system and financing transition plans, building on the 2018 Action Plan, which centered on developing the EU Taxonomy, putting in place disclosure regimes, and developing tools for the market to develop sustainable investment solutions and prevent greenwashing.
New Draft Disclosure Rules Change Timelines and Scope of EU Taxonomy
In recent months, a lot has been said and written about the EU Taxonomy, the green classification system of economic activities that aims to drive capital flows to sustainable investments supporting the EU’s policy goals on climate and the environment. Political, corporate, and civil society lobbying reached its peak when the EU published draft rules last December, which deviated substantially from expert recommendations. However, the latest draft delegated act with rules on Taxonomy reporting published by the European Commission on May 7th has received far less attention even though some of the proposed changes affect the practical implementation timelines as well as the scope and ambition of the regulation.
Unwritten Risks – The True Costs of Mispriced Climate Change
Research shows that Property & Casualty insurance underwriters are not accurately pricing climate risks, and US government policy and program decisions are proving to be unsustainable. In our most recent blog, Justin Cheng talks about the resulting premium pricing corrections in the wake of intensifying extreme weather events. With this trend, a significant number of US homeowners are unable to obtain property insurance while taxpayers take on the increased cost of climate risk.
Deepwater Plays Against Rising Risks: The U.S. Gulf of Mexico
As onshore resources became harder to locate over the past decades, offshore exploration and production have grown into a global industrial activity. The prospect of finding hydrocarbons has led some companies to explore deeper waters in some regions.
10 for 2021: Investing in the Circular Economy
This report aims to support investors interested in gauging environmental, social and governance (ESG) risks and opportunities in the global food value chain. We survey key subindustries – from agrochemicals, agriculture and aquaculture to packaged food, food retail and restaurants – in search of solutions that may support the principles of the circular economy (CE). These principles include minimizing waste and pollution, extending the use-phase of products and ecosystem regeneration. Some of the key insights found in the report are:
Building Back Better for the Next Normal
‘Build back better’ has become the new mantra for post-COVID-19 hopes and ambitions. As people, companies and governments are coming to terms with the crisis and starting to consider the post-pandemic world, many are realizing that going back to how things were is neither possible nor desirable. Just like disruptive technologies throughout modern history have swept away what humanity thought was the best or only solution and replaced it with something superior, the disruption brought on by COVID-19 has also opened the door for making and accepting some long-overdue changes. To truly leverage the opportunity to correct the destructive course on many fronts, responses to the pandemic must involve going beyond adapting to the new normal and focus on shaping what we want the next normal to be. Investors can play an important role in this transition by aligning their strategy and active ownership with progressive long-term objectives.
How China’s Electric Vehicle (EV) Policies have shaped the EV market
As CO2 emissions are inherent to Internal Combustion Engine Vehicles (ICEVs), Electric Vehicles (EVs) are widely considered to be the logical alternative towards realizing zero emissions. With the continuation of ongoing technological refinement and years’ of heavy investment, EV manufacturers have significantly upgraded the performance of their products and improved economies of scale making EV production more economically feasible allowing for EVs to become a more widely considered consumer choice. Improving economies of scale, in both the EV manufacturing and the recycling of decommissioned batteries along with the grid’s transition towards renewable energy will make the positive impacts of EVs increasingly undeniable.
Responsible Cleantech: The Processes Behind the Products
The growth of the cleantech industry seems resilient from an economic perspective. For it to maintain its social license-to-operate, however, it will also need to formulate answers to the environmental and social challenges throughout its value chains.
2020: The Year of the Flexitarian
The Economist named 2019 the year of the vegan; however, veganism is one part of a much greater trend away from animal proteins. While vegetarianism also continues at a steady growth rate, it is the flexitarian – i.e. traditional meat eater who makes a conscious effort to reduce their meat intake – that is having a notable impact on the market. This has been further accelerated by COVID-19 and the disruption to the fresh meat industry.
Future of Cement: Low-Carbon Technologies and Sustainable Alternatives
At a time when climate change has caught global attention and efforts are being made to meet the UN sustainable development goals, however concrete – the most widely used man-made material on earth – is a significant source of carbon dioxide (CO2) emissions and often overlooked. Cement, a key ingredient in concrete, accounts for about 7% of global CO2 emissions and is the second-largest industrial emitter of CO2 after the iron and steel industry [i]. The cement production process is responsible for 95% of concrete’s carbon footprint. Under the International Energy Agency’s sustainable development scenario, cement producers will need to reduce their carbon intensity at an annual rate of 0.3% per tonne of cement produced up to 2030 [ii]. With carbon emission regulations tightening globally to meet the 2-degree scenario (2DS) targets, cement companies that fail to adopt low-carbon processes and improved energy efficiency could face risks in the form of potential fines from non-compliance and lost opportunity costs by failing to innovate processes.
While being a vital part of the response to climate change as well as other economic and societal needs, the growing supply of cleantech products also entails environmental and social challenges within the various processes across the value chain. This engagement aims to encourage and enable the cleantech industry to grow in a more responsible manner.
Implications of the use of rare-earth elements in the wind energy market
Investors who are bullish on renewable energy are often drawn to the wind energy market. Alongside solar, wind energy has been rapidly adopted worldwide and continues to receive significant investments compared to other renewables.[i]
Blockchain: A new ESG tool?
Significant developments in the use of blockchain have occurred over the past year with applications across finance, supply chain, and healthcare, to name a few. As institutions have developed and deployed market solutions, the technology has gained momentum (as we noted in our 10 for 2017 report). However, until its use becomes widespread, blockchain will remain conceptual for most people, much akin to describing the internet before it became ubiquitous. So, what is blockchain exactly and can it be used to advance sustainability management?
Whole Risk, Whole Opportunity: The ESG implications of Amazon’s Whole Foods Acquisition
Amazon’s expansionism has brought it into multicategory retailing, consumer electronics, cloud computing, logistics and media production. Now, with its recent USD 13.7bn acquisition of Whole Foods Market, it strides into brick-and-mortar grocery retailing. As Amazon expands in all directions, so does the frontier of its ESG risks and opportunities. How do grocery stores fit into Amazon’s customer-obsessed technocracy? And how will it use the Whole Foods brand, built on a foundation of upmarket ethical consumerism?
What ESG Issues will Investors Face as the Electric Vehicle Market Gears up?
On 2 July 2017, Elon Musk tweeted that the first Model 3 would be delivered by the end of the month and that Tesla plans to ramp up production to 20,000 units by December. The announcement is a strong indication that the electric vehicles (EVs) revolution may be approaching faster than expected, driven by a favorable combination of political, technological and market trends. This is certainly a positive development, however, even in the world of clean tech, environmental, social and governance (ESG) issues abound. Companies and investors alike will need to manage related risks carefully.
Are Subprime Auto Loans the Next Bubble?
Through the course of our research, we’ve seen a significant increase in media coverage surrounding the U.S. auto loan market. Headlines highlight an increase in delinquency and default rates, a prevalence of deep subprime auto loans, lower vehicle deliveries and higher inventories. Reminiscent of the financial crisis, many investors are asking whether this is the next bubble and what they can do to manage related ESG risks.