Weekly ESG News: Financial Services and Insurance Industry (37/2024)
News in the spotlight: Microsoft bought 234,000 rainforest carbon credits from Toroto to support its 2030 carbon-negative goal.
Microsoft purchased 234,000 rainforest carbon credits from Toroto to restore 47,000 hectares in Mexico, supporting its carbon-negative 2030 goal.
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Regulations & Law
The Financial Conduct Authority (FCA) has postponed the implementation of new sustainability-related labeling rules for investment products from December 2024 to April 2025. This delay gives asset managers additional time to comply with the FCA’s Sustainability Disclosure Requirements (SDR), which aim to clarify the sustainability attributes of investment products and mitigate greenwashing. The SDR includes new labeling categories, such as Sustainability Focus and Sustainability Impact, requiring products to meet specific criteria for each label. While the delay affects the introduction of these labels, the anti-greenwashing rule, effective since May 2024, remains unchanged. The FCA has emphasized the importance of accurate and clear sustainability claims and urges firms to meet the new standards as soon as possible.
The U.S. Environmental Protection Agency (EPA) has proposed updates to its Recommendations of Specifications, Standards, and Ecolabels for Federal Purchasing, aiming to guide buyers towards environmentally sustainable products. This update follows the Biden administration’s new procurement rule prioritizing sustainable goods, finalized in April 2024. The proposal introduces 14 new standards and ecolabels for sectors including healthcare, laboratories, and clothing, and expands existing criteria for food service ware to include reusable, compostable, and recyclable products. It also removes seven outdated or non-compliant standards. Jennie Romer of the EPA emphasized that these recommendations help federal purchasers and consumers navigate the crowded ecolabel market, ensuring meaningful sustainability efforts.
Products and Services
Oracle has introduced Oracle Fusion Cloud Sustainability, a new solution designed to assist companies in managing and reporting their sustainability efforts. Integrated within Oracle’s Fusion Cloud Applications Suite, this tool pulls data from various ERP and SCM applications to provide a flexible framework for capturing and analyzing sustainability-related data. Key features include AI-powered automated transaction records, enabling the automatic creation of sustainability-ledger entries, and prebuilt dashboards offering a holistic view of sustainability performance with drill-down capabilities. Additionally, the solution provides emissions factor mapping, which helps organizations calculate their carbon footprint and assess the environmental impact of business decisions. By streamlining data collection from third-party applications and providing audit and traceability tools, Oracle’s new solution enhances decision-making and simplifies compliance with regional environmental guidelines.
Microsoft has purchased 234,000 Rainforest Restoration Carbon Removal Credits from Toroto, supporting a project in the Calakmul region of Campeche, Mexico. The credits help Microsoft offset its carbon emissions while restoring 47,000 hectares of tropical rainforest. The initiative benefits local landowners in the Conhuás ejido by providing income and resources for protecting natural ecosystems. The rainforest, home to endangered species like the jaguar, is a key ecological corridor near the Calakmul Biosphere Reserve. This purchase aligns with Microsoft’s goal of becoming carbon-negative by 2030. In June, the company made a record carbon credit purchase from Brazil’s BTG Pactual. Microsoft highlights the Conhuás project as a model for community-led climate action.
Novameat Raises $19 Million to Expand Plant-Based Meat Production
Barcelona-based sustainable food startup Novameat has raised €17.4 million (USD $19.2 million) in an oversubscribed Series A funding round. The funds will be used to scale production of its plant-based meat alternatives and launch its new Shredded Nova-b*ef product in mid-September. Novameat uses 3D printing technology with pea protein-based ingredients to create meat alternatives that mimic the texture of animal meat. The company aims to address sustainability challenges in agriculture, which is responsible for 14.5% of global greenhouse gas emissions. Led by Sofinnova Partners and Forbion, the investment will help Novameat further its mission to provide sustainable, animal-free protein options. CEO Giuseppe Scionti emphasized the positive feedback on their products and the company’s commitment to both people’s wellbeing and the planet.
Euronext has launched new ESG tools, including a benchmarking solution for listed companies to compare their ESG performance with peers and an advisory service for SMEs to meet the EU’s Corporate Sustainability Reporting Directive (CSRD) requirements. These initiatives were unveiled during Euronext Sustainability Week, alongside the release of the ESG Trends Report 2024 and the Euronext Sustainable Network, which fosters collaboration in sustainable finance. The ESG Advisory solution helps SMEs implement the European Sustainability Reporting Standards (ESRS) under the CSRD, which mandates detailed reporting on environmental and social impacts. Euronext also updated its ESG Reporting Guide and launched an Academy Coaching service to support executives in understanding ESG regulations and best practices. CEO Stéphane Boujnah emphasized the importance of collaboration and Euronext’s commitment to advancing sustainability in finance.
ESG and Green Bond Issuances
Bank of America Funds $205 Million Carbon Capture Project at Harvestone Biorefinery
Harvestone Low Carbon Partners (HLCP) has secured $205 million in tax equity financing from Bank of America for its carbon capture and storage project at its North Dakota-based biorefinery. This deal is the first of its kind since the Inflation Reduction Act (IRA) was passed in 2022, which significantly enhanced the 45Q tax credit for carbon capture. Harvestone’s Blue Flint biorefinery, one of the first U.S. facilities to implement carbon capture, has captured over 125,000 metric tons of CO2 and aims to capture more than 200,000 tons annually. The financing allows Bank of America to benefit from the 45Q tax credits and potentially purchase clean fuel tax credits. Karen Fang of Bank of America highlighted the bank’s commitment to innovative decarbonization financing and supporting sustainable transitions. Jeff Zueger, CEO of HLCP, noted the project’s positive impact on reducing emissions and strengthening local markets.
Standard Chartered has announced a debt financing deal with carbon removal developer UNDO, supported by British Airways, CUR8, CFC, and WTW. This innovative transaction aims to create a scalable financing model for Carbon Dioxide Removal (CDR) projects. UNDO, founded in 2022, uses enhanced rock weathering to accelerate CO2 removal through the application of crushed silicate rock on agricultural land. The deal is designed to overcome financing barriers by decoupling project costs from carbon credit sales, thus providing greater financial flexibility and reducing risks. Marisa Drew of Standard Chartered emphasized the need for novel financial solutions to scale carbon removal technologies. The transaction also includes commitments from British Airways for future carbon credits and CUR8’s due diligence to ensure high-quality removals. The initiative is expected to help accelerate the development of a robust carbon removals market and support broader climate goals.
Net Zero Commitments
American Express Global Business Travel (Amex GBT) has committed to achieving net zero greenhouse gas emissions across its value chain by 2050. The company’s interim goals, validated by the Science Based Targets initiative (SBTi), include an 80% reduction in absolute Scope 1 and 2 emissions and a 30% reduction in Scope 3 emissions by 2030, relative to 2019 levels. Amex GBT will also engage 67% of its airline suppliers to set science-based targets by 2028. Long-term, the company aims for a 90% reduction in Scope 1, 2, and 3 emissions by 2050. This announcement builds on its 2021 commitment to align with SBTi methodology. Paul Abbott, CEO, emphasized the need to address environmental impacts to sustain the benefits of global travel.
Google has signed a deal with Direct Air Capture (DAC) company Holocene to purchase 100,000 tons of carbon removal credits at a record-low price of $100 per ton. Holocene, founded in 2022, uses DAC technology to extract CO2 from the atmosphere using organic compounds, which is then stored underground. This technology is essential for achieving net-zero emissions and could scale significantly in the future. The low price is attributed to Holocene’s cost-effective solutions and Google’s financial support. The agreement also benefits from the U.S. government’s 45Q tax credit, which subsidizes DAC costs. Google’s Randy Spock emphasized that this partnership helps overcome high DAC costs and supports the company’s broader decarbonization goals.
ESG Data & Analytics
A recent Deloitte survey reveals that 85% of companies have increased their sustainability investments over the past year. Executives are increasingly prioritizing climate change, which now ranks third among their top concerns. As climate-related impacts rise, 70% of executives foresee significant effects on their company’s strategy in the next three years. Notably, companies are shifting focus from compliance to leveraging sustainability for direct business benefits, such as supply chain efficiency and operational margins. 92% of executives are optimistic about growing while reducing emissions and believe the world will take adequate action against climate change. Investment in sustainability has increased, with 45% of companies integrating it into their core strategies. Key actions include adopting technology for environmental monitoring and developing climate-friendly products. This trend signifies a growing alignment of sustainability with business innovation and competitive advantage.
A recent Bain & Company survey reveals that sustainability is increasingly falling down the list of priorities for CEOs, who are focusing on more immediate issues such as inflation and geopolitical uncertainties. However, this shift does not reflect the growing concerns of consumers and corporate buyers. The survey, which included over 19,000 consumers and 500 B2B buyers, shows that consumer anxiety about climate change has risen, with many expressing a willingness to pay more for sustainable products. Corporate buyers also place sustainability among their top purchasing criteria, with a significant number prepared to switch suppliers or pay a premium for sustainable offerings. Despite this heightened demand, many companies are struggling to meet their sustainability targets, leaving only half of buyers satisfied with the sustainable options available.