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This is our weekly newsletter of curated ESG content. We aim to surface relevant ESG news articles, academic papers, best practice reporting guides and latest industry developments. We have a strong ESG community and if you have feedback to share reply to this email to let us know what’s on your mind!

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Issue #110: A weekly update on responsible investment.
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\\ Weekly Insights \\

In just a few short weeks, the world has changed drastically yet again and time will tell what the Russia-Ukraine war will mean for the world of ESG. Oil and defense stocks have spiked and even Elon Musk has called for a ramped up energy output:

He even goes on to share: “Obviously, this would negatively affect Tesla, but sustainable energy solutions simply cannot react instantaneously to make up for Russian oil & gas exports.”

Financial News touches on these points with their article “Ukraine War ‘bankrupts’ ESG case” where they interview former BlackRock, ESG skeptic, Tariq Fancy. Fancy emphasises first that the crisis “highlights all kinds of inconsistencies that bankrupt a lot of the underlying theses” behind ESG.

We have already seen as the War continues that governments who had been previously been deepening their E targets and initiatives are now “scrambling to find other energy sources to meet demand.” On top of that — there has been a “wake of calls to hike spending on oil and gas companies.”

Then, there is new lobbying about defense- “BDSV, the German defense industry lobby group, has argued that defense stocks should be held in ESG portfolios, saying there’s a social imperative to do so during wartime.”

This type of lobbying seems to have already had an impact as the Financial Times notes that: “EU proposals last year to label the defense industry as socially harmful appear to have been ditched in a final report published last week on what constitutes socially sustainable finance.”

Leading ESG thinker, Bob Eccles shares about the impact of the Ukraine-Russia war on ESG considering a more nuanced thought about exclusion in the field:

“Exclusion by industry is a common and simplistic way of labeling a fund as ESG. Like I could create “The Great Green Feel Good Fund” by saying “No oil and gas! No tobacco! No weapons!” Sure, it has a bit of alcohol. And lots of consumer packaged goods companies with human trafficking in their supply chains, foods and drinks that contribute to obesity, and wrapped in plastic that ends up in the oceans. Oh, and an overweight on the FANGS despite concerns about data privacy, dual class share structures which limit investor influence, and business models which extract the value of the data they collect from all of us for free.”

As a final point, let’s consider ESG as a risk mitigation strategy. Should ESG have helped investors mitigate risk related to the Russia — Ukraine crisis early?

In a Financial Times piece they shared that the “war showed that ESG investors “have failed” by not managing risks associated with Russian investments before the latest invasion” and “companies should have learned from Russia’s annexation of Crimea in 2014.”

Even the data firms missed it and MSCI only chose to downgrade it’a ESG rating of the Russian government from B to CCC on March 8th. (Read about the downgrading here)

\\ Nossa News \\

What Magnified the ‘S’ Issues in ESG and what made companies resilient during Covid-19?

We interviewed Jeremy Richardson, Global Equities Senior Portfolio Manager at RBC Global Asset Management (UK).
“When the pandemic happened, there was a big focus of attention from companies on the ‘S’ of ESG; I think this remains incredibly topical. Back in the middle of 2020 it was all about PPE, social distancing and supporting remote workers. Employers were trusting their workforce to do their jobs when they were no longer clocking in and out every day. For many businesses this proved to be manageable. But for many it was also incredibly stressful. For example, we would not have been able to get through the pandemic nearly as well as we did were it not for the continuation of food delivery, etc.”
Read our feature.

ESG for early-stage businesses: Helping your portfolio companies.
ESG_VC is an initiative in the venture capital industry, responding to the pressing ESG issues that affect early-stage businesses. The initiative has established a whole VC community spanning across the UK, USA and Europe. The aim is to progress and support the efforts of early-stage businesses in managing and integrating ESG into their operation. The initiative equips entrepreneurs with the knowledge and tools necessary to embrace ESG from the very beginning. Nossa Data interviewed Henry Philipson, ESG_VC Co-Founder and Director of Marketing & Communications at Beringea. As well as Serena Taylor, active member of the ESG_VC initiative and ESG & Impact Officer at Talis Capital.
Read our feature.

Reach Out!

\\ Top Stories \\

EU presents watered-down rules on Corporate Sustainability Due Diligence

The new rules could have set a strong standard to lead companies in the EU on a path to climate neutrality and sustainable development. But important provisions in the proposal have been watered down.

“The introduction of mandatory due diligence rules is an important step towards curbing environmental damage or human rights violations in business operations,” says Maria van der Heide, Head of EU Policy at ShareAction.

“It is a real disappointment, however, that these rules only apply to large companies.* Human rights and environmental risks occur in operations and value chains of companies of all sizes. By excluding small and medium-sized enterprises, which account for around 99 per cent of all EU companies, only a tiny percentage of the EU’s economy will have to identify and manage these risks to.”
ShareAction.

The Industry’s First-Ever Partnership to Standardize ESG Reporting
Carlyle and the California Public Employees’ Retirement System (CalPERS) collaborated with a group of global general partners (GPs) and limited partners (LPs) to form the ESG Data Convergence Project, the private equity industry’s first-ever collaboration to standardize ESG metrics.

What metrics are measured?

  • Greenhouse gas emissions
  • Renewable energy
  • Board diversity
  • Work-related injuries
  • Net new hires
  • Employee engagement

Carlyle.

How global business can drive climate action
Global businesses can drive forward innovative technologies that create energy using the earth’s renewable resources. They can move quickly when a solution is promising. They can deploy capital in flexible ways to scale solutions across the globe. And, they can do all of this while creating well-paying jobs of the future.

What businesses need to be successful is also what we need to confront climate change:

  1. Ambitious scale,
  2. A wide lens,
  3. And a long-term outlook.

Illuminem.

The Shareholder Proposal Rule: A Cornerstone of Corporate Democracy

What are the most common shareholder proposal topics as if March 2022?

  • Corporate Governance (64)
  • Environmental (31)
  • Discrimination (19)
  • Human Rights (11)
  • Lobbying (9)
  • Executive Compensation (8)
  • Political Spending (5)

SEC.

Morningstar’s Jon Hale: Advisors’ ESG ‘Wave-Off’ Is History
Hale says sustainable-fund active managers may need to tweak their approach to continue outperforming. He weighs the potential impact should the Labor Department reverse the Trump-era policy of blocking retirement advisors from environmental, social, and governance (ESG) investment strategies. And he explains why some financial advisors call creating a sustainable-investing niche the smartest thing they’ve ever done.

What’s the appetite for sustainable investing among advisors these days? Overall, the appetite has grown tremendously in the past five years. I’ve seen all kinds of advisors get into this.
Barrons.

ShareAction has done it again!
“Unilever has committed to set a new benchmark for public reporting on the healthiness of food sales. This is a direct result of months of negotiation following the submission of our health-based shareholder resolution earlier this year — a massive win for investor engagement on health! The move sets a new precedent for global food manufacturers and sets the wheels in motion for significant progress on reporting. Our Healthy Markets investor coalition will have a key voice in the ongoing process building to the announcement of Unilever’s targets and disclosures later this year.”
Read the post.

The failed promise of ESG and the Wall Street Journal
In a just-published series of critical articles in The Wall Street Journal, columnist James Mackintosh outlines the “failed promise” of ESG investing and describes it as “absurd” to claim that investments in green bonds deliver higher yields. His conclusion: “These investments don’t do much to make the world a better place.” The series lit up threads of online comments from ESG advocates. Some argue that Mackintosh creates a false, either-or choice that misrepresents ESG with a complete lack of nuance in the description of ESG where we know there is no one-size-fits-all ESG.
GreenBiz.

* Want to make your ESG processes digital?
** Schedule a call to speak with Nossa Data
*** Email Team@nossadata.com

\\ Report & Paper Highlight \\

ESG in Silicon Valley — A look at ESG Disclosure Practices

This report examines how technology companies in particular are responding to the growing interest in this space and the demands for more ESG-related disclosure by looking at the ESG reporting practices of the technology and life science companies included in the Fenwick — Bloomberg Law Silicon Valley 150 List (SV 150), which can serve as a proxy for technology companies more generally.

Key Takeaways:

  • Approximately 90% of SV 150 companies provide some level of ESG disclosure, with the vast majority of such companies (83%) choosing to disclose throughout multiple channels (e.g., sustainability reports, websites and/or proxy statements).
  • The amount and quality of ESG disclosure varied by size of company, with the larger SV 150 companies generally providing more comprehensive disclosure, including quantitative metrics.
  • ESG disclosures addressed a variety of topics, including carbon emissions and related reduction efforts, human capital management programs and initiatives, board and employee diversity, data protection and privacy. A significant majority provided disclosures related to human capital management, while smaller majorities included community impact and carbon emissions.
  • Approximately half of the SV 150 companies reported using a third-party standard or framework to guide their disclosure.
  • Only 17% of SV 150 companies provided independent assurance for their quantitative ESG metrics, such as GHG emissions.
  • The vast majority of SV 150 companies delegated primary oversight of ESG to the nominating and corporate governance committee or its equivalent.

Fenwick.

Climate Change 2022 — IPCC

What are the overall conclusions presented to policymakers from IPCC’s latest report?

Observed and Projected Impacts and Risks

  • Human-induced climate change, including more frequent and intense extreme events, has caused widespread adverse impacts and related losses and damages to nature and people, beyond natural climate variability.
  • Vulnerability of ecosystems and people to climate change differs substantially among and within regions (very high confidence), driven by patterns of intersecting socio-economic development, unsustainable ocean and land use, inequity, marginalization, historical and ongoing patterns of inequity such as colonialism, and governance (high confidence).
  • Global warming, reaching 1.5°C in the near-term, would cause unavoidable increases in multiple climate hazards and present multiple risks to ecosystems and humans (very high confidence).

Current Adaption and Benefits:

  • Progress in adaptation planning and implementation has been observed across all sectors and regions, generating multiple benefits (very high confidence). However, adaptation progress is unevenly distributed with observed adaptation gaps (high confidence).
  • Soft limits to some human adaptation have been reached, but can be overcome by addressing a range of constraints, primarily financial, governance, institutional and policy constraints (high confidence).
  • Enabling conditions are key for implementing, accelerating and sustaining adaptation in human systems and ecosystems. These include political commitment and follow-through, institutional frameworks, policies and instruments with clear goals and priorities, enhanced knowledge on impacts and solutions, mobilization of and access to adequate financial resources, monitoring and evaluation, and inclusive governance processes.

Read the Report.

\\ Leading Across ESG \\

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Julianne Flesher
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