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This is the weekly ESG Wrap, which highlights Featured 9fin ESG content such as TLDRs for all deals, news stories that have interested the ESG team this week, and 9fin ESG product updates.

If you have questions related to this ESG Wrap please email us at ESG@9fin.com.

Sign up for 9fin’s latest ESG webinar “Nature risks: a material consideration for lenders”. The webinar will take a deep dive into the material financial impacts associated with land degradation and biodiversity loss. Our 9fin host Jennifer Munnings will be joined by Peter Elwin, director of fixed income at Planet Tracker, Zaneta Sedilekova, director at Climate Law Lab, and Charlotte Apps, sustainable investment analyst at Fidelity International.

TLDR: Stiga, a lawn mower manufacturer based in Italy, reports limited forward-looking climate information and its engagement with suppliers on climate issues is limited. Its sustainability governance is broadly aligned with good practice. As of 2022, Stiga had no women on its board of directors. Stiga reports limited measures to ensure environmental and social compliance in its supply chain. The group reports cyber security measures in line with good practice, however, there are some gaps in its reporting.

Ineos Quattro — ESG QuickTake (9fin) (1 Nov)

TLDR: Ineos Quattro reports a robust climate implementation plan and its sustainability governance is broadly aligned with good practice. Between 2019 and 2022, Ineos Quattro reduced its scope 1 and 2 (market-based) emissions roughly in line with the trajectory implied by its 2030 target. 10% of Ineos Quattro’s sites are located in areas of extremely high baseline water stress, however, it only discloses water consumption data publicly at the parent level. Some chemical products used by Ineos Quattro in the production process have been, or may be subject to restrictions or bans.

ESG Secondary Digest — Boparan, Techem, ThyssenKrupp (9fin) (2 Nov)

In this week’s Secondary Digest, 9fin takes a deep dive into Boparan, Techem and ThyssenKrupp’s climate transition reporting. We also analyse Boparan’s deforestation-free target, look into Techem’s ongoing legal proceedings, and assess ThyssenKrupp’s past links with corruption and the sale of weapons to controversial military regimes.

Ithaca, Aker BP and DNO among companies offered new North Sea licences (9fin) (31 Oct)

High-yield issuers Ithaca Energy, Aker BP and DNO are among those to have been offered new exploration and production licences in the North Sea, as the first batch of results from the UK’s 33rd Oil and Gas Licensing Round was released by the North Sea Transition Authority (NSTA). While this gives the firms an opportunity to expand their resources in the North Sea, it is difficult to gauge the scale of the assets, given that many of the blocks remain currently unexplored. Companies offered the licences now have to decide whether to accept the offer, a person briefed on the matter told 9fin. The NSTA does not negotiate terms of the offer at this stage — companies offered the licenses can either accept or reject the offers on the table.

Eskom says its coal pollution kills 330 South Africans a year (2 Nov)

South African state power utility Eskom has said that pollution from its coal-fired plants that supply more than 80% of the country’s power kills around 330 people a year. Eskom drew this figure from its own research, in contrast to a number of independent reports that put the figure at between 650 and 2,000 people a year. The company had planned to retire 11,300 megawatts of coal-fired power generation, or about a quarter of its capacity, by 2030. However, Eskom and the South African government are looking to slow down the pace of these planned closures to alleviate power outages. A report by the Centre for Research on Energy and Clean Air last month highlighted that suspending these plans could lead to 15,000 additional deaths. See 9fin’s UNGC/OECD Compliance Framework on Eskom here. 

SolarWinds sued by SEC after 2020 breach by Russian hackers (30 Oct)

SolarWinds, the IT company breached by Russian hackers as part of an espionage campaign in 2020, has been sued by the US Securities & Exchange Commission. The SEC on Monday filed a complaint accusing the company and chief information security officer Timothy Brown of misleading investors by not disclosing “known risks” and not accurately representing its cyber security measures. “We allege that, for years, SolarWinds and Brown ignored repeated red flags about SolarWinds’ cyber risks, which were well known throughout the company and led one of Brown’s subordinates to conclude: ‘We’re so far from being a security minded company’,” Gurbir Grewal, director of the SEC’s enforcement division, said in a statement. See 9fin’s report on SolarWinds from 2022 here.

Deutsche Bank executive warns of growing ‘fat tail’ ESG risk (26 Oct)

Investors are facing a growing risk that climate change will result in a sudden loss of value, with existing portfolio models often falling short, according to analysis from Markus Müller, chief investment officer for ESG at Deutsche Bank AG. “The temptation is to assume that the effects” of global heating “will accumulate only gradually,” he said. “However, this isn’t guaranteed.” According to Müller, investors need to prepare for the “fat-tail” risks associated with climate change. The climate change trajectory is not linear and the planet is approaching tipping points. As scientists have repeatedly warned, if breached, the physical effects of climate change could suddenly and dramatically worsen. In a recent client note, analysts at Jefferies said investors “may not be using the most up-to-date and relevant climate models” to help them assess the risks ahead.

BlackRock study finds gender-balanced companies outperform peers (2 Nov)

Companies with more gender-balanced workforces outperformed their least-balanced peers by as much as two percentage points annually between 2013 and 2022, a BlackRock study of the MSCI World index has found. While other researchers have also sought to document links between gender equity and performance, this global study of roughly 1,250 big companies that report at least some gender data is one of the largest ever done. 

Panama Canal traffic is being throttled by climate change impact (3 Nov)

A lack of rainfall, blamed on climate change, is leading to a steady decline in water levels on the Panama Canal. Quotas are now being imposed on how many ships can pass through the canal; restrictions started this month and will continue through at least February, the canal’s managing authority said. By then, trips will be limited to 18 per day, a 50% drop from a year earlier. Excluded vessels will likely alter course to the Suez Canal — adding at least a week to the journey between the US and China — or around the bottom of South America. Such voyages will burn more fuel and lead to higher freight costs. These restrictions are likely to have an impact on high yield issuer Hapag Lloyd and its competitor Maersk, which have both reported impacts from water level in the canal in the past (Hapag Lloyd hereand Maersk here).

Oil and gas companies face an era of credit downgrades, Fitch warns (31 Oct)

Much of the fossil fuel industry may be facing an era of credit downgrades if producers prove too slow to adapt to a low-carbon future, according to Fitch Ratings. Oil and gas companies stand out as the most vulnerable issuers in an analysis by Fitch. The International Energy Agency estimates that global demand for oil will peak this decade. But other researchers warn that this may happen even sooner. According to Inevitable Policy Response, a forecasting group whose data was used in the Fitch analysis, peak oil may come in 2025, after which demand will fall more than 60% over the next two-and-a-half decades.

Towards an EU ban on products made with forced labour (16 Oct)

In October, the Internal Market & International Trade committees adopted its position on keeping products made using forced labour out of the EU market. The draft regulation would put in place a framework to investigate the use of forced labour in companies’ supply chains. If it is proven that a company has used forced labour, all import and export of the related goods would be halted at the EU’s borders and companies would also have to withdraw goods that have already reached the EU market. These would then be donated, recycled or destroyed.

UK 'likely' to make TNFD mandatory (30 Oct)

The UK is ‘likely’ to make Taskforce for Nature-related Financial Disclosures-aligned disclosures mandatory, according to Linklaters. Kim Rybarczyk, an ESG-focused lawyer, recently told a Jefferies briefing that her interactions with the UK government suggests “the direction of travel is toward mandatory reporting”, although it is also conscious of overburdening companies. It is likely more information will be available on this when the government releases its report on how best to incorporate the TNFD into policy, which is expected later this year.

European investors downplay CSRD reporting quality concerns (02 Nov)

The big four accounting firms — Deloitte, EY, KPMG and PWC — all told Responsible Investor that neither corporates nor investors are prepared for the reality that many companies will fail their assurance engagements in the first few reporting cycles. As part of the Corporate Sustainability Reporting Directive (CSRD), companies will be required to obtain limited assurance from 2024, and reasonable assurance from 2028. Matthew Bell, global leader of EY’s climate change and sustainability practice, told RI that “EY is nervous that important stakeholders, like investors, are not properly prepared for the number of qualified opinions that are likely to be issued as companies undertake CSRD assurance for the first time”. 

Climate Risk Management Principles finalized by US banking regulators (Oct 30)

On 24 October, the US federal banking regulators finalised interagency principles for the effective management and supervision of climate-related financial risks (the “Climate Principles”). The Climate Principles are targeted at larger banking organisations and are intended to convey consistent supervisory expectations regarding how climate-related financial risks should be managed. The Climate Principles are effective immediately.

ESG wrap — Boparan’s climate strategy flew the coop, “fat tail” ESG risk

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