Primary Analysis

Coty — ESG QuickTake (9fin) (11/09/2023)

TLDR: Coty, a beauty products manufacturer, has achieved its near term SBTi-verified targets (1.5°C aligned). In 2022, only 68% of Coty’s purchased palm oil was certified by the Roundtable on Sustainable Palm Oil (RSPO). Coty has some targets in place to improve the circularity of its packaging. In March 2023, a US District Court Judge dismissed a case against Coty that claimed the company hid the presence of PFAS in its CoverGirl mascara. On 30 June 2020, Seed Beauty, a beauty products manufacturer, filed a lawsuit against Coty, Kim Kardashian-West, and Kylie Jenner alleging that their partnership (In 2020, Coty bought a 20% stake in Kim Kardashian-West and a 51% stake in Kylie Cosmetics) amounted to a theft of its trade secrets.

Palex Medical — ESG QuickTake (9fin) (08/09/2023)

Spain headquartered-Palex, a medical equipment distributor, does not report scope 3 emissions and does not have any emissions reduction targets. The group’s board of directors is made up 10% by women, which is lower than 9fin’s industry average for Health Care Equipment & Services (19%). 9fin identified some potential shortfalls in Palex’s quality management approach. Even though Palex sources from over 1,000 suppliers, its sustainable sourcing policy lacks detail. Palex highlights that there were no reports of data breaches in 2022.

Rexel — ESG QuickTake (9fin) (06/08/2023)

TLDR: Rexel’s sustainability-linked bond (SLB) issuance has a margin ratchet linked to two sustainability performance targets (SPTs). 9fin has determined these targets to be material and ambitious, but the financial penalty of failing to achieve the targets is limited. The electrical product distributor’s GHG emissions targets are SBTi-verified and better than peers Sonepar and Wesco. But Rexel’s operations are highly energy intensive and, in 2022, just 21% of its energy consumption was renewable.

Boels Rental — ESG QuickTake (9fin) (06/09/2023)

TLDR: Boels Rental reports some forward-looking climate transition information, such as GHG reduction targets. However, its plan requires a lot more detail related to its scenario analysis and it lacks board-level oversight on ESG matters. Its gender diversity performance is broadly aligned with peers. The company lacks a supervisory board, which is a potential governance risk.

9fin Featured Content

CLOs take inspiration from SFDR with push into ESG reporting (9fin) (06/09/2023)

Despite not falling under the scope of reporting deadlines imposed by the EU's Sustainable Finance Disclosure Regulation (SFDR), CLOs are still deeply wrapped up in ESG reporting one way or another. While some had made provisions for CLOs to be caught up under SFDR and have settled for voluntarily abiding by the rules courtesy of 'Article 8-aligned' CLOs, others have put forward their own bespoke ESG reports.

Tightening the Screws on Sustainability-Linked Financing Frameworks Video (08/09/2023)

In this video, ESG Analyst Daniel Power provides insights into how 9fin evaluates sustainability-linked financing frameworks. It covers important topics such as materiality, target ambitiousness, second-party opinions, margin ratchets, and callability. Financing arrangements that tie sustainability objectives to coupon payments have become commonplace in high yield and leveraged finance. However, as quality concerns arise accompanied by increasing regulatory scrutiny, it is becoming ever more important to identify and ensure the sustainability-linked debt in your portfolio is credible. Register now and get the recording on 20 September!

HY Company News

Rite Aid Sued Over Impact of Data Breach Said to Affect 24,000 (07/09/2023)

Rite Aid is facing a proposed class action over a May 2023 data breach that reportedly compromised the personal and health information of around 24,000 people. The complaint alleges that Rite Aid negligently ignored basic security practices including data encryption, which meant that hackers had access to customer company files after they breached a third-party vendor. Plaintiff Betty George and others affected by the breach are now at an increased risk of identity theft, the filing said.

House GOP expands probe into Ford for teaming up with Chinese EV battery supplier (05/09/2023)

House Republicans have intensified their investigation into Ford over its deal with a Chinese company to open a new $3.5bn facility in Michigan for electric vehicle batteries. The House Energy and Commerce Committee requested information in a letter to Ford about the agreement with Chinese battery supplier Contemporary Amperex Technology Co. Limited (CATL), adding to a previous probe opened this summer by House Republicans on two other committees. Republicans cited national security concerns about the agreement, set to expire in 2038, considering the Biden administration’s green energy transition and China’s dominance over critical minerals used in EV batteries.

Drahi to Face Altice Investors Over Corruption Probe and Debt (04/09/2023)

Altice International’s founder and controlling shareholder, Patrick Drahi, met with investors in London and New York last week to address how Altice will reduce its debt as it faces the fallout from a corruption probe in Portugal. Drahi held meetings in London last Wednesday and in New York last Thursday, according to the company. These non-deal roadshows came after calls with debt investors in August, when he promised to do “whatever it takes” to de-lever and improve the capital structure of his group.

News stories

EU ESG rating regulation should close second-party opinion 'loophole' (11/09/2023)

The European Commission has been encouraged to include second-party opinion (SPO) providers in its proposed ESG rating regulation. In June, the Commission outlined its proposed regulation which would require ESG ratings providers to be authorised and subject to supervision by the European Securities and Markets Authority (ESMA). The proposals aim to improve transparency, provide clearer scoring methodology and data sources, and manage conflicts of interest.

Institute for Energy Economics & Financial Analysis (IEEFA) European debt market sustainable finance analyst Kevin Leung described it is a "breakthrough" regulation, but warned that the explicit "broad exclusion" of SPO providers from the regulation created a "regulatory loophole". "The SPO services are often solicited – provided under an 'issuer-pays' business model, and thus are exposed to business separation or conflict of interest concerns – at times far more exposed than some 'score'-like products [currently covered by the ESG ratings regulation]," IEEFA said in a submission to the EU.

Deep-sea mining excluded as ICMA-backed coalition releases blue bond guidelines (06/09/2023)

Deep-sea mining has been excluded from use of proceeds under a blue bond guidance published last Wednesday by a coalition of the International Capital Markets Association (ICMA), UN agencies and multilateral development banks. The group put the guide together to provide issuers with guidance to launch a credible blue bond, to support investors by promoting availability of information to evaluate investment impacts, and to help underwriters “facilitate transactions that preserve the integrity of the market”.

Goldman Analysts Have Bad News for Fund Managers Ignoring ESG (04/09/2023)

Asset managers trying to sell funds in Europe are finding it “increasingly difficult” to do so unless their products are registered as ESG, according to a study by analysts at Goldman Sachs. The research comes more than two years after the European Union enforced its Sustainable Finance Disclosure Regulation (SFDR). The new regulatory world order has had “significant impacts on capital flows”, Goldman analysts including Evan Tylenda and Grace Chen wrote in a note published on Monday. Conversations they’ve had with industry insiders show it’s “increasingly difficult to market Article 6 funds”, they said.

No banks disclosed the share of total finance directed towards climate solutions in the last year, according to analysis by the TPI Centre (05/09/2023)

Following the analysis of 26 of the world’s largest banks’ actions on climate, the Transition Pathway Initiative Global Climate Transition Centre (TPI Centre) found that none have reported the total amount of finance they have directed towards climate solutions in the last year. The TPI Centre also found that only six banks have disclosed a commitment to halt all on- and off-balance sheet activities that finance new coal capacity immediately. The TPI Centre did conclude that, overall, there has been an improvement in banks’ climate action over the past year; 20 banks out of 26 have set a net zero commitment. However, only a few banks have actually designed specific policies to meet their targets.

HSBC Executive Sees Broad Mispricing of Risk as ESG Bites (30/08/2023)

Investors aren’t paying enough attention to the very real environmental, social and governance risks lurking in portfolios, according to the global head of ESG research at HSBC Holdings Plc. Events such as wildfires, environmental scandals and labour disputes are leading to sudden investor losses. Recent examples include AT&T Inc., whose shares sank amid reports that its cables contained toxic lead; United Parcel Service Inc., which issued a profit warning after trying to resolve a worker dispute; and TUI AG, whose shares have tanked as many of its tourist destinations have been ravaged by fires.

Product hints, tips, and updates

Nine new SFDR-aligned ESG metrics (including UNGC/OECD violations, biodiversity-sensitive areas and cyber security incidents) have been added to 9fin’s ESG database. The upload covers 278 companies, with 2253 new data points being added. Some examples:

• Nouryon
• Teva
• UPFIELD (Flora Food Group)
• Fedrigoni
• Cirsa