9fin Featured Content

Merlin Entertainments — ESG QuickTake (9fin) (22/05/2023)

TLDR: Merlin Entertainments does not have any SBTi-verified emissions reduction targets or a net zero target. Although the group outlines measures to improve energy efficiency and increase renewable energy consumption, it does not report time-bound and quantitative targets. Over the past decade the group and its brands have been involved in several serious health and safety incidents. In October 2022, the group experienced a breach of its IT systems, although Merlin Entertainments reports that it did not suffer a material impact to its business.

Lottomatica — ESG QuickTake — UPDATE (9fin) (16/05/2023)

TLDR: Lottomatica’s only emissions reduction target lacks ambition and is not SBTi-verified. The proposed reorganisation of Italian gambling regulation could materially impact the group. Lottomatica has taken actions to mitigate against problem gaming, however, it does not offer preventative assessments for its players, unlike competitors. Lottomatica experienced cyber attacks between December 2021 and February 2022, with moderate impact.

ESG secondary digest — Teva, Upfield, Nouryon, Nobian (9fin) (22/05/2023)

TLDR: As part of 9fin's expanding High Yield ESG coverage, we now produce secondary market analysis for a number of credits. Our latest analysis highlights that both Teva and Nobian are making good progress towards reaching their carbon reduction targets linked to their sustainability-linked bonds. Upfield’s latest TCFD report references low financial material impact on the company under all climate scenarios. In addition, Nouryon remains unlikely to reach its 2030 GHG emissions reduction target.

HY Company News

Subway Franchisees Agree to Avoid Child Labor Law Violations (17/05/2023)

The owners of 14 Subway sandwich shops in the San Francisco Bay Area agreed to avoid child labor law violations and pay over $265,000 in back pay, as part of a deal to settle US Department of Labor claims in February 2022 that minor workers were put in unsafe situations and paid with bad checks.

Vodafone to cut 11,000 jobs worldwide over next three years (16/05/2023)

Vodafone is to cut 11,000 jobs from its global workforce over the next three years, the largest round of cuts in the telecoms group’s history. The job losses amount to more than a tenth of the global staff employed by Vodafone. The company currently employs around 9,000 people in the UK, including at its headquarters in Berkshire. The cuts mark the first big move by Margherita Della Valle, appointed as Vodafone’s first female chief executive last month, who said that the company needed to be leaner and more efficient to compete against rivals.

Asda plans to ‘fire and rehire’ 7,000 workers, union claims (18/05/2023)

Asda has been accused of threatening to “fire and rehire” 7,000 employees in a pay dispute, as the supermarket’s owners prepare to merge their petrol and forecourt business. The GMB union said thousands of workers across 39 stores in southern England will lose location-based pay supplements and be paid less for night shifts. Asda employees who do not agree with the changes will have the new contract forced on them and could be dismissed if they refuse to sign, the trade union said. GMB national officer Nadine Houghton said: “Cutting the pay of 7,000 low-paid retail workers during a cost of living crisis is inexcusable.”

News Stories

ESG Debt Investors Face Confusion Over Trigger Event for Payment (17/05/2023)

The Anthropocene Fixed Income Institute (AFII), a nonprofit monitoring green claims in fixed-income markets, states it has found evidence suggesting that “creative emissions accounting” helped chemicals company Nobian Finance BV meet a key performance indicator (KPI) that determines the size of its interest payments. The concerns relate to Nobian’s scope 2 emissions reporting. The AFII says the exclusion of municipal waste incineration (MWI) steam emissions in its scope 2 emissions category estimate risks underestimating the true climate impact. Nobian said its approach is transparent, has been approved by an auditor and is based on external guidance; there’s no conclusive guidance regarding whether to count MWI toward scope 2. 

The shaky logic of corporate emission reduction claims (02/05/2023)

According to Climate Trajectories, a climate services provider, we need a better way of purchasing and accounting for renewable electricity; emissions from electricity don’t magically vanish just because a company has purchased “renewable electricity”. Nearly 44% of all voluntary electricity purchases in the US are in the form of unbundled renewable energy certificates (RECs). These are just the environmental attributes of renewable electricity that has already been produced and sold into the grid, and the emission benefits have already been realised. As a result, a company using RECs to cut its scope 2 emissions will have no discernible effect on the GHG emissions entering the atmosphere because there are no additional reductions as a direct result of the purchase.

European high yield issuers 'too opportunistic' with green bonds (10/05/2023)

A Europe-focused green bond investor, who wished to remain anonymous, told Environmental Finance that the few high yield bonds that have come to market to date in Europe have been underwhelming, both in terms of the quality of the frameworks and in terms of commitments. According to the investor, there has only been a handful of high yield green bonds from ‘pure’ high yield issuers, as opposed to high yield green bond instruments — such as hybrid bonds — issued by investment grade issuers. Many of these ‘pure’ high yield bond issuances have been from firms in the automotive sector, e.g. ZF Friedrichshafen, Faurecia and Volvo Cars.

Scathing Report Targets Investment Bankers’ Emissions Math (17/05/2023)

Investment bankers are being singled out in a new report by nonprofit ShareAction that targets a planned framework for calculating the carbon footprint of capital markets. If the industry is allowed to go ahead with what ShareAction characterises as a watered-down version of the plan, the climate cost will be severe, according to authors of the report. The analysis is timed to pre-empt an announcement by the Partnership for Carbon Accounting Financials (PCAF), a group made up of banks tasked with ensuring the finance industry is aligned with the goals of the Paris climate agreement. ShareAction says there’s now a real concern PCAF will settle on a model that will be significantly weaker than originally expected.

Almost no sustainable-labelled funds align with UK, EU and US labelling rules (15/05/2023)

Very few funds with sustainability language in their names comply with the proposed labelling rules put out by UK, EU and US regulators, while 85% fail to comply with any of the three regimes, according to research by Clarity AI. The analysis looked at 1,514 funds from all three jurisdictions with sustainability-related terms in their names. It found that just 15 percent of these funds complied with at least one of the three proposed regulations, and that just four percent of this subset complied with all three.

Regulatory round up

European Commission to widen scope of materiality assessment in first set of ESRS (17/05/2023)

The European Commission had a consultation on the first set of European Sustainability Reporting Standards (ESRS), which will underpin the incoming EU Corporate Sustainability Reporting Directive (CSRD). 

The Commission is set to release delegated acts with key amendments. Notably, it is believed that the Commission will move all mandatory disclosure requirements within the scope of the materiality assessment. 

This means that a reporting company would be able to exercise a rebuttal on a topic they deem to be immaterial, thus not having to report on it. It is also believed that the Commission will introduce a number of phase-in mechanisms as well as new sets of intermediary thresholds aimed at helping compliance by small undertakings. A third area of change is that a number of ‘shall disclose’ mentions in the draft standards have been reworded as ‘may disclose’. A civil society representative told Corporate Disclosures this marked the "victory of a – somewhat violent – lobbying campaign" which resulted in the EU Commission "levelling down its ambitions".

Product hints, tips, and updates

Secondary Coverage: As part of 9fin's expanding High Yield ESG coverage, we are producing secondary market analysis for a number of credits. Stay on the lookout as we continue to grow our ESG offering!