Market Wrap
ESG Wrap — Sunnova’s climate targets not so bright, Webuild constructs controversy
- 9fin team
•6 min read
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.
Primary analysis
Sunnova Energy — ESG QuickTake (9fin) (21 Sep)
TLDR: Sunnova Energy’s green bond could contribute to the Paris agreement by increasing solar energy use in the US. Sunnova is also set to benefit from the Biden administration’s push for clean domestic energy. Sunnova reports some forward-looking climate information. However, there are several shortfalls related to scenario analysis, emission reduction targets, and engagement with suppliers. A recently published report revealed that the vast majority of solar panels made globally have high exposure to China and Xinjiang, and potentially forced labour.
WeBuild — ESG QuickTake — UPDATE (9fin) (18 Sep)
TLDR: In 2022, Webuild surpassed its 2025 Sustainability Performance Target linked to its 2022 Sustainability Linked Bond issuance. At the end of 2022, 38% of the areas managed by the group were located in protected areas. The Webuild Group is involved in the construction of hydroelectric power projects linked with political unrest, while several NGO reports have linked Webuild with serious human rights violations due to its involvement in the construction of a stadium used in the 2022 FIFA World Cup in Qatar. Webuild is subject to a number of legal proceedings, including ongoing criminal proceedings surrounding a 2013 fatal accident at a work site in Ethiopia.
Cheplapharm Arzneimittel — ESG QuickTake — UPDATE (9fin) (18 Sep)
TLDR: Cheplapharm Arzneimittel (Cheplapharm) only reports scope 2 emissions (leaving out scope 1 and scope 3). In 2022, Cheplapharm did not have a single product recall. Cheplapharm is subject to risks in connection with nitrosamine impurities (a potentially carcinogenic by-product of pharmaceutical production processes). It generated 4.3% of its revenue in Russia in the 12 months ended 30 June 2023 and has a Russian subsidiary that could be subject to sanctions. The group processes sensitive personal patient data and is at risk of cyber attacks.
HY company news
Following the allegations relating to the alleged serious misconduct of Russell Brand while presenting shows produced by Endemol in 2004 and 2005, Banijay UK has launched an urgent internal investigation. It states that it will cooperate with any requests for information from broadcast partners and external agencies.
Facing fares row, Ryanair hit by new antitrust probe in Italy (20 Sep)
Italy's antitrust agency has opened an investigation into airline Ryanair "for possible abuse of a dominant (market) position". Ryanair, which is the largest carrier in Italy, is already in a dispute with the Italian government, which is trying to hold down the price of domestic flights to its main islands at peak times. The Italian competition authority has said it suspected the carrier of exploiting a dominant position "to extend its power" in other sectors such as hotels and car rentals, to the detriment of travel agencies.
Bed Bath & Beyond employees sue over 401(k) plan losses (15 Sep)
Employees of the former Bed Bath & Beyond on Thursday sued the committee that oversaw its 401(k) retirement plan, saying its "imprudence" caused them to lose more than $5m after the home furnishings retailer filed for bankruptcy. The former employees’ MassMutual “guaranteed investment account” suffered a 10% loss due to rising interest rates which hurt the value of its underlying investments. They said the 401(k) committee breached its fiduciary duties by failing to replace the account with similar investment options, such as money market funds and stable value funds, that carried less principal risk if the company went bankrupt.
News stories
UK prime minister under fire from industry for weakening climate policies (20 Sep)
UK prime minister Rishi Sunak has announced he would delay a ban on the sales of new petrol and diesel cars and the phasing out of gas boilers. Sharp criticism has ensued from investors and corporates who say this move harms transition goals. Sunak linked the announcement to the rising cost-of-living, and highlighted that the delay will better balance the “costs and trade-offs” of the UK’s decarbonisation policy.
Regulation round-up
No need to scrap SFDR Articles 8 and 9, PwC says (19 Sep)
The European Commission is considering how to change the Sustainable Finance Disclosure Regulation (SFDR) following concerns that the disclosure-based framework is being misused by investors as a labelling framework. According to Frédéric Vonner of PwC Luxembourg, the EU could make “tweaks” to the SFDR rather than larger changes that could lead to the Article 8 and 9 categories being scrapped. Vonner noted that financial institutions have spent considerable time and effort to meet the original SFDR requirements. Because of this, he argues that proposed changes to the SFDR should be minimised to make sure that existing concepts in the regulation are built on, rather than replaced.
EU to ban ‘climate neutral’ claims by 2026 (20 Sep)
With a view to cracking down on greenwashing of consumer products, the EU will ban sweeping environmental claims such as “climate neutral” or “eco” by 2026, unless companies can prove the claim is accurate. The rules will also outlaw claims based on emissions offsetting — often used as the basis for assertions that products are carbon neutral, or have reduced environmental impact — along with green labels that are not from approved sustainability schemes. The change would make the EU the toughest region in the world in terms of its approach to green claims made to the public. It still requires approval from the EU parliament and member states, but it is rare for EU lawmakers to refuse that approval.
SEC Adopts Rule Requiring ESG-Labelled Funds to Invest 80% in Alignment with Theme (22 Sep)
The US Securities & Exchange Commission (SEC) announced the adoption of new rules that will require funds with names that suggest an investment focus on ESG or sustainability-related factors to invest at least 80% of the value of assets in accordance with those factors. The SEC action consists of an amendment of the Commission’s “Names Rule,” first adopted in 2001, as a measure to prevent fund names from misrepresenting their inherent investments and risks. SEC Chair Gary Gensler said: “Today’s final rules will help ensure that a fund’s portfolio aligns with a fund’s name. Such truth in advertising promotes fund integrity on behalf of fund investors.”
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 initial upload covers 278 HY companies. There’s lots more to come, with a focus on private companies and loans issuers. Some examples:
