ESG Wrap — The Musk shake-up, INEOS’ Halloween special and ESG rules tighten further
- 9fin team
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.
9fin Featured Content
Starwood – ESG QuickTake (9fin) (4/11/22)
TLDR: Energy consumption is only reported for 48% of Starwood’s property segment. In 2021, renewable power made up only a small fraction of its Infrastructure Lending Segment’s investment portfolio (fossil fuels made up the vast majority).
Portfolio water consumption is not disclosed and Starwood has no emissions reduction targets. It mostly performs in line with competitors in terms of diversity and inclusion metrics. Starwood’s risk management approach does not follow good practice. No information is provided on cyber security, despite the heightened risk of cyber attacks for Real Estate Investment Trusts (REITs). (If you are not a client but would like to request a copy, please complete your details here.)
Nielsen – ESG QuickTake (9fin) (4/11/22)
TLDR: Nielsen’s environmental disclosures follow good practice and are consistent with industry peers. Lack of ethnic diversity highlights a wilder issue in tech. Nielsen is potentially exposed to some regulatory risks around data processing, particularly the EU’s ePrivacy Regulation proposal.
The group provided incomplete rating information to its clients in late 2020/early 2021, resulting in its Media Rating Council accreditation being suspended and being named the defendant in a 2022 lawsuit. The group demonstrates good engagement on cyber and IT security issues and has not reported experiencing any material breaches. (Request a complimentary copy here)
INEOS – ESG QuickTake (9fin) (31/10/22)
TLDR: Besides emissions, standardised ESG metrics for Ineos GH are not disclosed publicly (ESG reporting is consolidated at the parent level). Ineos GH does not report Scope 3 emissions. Scope 1 and 2 performance is comparable to peers but poor in relation to SBTi near-term target criteria. Ineos GH is responsible for producing polymers and polymer inputs which are significant downstream pollutants.
The parent organisation’s overall recordable injury rate is better than the industry average, however, it has been prosecuted and fined for health and safety violations. The approval of Ineos GH’s Project One plant (Antwerp, Belgium) is the centre of a court case between ClientEarth and the Flemish authorities. (If you are not a client but would like to request a copy, please complete your details here.)
Blackstone stands by ESG despite polarized criticism (9fin) (2/11/22)
With ESG facing growing criticism, this 9fin feature examines Blackstone’s commitment to ESG according to Elizabeth Lewis, deputy head of Blackstone’s ESG business at a Thomson Reuters ESG conference. According to Lewis, Blackstone is aiming to reduce the carbon footprint of its portfolio companies by 15% in the first three years of ownership. The firm also requires its portfolio companies to submit quarterly ESG reports, she added. However, when asked to comment on the backlash against the ESG movement, Lewis somewhat dodged the question from 9fin.
GHG emissions — should issuers recalculate? (9fin Educational) (1/11/22)
Greenhouse gas (GHG) emissions reporting is vital for investors looking to track the progress of companies reducing their GHG emissions, for example, in relation to a net zero target or a sustainability-linked bond issuance. However, for investors to be able to track the progress of companies over time, it is important that emissions data can be compared across years. This 9fin feature examines the question of how emissions should be reported when a company undergoes a significant structural change, such as an acquisition or a divestiture.
ESG star reporters — Part 2 (9fin) (1/11/12)
This is the second of a two-part series exploring the best and worst examples of ESG reporting. Part 1 focused on why robust standards for ESG reporting are important to combat greenwashing, and on the main blunders we see in ESG reporting. This second part focuses on some of the better examples of ESG disclosure. The article focuses on attributes in company disclosure that are helpful to lenders, using three examples: Jaguar Land Rover, Hannon Armstrong and WeBuild.
News & Stories Followed by 9fin's ESG team
Elon Musk begins mass layoffs at Twitter (4/11/22)
Following Elon Musk’s $44bn buyout of Twitter, he has already started layoffs in an attempt to drastically cut costs. According to an email seen by the Financial Times, Twitter employees will be notified of their employment status by 9am Pacific time on Friday. The email did not clarify the scale of the headcount cut. However, Musk has drawn up plans to cut around 3,700 jobs, equivalent to half of the workforce, according to two people familiar with the plans.
L’Oréal suspends advertising spending on Twitter (3/12/22)
Two people with knowledge of the matter have revealed that L’Oréal has suspended advertising spending on Twitter. Leading brands and marketing groups are growing anxious that inappropriate content will spread on the platform now that Elon Musk owns the social media platform. L’Oréal has not publicly announced its decision. Although Musk has sought to reassure marketers that Twitter will not become a “free-for-all hellscape”, executives at some of the biggest advertising groups said clients were privately reviewing their exposure.
Twitter owner Elon Musk met with civil rights leaders Tuesday — here’s what happened (2/11/22)
Elon Musk faced pressure from heads of civil rights groups to reject users that had been previously banned from the platform and to give company staffers access to the tools necessary to combat election-related misinformation. Some organisations have co-signed an open letter to Twitter’s advertisers encouraging them to “cease all advertising on Twitter globally if he [Musk] follows through on his plans to undermine brand safety and community standards including gutting content moderation.”
Fund manager rejecting a fifth of green bonds as quality concerns continue (4/11/22)
According to an analysis by Responsible Investor, green bond fund managers are rejecting a fifth of green bonds on sustainability grounds as quality concerns in the market continue. An example of a rejected bond was one that would finance electrified rail. Despite the project being described as having zero direct emissions, the cargo transported along the rail was majority fossil fuels-related.
Companies Face Tougher Net-Zero Validation Requirements (1/11/22)
From next year, the Science Based Targets initiative (SBTi) will no longer allow companies to wait more than 24 months to provide concrete emissions reduction targets. Those that miss the deadline or drop their SBTi commitments will remain indefinitely on its database, compared with previously when their names would disappear. “This will provide consistency in the commitment time-frame and increased transparency and accountability,” an SBTi spokesperson said.
Tesla held discussions over taking stake in Glencore (31/10/22)
Tesla held talks with Glencore about taking a stake in the Swiss commodities group. However, the discussions ended with no deal reached, according to two people familiar with the matter. Tesla had concerns over whether Glencore’s extensive coal mining business was compatible with the carmaker’s environmental goals, and was reluctant to take a minority equity stake.
HSBC invested ‘sustainable bonds’ in fossil fuels (31/10/22)
HSBC allegedly contributed $2.4bn into expanding fossil fuels, air travel, and other polluting activities and labelled it “sustainable finance”. HSBC, Britain’s biggest banking group, has a target to contribute up to $1trn in sustainable finance and investment by 2030. However, the Bureau of Investigative Journalism and the BBC found that billions of dollars counted towards this goal were funding activities contributing to the climate crisis. HSBC counts various financial products towards its target, including sustainability-linked bonds (SLBs).
Article 9 downgrades gather pace as regulatory uncertainty continues (28/10/12)
Uncertainty over SFDR Article 9 classifications saw 41 funds drop their Article 9 classification to reclassify as Article 8. In June, the European Commission clarified that Article 9 funds could only make sustainable investments making a swathe of funds intelligible. More funds are expected to reclassify due to the lack of clarity on the regulation. The Commission is expected to publish new guidance in the next few months, however, the expansion of SFDR requirements on January 1st in addition to future expected downgrades highlights areas for growth.
Bolsonaro election loss could cut Brazilian Amazon deforestation by 89% (23/09/22)
The loss of Jair Bolsonaro in the Brazilian presidential election to Luiz Inácio Lula da Silva, more commonly known as Lula, could reduce the deforestation rate in the Amazon by 89% over the next decade. Lula has pledged to fight for zero deforestation in the Amazon and expressed a willingness to work with the international community to protect the rainforest in his acceptance speech. The enforcement of environmental laws that had been neglected under Bolsonaro should reduce Brazil’s GHG emissions stemming from deforestation.
Product hints, tips and updates
ESG webinar: We are delighted to invite you to our latest webinar where our ESG team will give you a guided tour of the EU’s Sustainable Finance Disclosure Regulation. With the implementation of Tier 2 reporting fast approaching in January, the team will look at how asset managers should approach the thorny issue of Article 8 and 9. Register here.