TBLI Weekly - June 27th 2023


TBLI Weekly - June 27th, 2023


Your weekly guide to Sustainable Investment


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TBLI Impact Networking (Mixer)

July 7th, 2023
4:00 PM - 5:30 PM

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Sept. 22-25, 2023

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Destruction of world’s pristine rainforests soared in 2022 despite Cop26 pledge

An area of primary rainforest the size of Switzerland was felled last year suggesting world leaders’ commitment to halt and reverse deforestation by 2030 is failing

Nature restoration across Southeast Asia could cost $200 billion annually

Nature restoration projects are needed across Southeast Asia to help the region better adapt and tackle climate change, but estimated annual costs could be exceptionally and unreachably large

Ecological and economic uncertainty in the Southeast Asian region is intensifying as climate change continues to disproportionately impact Asian economies and nature in the region.

According to a new estimate by the Imperial College Business School, the annual cost of nature restoration across Southeast Asia could total $200 billion. In this study, focusing solely on Malaysian nature restoration, notes that this will require huge private-sector involvement.

To tackle this immense estimated cost, researchers are looking to well-structured capital market instruments such as sustainability-linked bonds (SLBs) to scale up investments in nature restoration projects.

SLBs and other capital market instruments are one way to gain support from fixed-income investors to back the Malaysian government’s biodiversity ambitions, the researchers at Imperial’s Centre for Climate Finance & Investment (CCFI) say.

Using sustainability-linked bonds to get the private sector on board

The study first looks at financial instruments and SLBs available to support the funding of much-needed nature restoration projects in the region.

SLBs, of which some US$73 billion were issued globally in 2022, tie organisations to certain sustainability commitments via penalties that are incurred for targets missed.

The researchers propose the use of credible and verifiable key performance indicators (KPIs) in administering these SLBs.

As well as biodiversity-linked SLBs, researchers also suggest that a broad range of financial instruments are available for use and offers viable avenues for generating private sector investment in the region as it looks to fund crucial nature restoration and action projects.

As nature investments offer both a financial and powerful response to the climate and nature emergency in Southeast Asia, the study stresses the variety of choices available via financial and nature market instruments.

Mangrove restoration projects are a ‘powerful nature investment opportunity’

One of the biggest nature restoration investments needed is for mangrove restoration projects, which could drastically improve coastal responses to climate change.

These restoration projects offer asset owners, insurance companies and impact investors’ cost savings or financial returns.

The only negative aspect is while these projects represent a potentially powerful nature investment opportunity in Southeast Asia, scalable business models remain in their infancy and may advise against overreliance on carbon credits to provide the investment case for nature.

Read full article

Decarbonising aviation

In conversation with Lauren Riley, chief sustainability officer and managing director for global environmental affairs at United Airlines.

You’re about to go on stage at Economist Impact’s third annual Sustainability Week US to discuss the role of public-private partnerships in decarbonising hard-to-abate sectors. Can you talk a bit about the challenges of decarbonising aviation and what United Airlines is doing in that space?

Well, we are noted as a hard-to-abate industry, which means we don’t have the solutions today at scale that we’re going to need to decarbonise. We are frankly high-emitting. But the great news is that we know the solutions we need. We have road maps to recognise a future that is low-carbon for aviation, and that fundamentally means using sustainable aviation fuels. [These] are an alternative to conventional jet fuel that today emit up to 85% less carbon on a life-cycle basis. But they have the potential to go even further. I mean, maybe one day it could be carbon-negative fuel, which would be really exciting.

United has been focused on driving the kind of change that we know we’re going to need in this industry. Our commitment to net zero by 2050 is different from every other airline in the world, because it does not include the use of voluntary carbon offsets. We don’t have the solutions today to make a difference in reducing emissions. And so it didn’t feel right to us to simply cut a check for some carbon offsets that claimed that we were green and progressive and changing the world when in fact we didn’t change anything about our business. Fundamentally that’s what our strategy [is] about, and we’ve made some really bold statements and actions since then to take tangible steps in our transition. And that has to do with financing those costs associated with sustainable aviation fuels. I’m sure you know that sustainable aviation fuels are two to four times the cost of conventional jet fuel. In an industry like ours with small margins, that’s not financially sustainable. And so we’ve got to figure out a way to finance that transition, and we have a couple of programmes.

The first is one we established a couple of years ago with our corporate customers. They said, how do we make sure that we are backing the right solutions for aviation? How do we make sure that when we look at our greenhouse-gas inventories—specifically the emissions associated with business travel or for cargo—we are putting our dollars and time and resources and our reputations behind the right solutions? That was the genesis of our EcoSkies Alliance programme, which just this year alone helped us fund about 10m gallons of sustainable aviation fuel. About 30 corporate customers helped fund that premium, and they got to reduce the emissions from flying.

Another great example in response to what we see is needed in the market today is that two months ago United established the Sustainable Flight Fund. This is an opportunity for investors to join United [and] put some dollars in to support some of these early-stage technologies that we think have promise to decarbonise aviation permanently. This is all about creating a movement to support those technologies that aren’t yet viable. And I’m really excited to see that United is taking a step in that direction.

Read full interview

The role of politics in creating a greener Europe - Podcast

In this new episode of Inside Impact Investing - a podcast produced by Triodos Asset Management - Bas Eickhout and Hans Stegeman discuss in which direction European sustainable policy making is currently going, what the challenges are, but also what gives reason for optimism.

In this episode of our podcast series Inside Impact Investing, Hans Stegeman talks to EP member Bas Eickhout about the role of politics in creating a greener Europe.

While the EU Taxonomy was meant to create a golden standard for green investments leading to a new economy, it has become a label which can be obtained if you do well, says Eickhout: "The etire meaning of the Taxonomy changed because of political compromises and lobbying into an obligation of which you don't see the added value anymore."

Still, he thinks that in a couple of years time people will start to realise that the current political compromise is not enough, that it is not delivering enough: "Then there will be a hook to improve it."

Bas Eickhout is a member of the European Parliament for the Greens/EFA and vice-chair of the Environmental Committee.

Listen on Spotify or via RSS.


How do I know if my ESG investments are doing any good?

ESG, or environmental, social and corporate governance criteria, has become a lightning rod for contention. The right says it’s woke hogwash, and the left says it can save the planet. But few can say what ESG has actually done.

Why can’t we measure in polar bears?

If you’re putting in the effort of researching companies, deciphering ESG scores and choosing investments, you probably want to know what your dollars are actually doing.

I’ve long wished for an app that would tell you exactly how many polar bears you’re saving with X number of dollars in ESG investments. Unfortunately, ESG statistics and impact reports don’t deal in polar bears.

Measuring ESG’s output of good is tricky. “Good” is not necessarily a concept we all agree on. Plus, to show how a company is doing, ESG uses numerical scores that are not easily deciphered.

Here’s one example: A major energy drink manufacturer had an ESG score of 0. The company massively reduced the amount of forced labor in its supply chain thanks to shareholder interventions, says Andrew Behar, CEO of As You Sow, a nonprofit working to increase corporate environmental and social responsibility.

Reducing forced labor was overwhelmingly better for the brand, and the return on investment outweighed the cost of implementing new practices. Much of the focus of making this change was on improving the company’s ESG score (which went from 0 to 26 out of 100), but the result was a significant reduction in forced labor.

Greenwashing and ESG

How do you assign a number to positive impact? There are a few ways, such as pounds of carbon prevented from entering the atmosphere, or dollars donated to charity, but even those numbers can be misleading. Those misleading, or sometimes entirely false, claims are called greenwashing.

Many automated financial advisers, or robo-advisers, now offer impact portfolios. Those portfolios are typically made up of exchange-traded funds built along certain themes, such as investing in clean energy. A few say they donate to charities. But several of these funds haven’t donated a dollar.

ESG is a grading system that can be used to combat greenwashing by providing quantitative data. But since the term “ESG” isn’t regulated, that can cause even more confusion.

“We did a report where we noticed that there were 90 mutual funds with ESG in their name, and 60 of them got a D or an F on ESG from us,” says Behar. “So we did an analysis of their prospectuses. The bottom line is that the prospectus language is in no way correlated to the holdings, and no way correlated to the [fund] name.”

Read full article

Customer demand for banking tools to track sustainability outstripping supply

Tink, Europe’s leading open banking platform, reveals research finding that an estimated 40% of people in the UK would like their bank to offer tools to track their environmental impact.

Based on a survey of over 2,000 UK consumers and 113 senior retail banking executives, the research highlights the opportunity for banks to play a bigger role in helping customers on their sustainability journey.

An estimated 37% would like to see their bank do more to help them reduce their environmental impact. The research suggests 32% specifically want their bank to provide an overview of their CO2 emissions from transactions across all their bank accounts in one place.

However, despite clear demand for tools to help them manage their environmental impact through their bank, research finds just 17% of banking customers are actively using them – suggesting a gap between appetite for and adoption of these sustainability related services.

Insights from Tink’s survey of banking executives suggest an explanation for this mismatch – revealing that currently just 24% of banks are offering customers tools to help them understand their carbon footprint based on their spending.

However, encouragingly, research shows a further 40% of banks report that they are currently working on delivering this service to their customers – with half saying they are making use of a fintech partnership to do so. Furthermore, 30% of banks say they would like to offer tools to help customers track their carbon impact, but currently have no plans to do so.

While this paves the way for a higher number of customers to access the carbon tracking tools they want, it also suggests there is an opportunity for banks to do more to make customers aware of these tools as they become available.

Read full article

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