Etsy takes aim at shipping and packaging in setting 2030 net-zero goal

March 16, 2021 by  
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Etsy takes aim at shipping and packaging in setting 2030 net-zero goal Deonna Anderson Tue, 03/16/2021 – 05:00 Scope 3 emissions are the hardest emissions for companies to address when setting goals. But often, they are the most emissions to take on. For Etsy, the e-commerce marketplace known for handmade items like jewelry, art and apparel, Scope 3 emissions make up 99 percent of the company’s carbon footprint. That’s why it’s prioritizing engagement with sellers in its marketplace to drive down emissions. The ambition is part of the company’s net-zero carbon emissions by 2030 goal, which it set in February.   “I know many companies have different definitions of net-zero. We are definitely following the Science-Based Targets Initiative’s (SBTI) forthcoming emerging definition around net-zero ,” said Chelsea Mozen, director of sustainability at Etsy, who as one of the company’s first sustainability hires has helped build its strategy from the ground up. “It has been a really fun journey over the past seven years,” Mozen observed. “In the beginning, we really focused on our own operation, so getting our own house in order.” In addition to the net-zero goal, the e-commerce site has set two science-based targets using a baseline year of 2019, which are pending validation from the SBT i. They call for: a 50 percent absolute reduction in Scope 1 and 2 greenhouse gas emissions by 2030, including Etsy’s office operations and purchased energy a 13.5 percent absolute reduction in Scope 3 greenhouse gas emissions by 2030, including seller shipping and fulfillment The company’s most recent 10-K form for the fiscal year that ended Dec. 31, 2020, which it files annually with the U.S. Securities and Exchange Commission, also noted a 2021 goal to “offset 100 percent of measured Scope 1, 2 and 3 greenhouse gas emissions annually.”  In a blog about the new net-zero pledge , Etsy CEO Josh Silverman wrote, “We’re committed to holding ourselves accountable and maintaining transparency as we push toward a net-zero 2030.” Mozen said that as the company makes its way toward the net-zero goal, it will continue the practice of reporting all of its sustainability metrics in its 10-K form, as well as within its Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) disclosures. Only 10 percent of companies are integrating sustainability metrics into 10-K filings, according to SASB . A couple of years ago, when Etsy first started including such metrics in its filings , former Etsy Senior Sustainability Manager Hilary Young, who still works at the company in a different role, wrote, “Key non-financial metrics around our economic, social and ecological impact are an integral part of how we run Etsy. It just makes sense for us to report those metrics in the same place.” The idea was that we know with the urgency of the climate crisis, we wanted to do something to immediately address that impact while we work towards long term reductions. In order to be transparent about its sustainability work, Etsy has to do the relevant work behind those reports. In recent years, Etsy has been working on addressing the carbon impact of its marketplace, which is made up of nearly 4.5 million sellers with more than 85 million items available for sale, as of December 2020. Back in 2019, Etsy launched its first initiative focused on reducing the carbon emissions of its marketplace by introducing carbon offset shipping . To offset shipping, Etsy estimates the emissions created by each product sold by looking at data such as the distance between a seller and buyer for each order and the expected weight of the items. Etsy then works with 3Degrees , a carbon offset and renewable energy company, to invest in emissions reduction projects such as wind and solar farms or forest protection.  Mozen said this was an obvious step for the company to address the emissions for the marketplace because it is the source of Etsy’s largest measured carbon impact.   In 2020, Etsy offset 404,439 metric tons of carbon in total and shipping alone was 303,218 metrics tons CO2 equivalent in 2020, according to the company. “The idea was that we know with the urgency of the climate crisis, we wanted to do something to immediately address that impact while we work towards long-term reductions,” she said. The third-largest area of Etsy’s footprint is purchased goods and services in its corporate supply chain, according to Mozen. Between now and 2030, Etsy said it plans to deepen its engagement on climate with vendors and will continue to prioritize partners that share similar carbon standards. Here’s a recent example of how Etsy has already done this: In 2020, the company completed its migration to Google Cloud, which combined with a 15-year power purchase agreement helped in reaching its goal to be 100 percent renewably powered by 2020 .  “From 2018 to 2020, our energy use for computing decreased by 23 percent. And that is largely thanks to the efficiency of Google Cloud Platform compared to what we have in our own colocated data centers,” Mozen said. And in total, last year, 81 percent of the money Etsy spent in its supply chain went to companies that have set a greenhouse gas emissions reduction goal. But a lot of the focus will be on other areas of Etsy’s business, over which it doesn’t necessarily have direct influence, she added. For example, in 2020, 75 percent of Etsy’s carbon footprint came from shipping, which it doesn’t have control over — its sellers ship directly to buyers.  “But we will be looking at that footprint,” said Mozen, who noted that the company thinks one of the ways to address shipping emissions is through public policy.  “There’s been a lot of moves in the space right now. And we’ve been very active in it,” she said. “We’re gonna double down on advocating for the decarbonization of the logistics sector. And that, for the next few years, will be very important as we head towards 2030.” In 2020, Etsy advocated for the Transportation and Climate Initiative, for which it received an award from the Ceres BICEP Network, as well as the California Air Resources Board (CARB) Advanced Clean Trucks Rule and other regional policies that the company believes have the potential to accelerate the decarbonization of the transportation sector. Etsy also plans to address the second largest contributor to its footprint, packaging, which it started measuring in 2020, Mozen said.  “We’re hopeful that providing more tools for [sellers] will help drive some of these decreases in our carbon footprint, especially in the packaging space,” she said. “We’re hoping that partnerships for more sustainable packaging that will be affordable for our sellers will help reduce that footprint.” She said Etsy is also interested in digging into the circular packaging space. “This would be early days for us. But that’s where I hope that we can make some gains.” Pull Quote The idea was that we know with the urgency of the climate crisis, we wanted to do something to immediately address that impact while we work towards long term reductions. Topics Shipping & Logistics E-commerce Packaging Net-Zero Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Etsy’s annex office in Hudson, New York. Courtesy of Etsy.

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Etsy takes aim at shipping and packaging in setting 2030 net-zero goal

Corporate philanthropy becomes a renewed focus for leadership companies

February 23, 2021 by  
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Corporate philanthropy becomes a renewed focus for leadership companies Myisha Majumder Tue, 02/23/2021 – 00:05 In 2020, philanthropic donations by major donors saw an almost 7 percent increase on a year-to-date basis. As companies direct more of their money to external charitable causes, internally decision-makers are assessing how the companies’ philanthropic efforts tie into their values, corporate responsibilities and sustainability strategies. For many, this includes weaving sustainability into their already established practices. Jeannette Astorga, head of sustainability at Zoetis, explained during the recent GreenBiz 21 event that the company’s philanthropy needs to be strategic and in line with the company’s sustainability strategy. During the session, Cecily Joseph, adviser for the Presidio Graduate School Initiative for Equity and Social Justice, highlighted the three major components of sustainability in business today — racial equity, climate change, and health and wellness. Joseph noted that racial equity is especially at the forefront of philanthropic strategy given a rise in calls for racial justice in 2020 in the corporate sector. “For companies, [racial equity] encompasses talent and workforce development that are internal to the company,” Joseph said. “[But also] systemic and institutional racism, policies, education.” A multifaceted approach for achieving racial equity is at the center of philanthropic efforts. For example, JPMorgan Chase committed $50 billion towards the advancement of racial justice — including $2 billion specifically for philanthropic efforts — while also working inside the company to diversify its employees. Joseph also cited Apple ’s and Intel’s recent initiatives dedicated to racial equity, pointing out that those initiatives are fueled by philanthropy dollars. While racial justice has become a top corporate priority for many companies this past year, the increased prevalence of the climate crisis has led to further emphasis on using philanthropic dollars on climate change. The violent North American wildfire season , the midwestern and southern winter storms last week and 2020 ending as the hottest year on record, tying with 2016, have made it clear we are entering a new phase of climate catastrophe. And while philanthropic donations towards climate change, in particular, have doubled in the last five years, they still only account for less than 2 percent of total philanthropic donations. But 2020 also presented an opportunity for corporate leadership to look closer to home than a typical philanthropic venture. As the coronavirus pandemic pushed people into isolation, drastically increased burnout and created intense stress, companies worked to support the well-being and the emotional sustainability of their employees.  Philanthropic donations towards climate change have doubled in the last 5 years, yet still only account for less than 2% of total philanthropic donations. In addition to her normal philanthropic work, Kimberly Paxton-Hanger, co-owner of Kwik Lok, worked to give her employees a sustainable lifestyle that supported their communities and families, and helped them be good stewards of their home environment. According to her, this holistic approach made it so that “[the company’s] values are reflected in everything you choose to do.” According to Kwik Lok’s 2020 Corporate Social Responsibility report , the company covered 100 percent of health insurance costs in the U.S. during COVID-19 and nearly one-third of U.S. employees participate in “a company well-being program.”  Astorga explained how during the pandemic, Zoetis looked for ways it could help people struggling outside the company and support healthcare workers. The animal health company donated its cold storage equipment to food banks and personal protective equipment to local hospitals. But to enact true and lasting change, both Paxton-Hanger and Astogra highlighted the need for long-term partnerships. “We want to have partnerships where we are actually interacting with them in a way that is part of our core business operations,” Astogra said. In doing so, sustainability can become a part of the business, rather than solely a one-off philanthropic goal. As Joseph looks to the future, she finds a powerful truth and wisdom in BlackRock CEO Laurence Fink’s 2021 letter to CEOs. In his letter, Fink underscores the importance that no issue is independent of social consequences. Philanthropic work is one pathway of many, that must work in conjunction with others, to achieve equity and justice. “[We are seeing] interconnectedness between philanthropy and sustainability in a way we hadn’t seen before,” Joseph said. Pull Quote Philanthropic donations towards climate change have doubled in the last 5 years, yet still only account for less than 2% of total philanthropic donations. Topics Corporate Social Responsibility Corporate Strategy Philanthropy Corporate Social Responsibility Corporate Strategy ESG GreenBiz 21 Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off There is a renewed focus on what corporate money can and should be doing in the philanthropy space.  Via Shutterstock.

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Corporate philanthropy becomes a renewed focus for leadership companies

Nestlé and Microsoft on financing circular innovations

February 22, 2021 by  
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Nestlé and Microsoft on financing circular innovations Elsa Wenzel Mon, 02/22/2021 – 01:30 A circular economy looks different within each industry, but its broad vision of healing the harm from the industrial economy’s extractive, polluting original sins is appealing more to a variety of businesses. A small number of influential large companies are creating internal funds to support sustainability goals specific to circular economy initiatives, such as designing out waste and recovering materials from products used internally or sold in the market. The eyes of traditional investors are widening to the landscape as well. It’s an early-stage, sometimes loosely defined space, where many solutions remain unproven, but the long-term payoffs in terms of sustainability and cost reductions could be enormous. That’s the hope of several early movers in circular economy investing, who shared their insights at the GreenBiz 21 virtual event in early February.  Nestlé and Microsoft are among the noteworthy corporations putting considerable investments behind circular programs involving products and services, in service of their sustainability targets and with an eye to spark broader change across their industries. “I would almost challenge people to not think of it as, ‘I have to set up a fund separate from,’ but it’s more of, ‘How do I set up our business to operate differently going forward?’” said Anna Marciano, head of U.S. legal sustainability at Nestlé USA. “If we’re going to make sure that we’re using more recycled content, if we’re going to ensure that we’re going to reduce carbon emissions, then we need to be tracking that. So then our procurement team needs to be monitoring that and they need to be held accountable for all of our ESG commitments.” If you’re going to use more recycled content, you’re going to use alternative materials for packaging, you have to be ready to make the capital investment needed in your infrastructure in your factories. One goal of Closed Loop Partners (CLP), entering its ninth year, is to bring together institutional investors with strategic corporate investors who seek to build a circular economy for their supply chains while helping their sustainability goals. (CLP’s private-equity Closed Loop Leadership Fund , launched in 2018, counts Nestlé, Microsoft and Nuveen among its investors.) “I have heard more in the last few years, probably than ever before, companies talking about investing off their balance sheets to achieve some of these goals, which I think is new vernacular for a lot of companies,” said Bridget Croke, managing director at CLP. Nestlé’s circular recipe Also about one year ago, Nestlé launched its $2 billion sustainability fund , to support companies developing innovative packaging and recycling technologies through 2025. (The company’s first investment was in the Closed Loop Leadership Fund.) The producer of coffee, candy and cocoa also created a nearly $260 million venture fund in support of planet-friendly packaging technologies. Its broader sustainability targets include getting to net-zero carbon emissions by 2050.  Nestlé’s circular plans include, by 2025, reducing virgin plastics in packaging by one-third and making all of its packaging reusable and recyclable. But goals aren’t enough without something to back them up, Marciano said. “If you’re going to use more recycled content, you’re going to use alternative materials for packaging, you have to be ready to make the capital investment needed in your infrastructure in your factories,” Marciano said. “And so it becomes really critical for this to be a mindset shift to say, yes, this is absolutely what we need to achieve.” Nestlé knew it had to invest in designing packaging for the future to meet its packaging commitments, so it established its Institute for Packaging Science in 2019 in Switzerland. One pocket-size result is new recyclable paper packaging for Smarties candies, popular in the U.K. “That’s really where the strong collaboration, the collective action of financial investments come into play,” Marciano added. ”So we’re really targeting investments to help transform the recycling infrastructure, so we could advance the circular economy at the end of the day.” Microsoft’s circular formula Similarly, as a corporate citizen, Microsoft aimed to look beyond the four walls of its own operations toward suppliers and customers, and other industries it touches, to enable circular markets to grow, said Brandon Middaugh, director of Microsoft’s Climate Innovation Fund.  Like Nestlé, Microsoft also looks at translating its goals into circular economy action in terms of designing out waste, reusing and recycling materials and products, and replenishing natural resources that it uses — three pillars reflected by the Ellen MacArthur Foundation. The investment strategy includes identifying and prioritizing the major areas of waste that apply to Microsoft’s own supply chains and operations, including its devices, cloud infrastructure and campus operations, Middaugh said. One new initiative is to build Microsoft Circular Centers  to further the reuse of computer servers and other hardware from the company’s data centers.  “We really recognized that it was not enough to set the operational goal and to do that work internally. We needed to be partnering externally and reaching outside into the market to try to be an advance team for the innovation in the industry,” she said. Microsoft is one year into its $1 billion, four-year Climate Innovation Fund . Carbon, water, waste and ecosystems are the core focus areas for the software juggernaut, which is aiming to carbon negative by 2030, removing all the carbon it has historically emitted by 2050. If you are not going to invest, what’s the cost of not investing? The fund, a joint finance-sustainability initiative, is one of three balance-sheet ESG funds at Microsoft, in addition to others around affordable housing and racial equity.  Middaugh said it’s useful to have a unified playbook toward a single goal, which may lean on products, operational investments, employee engagement and even advocacy, using partnerships in civil society. For Microsoft, the main points are about being carbon negative, water positive, zero waste — and building a ” planetary computer ” that harnesses artificial intelligence (AI) to recommend resource protection measures, tree by tree. Tangible examples of these include reducing electronic waste and packaging hardware without waste. “Then it’s also about giving the tools for traceability and transparency that we, our customers, need to be able to track circular economy themes,” Middaugh said. Those areas of strategic importance cascade to the investment strategy as well. How to prove circular success? For traditional investors, sustainability with a sound return on investment is key, according to David Haddad, managing director and co-head of impact investing at Nuveen , a subsidiary of TIAA. “We want there to be an economic viability, because our time horizon tends to be relatively shorter than many of these larger companies.”  And traditional institutional investors are challenged by the need to make a certain return within a relatively short time frame, maybe five or 10 years, which may not be enough for a market to mature.  Ways to reduce the risk around investments can include investing in research and innovation; proving that new business models are moving in a certain direction and integrating that into the business; and exploring longer-term contracts, according to Croke. Nestlé’s sustainability fund is already driving results, said Marciano, who is also division general counsel for Nespresso USA and International Premium Waters. “We have access to more recycled plastic already, we’re able to integrate it into our Stouffer’s business, into our Coffee mate business, into our water business,” she said. “So we see it working already. And it’s only been a few months in.” Middaugh noted that Microsoft focuses on metrics around the use of recyclable materials; landfill diversion in terms of solid waste and the construction and demolition waste at its campuses, and an overlapping focus on embodied carbon. “And in terms of how we integrate those with the rest of the decision process. It’s really around assessing the impact, assessing the risk and then looking for that impact and risk-adjusted return,” she said. For Nestlé, measuring circular economy success involves improving recycling rates beyond the company itself by spurring improvements in recycling infrastructure more broadly, encouraging consumers to recycle too. But that’s tricky. The question of measuring social impacts, not just the environmental ones most companies have prioritized, is another matter. Haddad noted that as an impact investor, there’s no cookie-cutter recipe, but Nuveen works closely with each young company to determine relevant metrics, and any failure to be able to report on those alongside financial performance will make it a no-go for funding. Croke agreed that limited tools for tracking certain metrics related to circular goals are difficult for companies or municipalities, but a bonus to working with large tech companies is being able to identify and address data gaps and useful technologies. Partnerships and collaborations are essential How does a sustainability advocate make the business case for investing toward circular, sustainable solutions? What’s the benefit of leveraging the company’s balance sheet or other capital? Early corporate movers may offer useful examples. Croke noted that some companies may find it hard to identify such investment opportunities and run up against limits to the size of deals they can take on. “And so the ability to invest through other funds helps sometimes open up opportunities to invest in things that might be too early-stage or small that need some de-risking,” Croke said. Partnerships with third-party leaders can help when trying to apply lessons to the rest of the business from initiatives around circular servers, recycling and reuse, Middaugh said. She, Marciano and Croke agreed that no organization should try to go it alone when addressing a systemic challenge as large as growing a circular economy. For example, it’s upon Nestlé to share its expertise in sustainable packaging, collaborating with other stakeholders to make sure it’s not introducing harmful materials into products. Such relationships can improve the wheel in multiple areas. And policy advocacy is another spoke of the wheel for Nestlé. Middaugh added that collaborations should involve early-stage innovations and pilots — such as sharing information with other companies exploring advanced materials — as well as later-stage infrastructure buildout. Microsoft is working with suppliers to update its supplier Code of Conduct to reflect its carbon and sustainability goals, also providing the tools to help its partners meet their goals.  The coming transition CLP draws connections across that ecosystem by backing circular efforts by municipalities, recycling facilities and material recovery facilities (MRFs). It has invested, for example, in Amp Robotics , which offers early-stage AI for recycling facilities, and PureCycle Technologies , whose technology turns polypropylene back into virgin-quality material. CLP started an innovation hub to support pre-competitive ideas. Croke agreed that data points around diversion of material and greenhouse gas impacts, to name just a couple, are relatively simple to understand. “What I think is sometimes more interesting, and a little bit harder to measure is the catalytic impact that’s being had, we’re all trying to completely transform a supply chain, the way that the supply chain works from being linear to being circular, and the linear supply chain is quite scaled,” she said. “The economics are very efficient today.” However, there’s going to be a lead-up time to building up the scale for new, circular models. In time, costs will expand for existing linear systems, becoming less attractive to newly affordable circular ones.  “But what we’re finding is that there are definitely specific investment opportunities today that are profitable, that makes sense for the institutional kind of partners make sense for our corporate partners, and hopefully create the levers that unlock, value and scale for the rest of the system,” Croke added. Haddad advocated for companies to recognize private equity firms as a force multiplier. “We can really bring capital to bear and our experience with boards and governance to scale those things,” he said. Marciano insisted that it’s not necessary to invest millions of dollars to get started. Pick up the phone and talk to people, and take other small steps to explore circular possibilities. “If you are not going to invest, what’s the cost of not investing?” she said. “Think of it that way, and really try to inspire others within your organization to take a chance … What’s the worst that could happen? You asked for the money and you’re told no or not yet. But at least you’ve already planted the seed, that you believe that the money is needed and could make a difference.” Pull Quote If you’re going to use more recycled content, you’re going to use alternative materials for packaging, you have to be ready to make the capital investment needed in your infrastructure in your factories. If you are not going to invest, what’s the cost of not investing? Topics Circular Economy Finance & Investing Corporate Strategy GreenBiz 21 Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off  Illustration of circular economy in industry. Shutterstock MG Vectors Close Authorship

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Nestlé and Microsoft on financing circular innovations

Nestlé and Microsoft on financing circular innovations

February 22, 2021 by  
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Nestlé and Microsoft on financing circular innovations Elsa Wenzel Mon, 02/22/2021 – 01:30 A circular economy looks different within each industry, but its broad vision of healing the harm from the industrial economy’s extractive, polluting original sins is appealing more to a variety of businesses. A small number of influential large companies are creating internal funds to support sustainability goals specific to circular economy initiatives, such as designing out waste and recovering materials from products used internally or sold in the market. The eyes of traditional investors are widening to the landscape as well. It’s an early-stage, sometimes loosely defined space, where many solutions remain unproven, but the long-term payoffs in terms of sustainability and cost reductions could be enormous. That’s the hope of several early movers in circular economy investing, who shared their insights at the GreenBiz 21 virtual event in early February.  Nestlé and Microsoft are among the noteworthy corporations putting considerable investments behind circular programs involving products and services, in service of their sustainability targets and with an eye to spark broader change across their industries. “I would almost challenge people to not think of it as, ‘I have to set up a fund separate from,’ but it’s more of, ‘How do I set up our business to operate differently going forward?’” said Anna Marciano, head of U.S. legal sustainability at Nestlé USA. “If we’re going to make sure that we’re using more recycled content, if we’re going to ensure that we’re going to reduce carbon emissions, then we need to be tracking that. So then our procurement team needs to be monitoring that and they need to be held accountable for all of our ESG commitments.” If you’re going to use more recycled content, you’re going to use alternative materials for packaging, you have to be ready to make the capital investment needed in your infrastructure in your factories. One goal of Closed Loop Partners (CLP), entering its ninth year, is to bring together institutional investors with strategic corporate investors who seek to build a circular economy for their supply chains while helping their sustainability goals. (CLP’s private-equity Closed Loop Leadership Fund , launched in 2018, counts Nestlé, Microsoft and Nuveen among its investors.) “I have heard more in the last few years, probably than ever before, companies talking about investing off their balance sheets to achieve some of these goals, which I think is new vernacular for a lot of companies,” said Bridget Croke, managing director at CLP. Nestlé’s circular recipe Also about one year ago, Nestlé launched its $2 billion sustainability fund , to support companies developing innovative packaging and recycling technologies through 2025. (The company’s first investment was in the Closed Loop Leadership Fund.) The producer of coffee, candy and cocoa also created a nearly $260 million venture fund in support of planet-friendly packaging technologies. Its broader sustainability targets include getting to net-zero carbon emissions by 2050.  Nestlé’s circular plans include, by 2025, reducing virgin plastics in packaging by one-third and making all of its packaging reusable and recyclable. But goals aren’t enough without something to back them up, Marciano said. “If you’re going to use more recycled content, you’re going to use alternative materials for packaging, you have to be ready to make the capital investment needed in your infrastructure in your factories,” Marciano said. “And so it becomes really critical for this to be a mindset shift to say, yes, this is absolutely what we need to achieve.” Nestlé knew it had to invest in designing packaging for the future to meet its packaging commitments, so it established its Institute for Packaging Science in 2019 in Switzerland. One pocket-size result is new recyclable paper packaging for Smarties candies, popular in the U.K. “That’s really where the strong collaboration, the collective action of financial investments come into play,” Marciano added. ”So we’re really targeting investments to help transform the recycling infrastructure, so we could advance the circular economy at the end of the day.” Microsoft’s circular formula Similarly, as a corporate citizen, Microsoft aimed to look beyond the four walls of its own operations toward suppliers and customers, and other industries it touches, to enable circular markets to grow, said Brandon Middaugh, director of Microsoft’s Climate Innovation Fund.  Like Nestlé, Microsoft also looks at translating its goals into circular economy action in terms of designing out waste, reusing and recycling materials and products, and replenishing natural resources that it uses — three pillars reflected by the Ellen MacArthur Foundation. The investment strategy includes identifying and prioritizing the major areas of waste that apply to Microsoft’s own supply chains and operations, including its devices, cloud infrastructure and campus operations, Middaugh said. One new initiative is to build Microsoft Circular Centers  to further the reuse of computer servers and other hardware from the company’s data centers.  “We really recognized that it was not enough to set the operational goal and to do that work internally. We needed to be partnering externally and reaching outside into the market to try to be an advance team for the innovation in the industry,” she said. Microsoft is one year into its $1 billion, four-year Climate Innovation Fund . Carbon, water, waste and ecosystems are the core focus areas for the software juggernaut, which is aiming to carbon negative by 2030, removing all the carbon it has historically emitted by 2050. If you are not going to invest, what’s the cost of not investing? The fund, a joint finance-sustainability initiative, is one of three balance-sheet ESG funds at Microsoft, in addition to others around affordable housing and racial equity.  Middaugh said it’s useful to have a unified playbook toward a single goal, which may lean on products, operational investments, employee engagement and even advocacy, using partnerships in civil society. For Microsoft, the main points are about being carbon negative, water positive, zero waste — and building a ” planetary computer ” that harnesses artificial intelligence (AI) to recommend resource protection measures, tree by tree. Tangible examples of these include reducing electronic waste and packaging hardware without waste. “Then it’s also about giving the tools for traceability and transparency that we, our customers, need to be able to track circular economy themes,” Middaugh said. Those areas of strategic importance cascade to the investment strategy as well. How to prove circular success? For traditional investors, sustainability with a sound return on investment is key, according to David Haddad, managing director and co-head of impact investing at Nuveen , a subsidiary of TIAA. “We want there to be an economic viability, because our time horizon tends to be relatively shorter than many of these larger companies.”  And traditional institutional investors are challenged by the need to make a certain return within a relatively short time frame, maybe five or 10 years, which may not be enough for a market to mature.  Ways to reduce the risk around investments can include investing in research and innovation; proving that new business models are moving in a certain direction and integrating that into the business; and exploring longer-term contracts, according to Croke. Nestlé’s sustainability fund is already driving results, said Marciano, who is also division general counsel for Nespresso USA and International Premium Waters. “We have access to more recycled plastic already, we’re able to integrate it into our Stouffer’s business, into our Coffee mate business, into our water business,” she said. “So we see it working already. And it’s only been a few months in.” Middaugh noted that Microsoft focuses on metrics around the use of recyclable materials; landfill diversion in terms of solid waste and the construction and demolition waste at its campuses, and an overlapping focus on embodied carbon. “And in terms of how we integrate those with the rest of the decision process. It’s really around assessing the impact, assessing the risk and then looking for that impact and risk-adjusted return,” she said. For Nestlé, measuring circular economy success involves improving recycling rates beyond the company itself by spurring improvements in recycling infrastructure more broadly, encouraging consumers to recycle too. But that’s tricky. The question of measuring social impacts, not just the environmental ones most companies have prioritized, is another matter. Haddad noted that as an impact investor, there’s no cookie-cutter recipe, but Nuveen works closely with each young company to determine relevant metrics, and any failure to be able to report on those alongside financial performance will make it a no-go for funding. Croke agreed that limited tools for tracking certain metrics related to circular goals are difficult for companies or municipalities, but a bonus to working with large tech companies is being able to identify and address data gaps and useful technologies. Partnerships and collaborations are essential How does a sustainability advocate make the business case for investing toward circular, sustainable solutions? What’s the benefit of leveraging the company’s balance sheet or other capital? Early corporate movers may offer useful examples. Croke noted that some companies may find it hard to identify such investment opportunities and run up against limits to the size of deals they can take on. “And so the ability to invest through other funds helps sometimes open up opportunities to invest in things that might be too early-stage or small that need some de-risking,” Croke said. Partnerships with third-party leaders can help when trying to apply lessons to the rest of the business from initiatives around circular servers, recycling and reuse, Middaugh said. She, Marciano and Croke agreed that no organization should try to go it alone when addressing a systemic challenge as large as growing a circular economy. For example, it’s upon Nestlé to share its expertise in sustainable packaging, collaborating with other stakeholders to make sure it’s not introducing harmful materials into products. Such relationships can improve the wheel in multiple areas. And policy advocacy is another spoke of the wheel for Nestlé. Middaugh added that collaborations should involve early-stage innovations and pilots — such as sharing information with other companies exploring advanced materials — as well as later-stage infrastructure buildout. Microsoft is working with suppliers to update its supplier Code of Conduct to reflect its carbon and sustainability goals, also providing the tools to help its partners meet their goals.  The coming transition CLP draws connections across that ecosystem by backing circular efforts by municipalities, recycling facilities and material recovery facilities (MRFs). It has invested, for example, in Amp Robotics , which offers early-stage AI for recycling facilities, and PureCycle Technologies , whose technology turns polypropylene back into virgin-quality material. CLP started an innovation hub to support pre-competitive ideas. Croke agreed that data points around diversion of material and greenhouse gas impacts, to name just a couple, are relatively simple to understand. “What I think is sometimes more interesting, and a little bit harder to measure is the catalytic impact that’s being had, we’re all trying to completely transform a supply chain, the way that the supply chain works from being linear to being circular, and the linear supply chain is quite scaled,” she said. “The economics are very efficient today.” However, there’s going to be a lead-up time to building up the scale for new, circular models. In time, costs will expand for existing linear systems, becoming less attractive to newly affordable circular ones.  “But what we’re finding is that there are definitely specific investment opportunities today that are profitable, that makes sense for the institutional kind of partners make sense for our corporate partners, and hopefully create the levers that unlock, value and scale for the rest of the system,” Croke added. Haddad advocated for companies to recognize private equity firms as a force multiplier. “We can really bring capital to bear and our experience with boards and governance to scale those things,” he said. Marciano insisted that it’s not necessary to invest millions of dollars to get started. Pick up the phone and talk to people, and take other small steps to explore circular possibilities. “If you are not going to invest, what’s the cost of not investing?” she said. “Think of it that way, and really try to inspire others within your organization to take a chance … What’s the worst that could happen? You asked for the money and you’re told no or not yet. But at least you’ve already planted the seed, that you believe that the money is needed and could make a difference.” Pull Quote If you’re going to use more recycled content, you’re going to use alternative materials for packaging, you have to be ready to make the capital investment needed in your infrastructure in your factories. If you are not going to invest, what’s the cost of not investing? Topics Circular Economy Finance & Investing Corporate Strategy GreenBiz 21 Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off  Illustration of circular economy in industry. Shutterstock MG Vectors Close Authorship

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Nestlé and Microsoft on financing circular innovations

The ‘last mile’ of consumer sustainability behavior

February 18, 2021 by  
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The ‘last mile’ of consumer sustainability behavior Mike De Socio Thu, 02/18/2021 – 00:05 These days, it’s hard to argue that sustainability is a niche consumer interest. A vast majority of consumers worldwide believe we need to consume less, according to research by GlobeScan . More to the point, 57 percent of consumers in that survey were willing to pay more for sustainable products. But only about a quarter of them actually made any sustainable changes to their lifestyle or consumption. So what gives? “There’s this really marked intention-action gap when we’re asking people to change their behaviors to be more sustainable,” said Katherine White, professor of marketing and behavioral science at the University of British Columbia. White shared her research on sustainable consumption during GreenBiz 21. She was among industry leaders from Amazon and Procter & Gamble, as well as nonprofit executives, who shared insights on the trends in sustainable consumption. Here are three takeaways from the session: 1. Attitude has shifted, but behavior lags Across the board, indicators for consumer interest in sustainable products are up, according to the GlobeScan survey. The 2020 results, for example, showed that 73 percent of consumers wanted to reduce the impact they have on the environment by a large amount, up almost 10 percentage points from the year prior. During the session, Chris Coulter, CEO of GlobeScan, described it as a “remarkable shift” in consumer attitude that bodes well for the sustainable products market. But he was quick to underline the shortcomings of that progress. “There is still a gap between our desire to change and what we’re actually doing, but we do see significant movements happening across the world,” he said. White’s research in behavioral science looks into what levers could be most effective in convincing consumers to align their choices with their concern for the planet.  A fundamental truth for sustainable products: Consumers’ top concerns are still performance and price. “This is a real challenge for marketers, for organizations, for public policymakers,” she said. “We really need to understand, what are the key drivers of behavior change in particular?” White identified a few factors that stakeholders can focus on to shift behavior — social influence (in other words, peer pressure), habit formation, individual values, emotional buy-in and tangible outcomes.  But ultimately, no one should think about hitting consumers with all of those efforts at once, White said. The shifts are more likely to be gradual. 2. Price and performance are still king Todd Cline, as director for Procter & Gamble’s North America fabric care research and development, is trying to focus consumers on one tiny change that could drastically slash the climate impact of his company’s product: Wash their clothes in cold water. Cline said what consumers do with Tide, one of the company’s sub-brands, once they take it off the shelf accounts for two-thirds of the product’s carbon footprint. The biggest chunk of that is the energy used to heat the water in the washing machine. But Cline knows if he wants consumers to change to cold, the performance can’t suffer. So his plan is simple: “Make products that work great when consumers use them on cold,” he said. This highlights a fundamental truth for sustainable products: Consumers’ top concerns are still performance and price. So sustainable products must tick those two boxes before showing off their climate bona fides.  Adam Werbach, global lead for sustainable shopping at Amazon, knows this well. He led the development of a “Climate Pledge Friendly” label on the site that uses external certifications to direct customers to the most sustainable products. The experience so far has shown Werbach that customers, even at Amazon’s eco-conscious Whole Foods, primarily seek out price and performance before considering sustainability.  But the “Climate Pledge Friendly” label can be a quick, easy way for them to make that decision. “Customers like the cognitive load being taken off them,” he said. 3. Less (information) can be more The success of a simple label for Amazon speaks to another important tactic for nudging customers to more sustainable options: Sometimes less information is better. The average consumer, according to White, doesn’t have the time or interest to know all the details on ingredients, manufacturing or packaging. They just want to know it’s not going to harm the planet. “At the end of the day, if it’s really quick and easy and enjoyable and pleasant, I’m going to do it,” White said. That’s where labels can help. Doug Gatlin, CEO of Green Seal, said his company has worked to simplify the way it communicates its own sustainability certifications. “It can really be difficult to communicate the various attributes to the consumer,” he said. So rather than listing 20 or more claims on one label, Green Seal developed a “compass” that identifies four main categories — water, waste, health and climate — and acts as a shorthand to evaluate products. Cline keeps this in mind, too, as Procter & Gamble refines its own packaging and labeling. “If we can make it simple and make it so it’s a great experience for people, they’ll adopt the behavior and stick with it,” he said. Pull Quote A fundamental truth for sustainable products: Consumers’ top concerns are still performance and price. Topics Consumer Trends GreenBiz 21 Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Consumer trend surveys show a shift towards an environmental mindset among shoppers but they need to start putting their money where their mouth is.//Image courtesy of Unsplash 

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The ‘last mile’ of consumer sustainability behavior

Paul Polman’s rallying cry for courageous leaders

February 15, 2021 by  
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Paul Polman’s rallying cry for courageous leaders Jean Haggerty Mon, 02/15/2021 – 02:15 In addition to having a devasting effect on lives and livelihoods, COVID-19 has been the biggest global disruptor in recent memory. It also has pushed us to a new moment of corporate leadership. “This is where the moral leaders [will] separate themselves from the greenwashers,” Paul Polman, global sustainability leader and former Unilever CEO, said in a GreenBiz 21 keynote conversation about what leadership means today. The scale and scope of the climate change, biodiversity loss and inequality challenges facing corporate leaders is extensive. “[We] need leaders who know that by investing in others, they will be better off themselves. But that takes courage,” said Polman, who in 2019 created Imagine, a foundation aimed at eradicating poverty and inequality and stemming runaway climate change. It is now much cheaper to design right and invest in that. In the coming years, the speed and skill with which progress is made on these issues will be critical. With that in mind, Imagine is trying to help corporate leaders be more courageous. It does this by bringing together 20-25 percent of the CEOs from the same sector to drive system changes, Polman said. For example, in the food sector, Imagine is working with 30 companies on a project that involves looking at regenerative agriculture, setting up a common data bank and creating a joint labeling system. “Because they are together, they become more courageous, and because [you] have critical mass, governments want to work with you. [Also], civil society comes in, and you [can] form partnerships that lead to breakthroughs,” he explained.  Spend back better Governments already have spent $12 trillion to $13 trillion just to stabilize global economies ravaged by COVID-19. Many of these same governments are devising ways to reconstruct global economies by spending back better, addressing climate change and inequality along the way. During the last economic crisis, an opportunity to green the economy was missed. Only 3-5 percent of the money that governments spent went toward greening the economy, and in the years that followed, climate change worsened and inequality grew. “We don’t want to repeat that. It led us to this current crisis … It is now much cheaper to design right and invest in that,” Polman said. “People are starting to realize that the cost of inaction is now significantly higher than the cost of action.” Uneven COVID-19 vaccine distribution between developed and developing countries is a case in point. In addition to directly affecting lives and livelihoods, a new report commissioned by the International Chamber of Commerce Research Foundation found that if governments fail to ensure access to COVID-19 vaccines in developing countries, the global economy stands to lose about $8 trillion to $9 trillion. As much as half of this bill will fall to advanced economies, and economies and sectors with a high degree of international exposure will bear the brunt of these economic losses, the study said. Another shot The COVID-19 vaccine itself offers a lesson about the impressive speed with which humanity can deliver change. “We invented a vaccine within one year. We put communities together that rallied and filled in where others fell short,” Polman said. This, when combined with the coming of age of ESG investing, offers hope, but caution is essential. “Now there is a bit of euphoria, and we need to watch for it,” Polman said, underscoring that many issues are far from solved. Only about 10 percent of companies have climate commitments that are approaching seriousness, and nature loss needs to stop by 2030, he pointed out. To stay below a 1.5 degrees Celsius temperature increase, continued development and progress on science-based targets is needed. The objectives for science-based targets for climate risk and for nature are closely related, but more granularity is needed and work still needs to be done, particularly on science-based targets for nature. Against this backdrop, Imagine, Conservation International and the Global Environment Fund are working with 65 fashion companies — representing about 30-35 percent of the fashion industry — to design a set of industry-specific science-based targets for nature. “I think that we will be able to do that very quickly for other industries too,” he added. The simple truth Ultimately, corporate leadership has to change because “less worse” is not an option anymore, Polman said. To be successful today, leaders need to be “systematic” thinkers. The work required to attack climate change and inequality is difficult, and these issues need to be solved at different levels and in ways that the current system was not set up to deliver. In light of this, today’s and tomorrow’s corporate leaders need to be purpose-driven, able to work in partnerships and equipped to think intergenerationally, Polman said. They also need to lead with a high degree of humanity and humility, he said.  A new crop of moral leaders who understand that the role of business goes beyond shareholder primacy is already emerging, he added. Now there is a bit of euphoria, and we need to watch for it. In the face of these transformational changes, corporate boards need to keep pace. They need to adapt, become more diverse and gain greater competency on climate risk issues, Polman said. Until recently, MBA programs were not producing the multi-disciplinary leaders needed to meet today’s challenges. Instead, programs were offering up “Milton Friedman on steroids,” he quipped. Last year was a wake-up call, but the real black swan revealed itself to be the lack of global cooperation. “And you can’t solve many of these global problems that we have [without global cooperation]. That is needed to redesign our economic system,” Polman said. Pull Quote It is now much cheaper to design right and invest in that. Now there is a bit of euphoria, and we need to watch for it. Topics Corporate Strategy Leadership GreenBiz 21 Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off Paul Polman at the 2014  One Young World  Conference in Dublin, Ireland. Photo: Stefan Schäfer, Lich

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Paul Polman’s rallying cry for courageous leaders

Take your sustainable lifestyle to the next level in 2021

January 1, 2021 by  
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Are you already recycling? Carrying around a refillable water bottle rather than contributing to the ocean-bound plastic problem? Composting your food scraps? That’s all commendable, but there’s more to be done to achieve a net-zero lifestyle. If you’re ready to up your environmental commitment this year (and hold larger entities accountable along the way), here are a few ideas — some more dramatic than others — for sustainable resolutions in 2021. Get rid of your car If you have a car , sell or donate it. Once you’ve unloaded the gas guzzler, do your errands on foot or by bike. If you don’t have your own bike, join your city’s bike-share program. With proper COVID-19 precautions, take public transportation for longer distances. Related: The pros and cons of electromobility Ditch the plastic liners Do you know how long those kitchen trash bags take to decompose? Anywhere from 10 to 1,000 years. Instead, go au naturel and regularly clean your trash, recycling and compost containers. Change your laundering style Did you know that most of the energy it takes to run a washing machine comes from heating the water? Only 10% of energy is for working the machine, so switch to cold-water washing . Once your clothes are clean, hang them to dry. If you live somewhere sunny and have space for a clothesline, this won’t be too hard. If you live somewhere cold and rainy, see if you can hang an inside clothesline or set up a drying rack. But if this is impractical and you must run the dryer, make sure it’s fairly full so you make the most of the energy. Dryers are the third-biggest energy hogs in the average house, after the refrigerator and washer. Forget the lawn Lawns are a huge waste of space and resources. In the U.S., people spray about 3 trillion gallons of water on them every year, use 800 million gallons of gas in their lawnmowers and treat them with nearly 80 million pounds of pesticides . But who are we trying to impress with this golf course-looking terrain around our homes? Instead, go with xeriscaping or planting vegetables. Let clover take over, or fill your yard with pollinator-friendly plants. Control your climate Invest in ways to weatherize your home and lifestyle year-round. If you have the money and own a home, a heat pump can cut your energy use in half. Try low-tech solutions like wearing thicker socks and a fleece bathrobe over your clothes so that you don’t need to turn the heater up as much in winter. Add an extra blanket to the bed, and turn your thermostat down at least seven degrees at night. You use about 1% less energy per eight hours for every degree you turn it down. In summer, air conditioning is a massive energy hog. Three-quarters of U.S. homes have air conditioners, which use 6% of the total electricity produced in the nation, according to Energy Saver . Annual cost? About $29 billion dollars and 117 million metric tons of carbon dioxide released. If you must use AC, don’t set it so low. Add insulation to your house. Wear a bikini. Eat more ice pops. Sweat a little, it won’t hurt you. Go vegan Yes, Meatless Mondays are a terrific start. But this year, try adding Tuesday. And Wednesday. Et cetera. A University of Oxford study concluded that cutting out meat and dairy could reduce your carbon footprint by 73%. “A vegan diet is probably the single biggest way to reduce your impact on planet Earth, not just greenhouse gases, but global acidification, eutrophication, land use and water use,” said lead author Joseph Poore, as reported by The Independent . Boycott new One way to stop supporting the constant addition to more junk in the waste stream is to boycott buying anything new (excluding food, prescriptions or emergency items). Perhaps you already enjoy thrifting and flea markets. If so, committing to buying nothing new might be a fun challenge. Make 2021 your year of browsing the free libraries, finding your new look at a garage sale and swapping useful items with other folks in your neighborhood. Set up regular donations to environmental organizations Just about every organization needs your help right now. Whether you prefer whales or bats, oceans or rivers, an environmental charity exists that would greatly appreciate your recurring donation, even if it’s just five bucks a month. Control your food waste The U.S. is one of the top countries for food waste in the world, tossing almost 40 million tons annually. Most of this food goes to landfills. In fact, food waste is the second-largest component of the average American landfill behind paper. This year, commit to only buy what you’ll eat and to eat what you buy. If you don’t already compost, get yourself a compost bin and throw in all your banana peels, coffee grounds, etc. Get political On the most basic level, vote. Beyond that, support causes you believe in by writing letters to your politicians or boycotting companies that are contributing to the global climate crisis. Attend town hall meetings with your local or state representatives. If you have the time, energy, resources and moxie, run for office. Images via Adobe Stock

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Take your sustainable lifestyle to the next level in 2021

BofA, BlackRock and State Street CEOs talk stakeholder primacy — and fall short

December 14, 2020 by  
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BofA, BlackRock and State Street CEOs talk stakeholder primacy — and fall short Sara Murphy Mon, 12/14/2020 – 01:45 Some of the world’s biggest asset managers have been talking a lot lately about sustainable capital markets, stakeholder capitalism and how improved environmental, social and governance (ESG) disclosure can contribute to more resilient markets. While these organizations are taking steps in the right direction, their companies’ actual behavior in the marketplace often falls short of their leaders’ proclamations, and those leaders’ visions for capital markets fail to rise to the increasingly urgent challenges that confront our society. At the recent 2020 Sustainability Accounting Standards Board (SASB) Symposium , the CEOs of Bank of America (BofA), BlackRock and State Street provided their views on the role of the private sector in addressing societal challenges and why ESG integration is no longer optional. They led with their thoughts on stakeholder capitalism, a concept that has exploded since Aug. 19, 2019, when the Business Roundtable (BRT) updated its Principles of Corporate Governance to redefine “the purpose of a corporation to promote an economy that serves all Americans.” CEOs from 181 publicly traded companies — including those addressing the SASB Symposium — signed the principles, which purportedly signaled an end to Milton Friedman’s doctrine of shareholder primacy established in the 1970s, and the beginning of a new era of stakeholder capitalism. “The concept of just one stakeholder — shareholders — has evolved and changed,” said Larry Fink, CEO of BlackRock, the world’s largest asset manager. He noted the need for businesses to work with their employees and clients, and in a globalizing world, to work with the societies in which businesses operate. We’re not looking for short-term blips as a shareholder but rather durability. “This creates some difficulties but companies that manage this set themselves up for long-term profitability,” Fink said. “We’re not looking for short-term blips as a shareholder but rather durability. In challenging cycles like the pandemic, those companies are the ones that make it through and endure. That’s how management and boards need to think about this.” Bank of America CEO Brian Moynihan concurred, adding that a long-term focus on all constituencies helps to attract talent and customers. State Street Global Advisors CEO Cyrus Taporevala remarked that asset managers and owners are reacting to three trends: a growing correlation between ESG factors and investment risk; end investors wanting to see their ESG preferences expressed in their investments; and regulators around the world signaling an intention to require more around ESG criteria, reporting and investing. A clarion call to convergence All three CEOs repeatedly asserted an urgent imperative for the financial services industry to “coalesce” and “converge” around standardized disclosure of ESG information and data, perhaps unsurprising given that SASB — the symposium’s host — is a leading disclosure framework. Their general argument was that standardized disclosure is less burdensome for companies, which will enhance the quality of reporting and encourage smaller companies to participate. It allows for collection and analysis of large data sets that help investors, regulators and the public to assess and compare companies’ ESG performance, they said. In addition to SASB, the CEOs pointed to the Task Force on Climate-related Financial Disclosures (TCFD) as a leading standard. Moynihan recommended convergence with the United Nations Sustainable Development Goals (SDGs). “If that’s what the world told us we need to do across 90 countries in 2015, then that’s what we should be aiming to achieve,” he said. The CEOs also emphasized the value of transparency. “We need people to say what they’re doing so they can be encouraged to do more,” Moynihan said. “When we [at Bank of America] make decisions about whom to lend to, we have the information, but the world may not. It’s a little behind the curtain. Standardized disclosure will cascade down the system, even to a middle-market private company where employees and customers will ask, ‘Where’s our disclosure?’” “Transparency reveals the good and the bad,” Fink said. “Better financial and sustainability disclosure forces management and the board to have laser focus. It lifts us faster, even if we’re embarrassed at times when we’re not moving as quickly as we should.” Too little too slowly And indeed, they’re not moving as quickly as they should, and the actions of these three companies are not entirely setting the examples these CEOs espouse. Bank of America is the world’s fourth leading financer of fossil fuels , even as the imperative to decarbonize the economy to stave off the worst effects of climate change grows more urgent by the day. In 2019 the company agreed to pay $4.2 million to resolve employment discrimination allegations brought by the Office of Federal Contract Compliance Programs. Nevertheless, Bank of America maintains it is fulfilling its commitment to stakeholder primacy. Standardized disclosure will cascade down the system, even to a middle-market private company where employees and customers will ask, ‘Where’s our disclosure?’ Among 60 of the world’s largest asset managers, BlackRock was the fourth least supportive and State Street the 13th least supportive of shareholders’ efforts to promote better social and environmental stewardship among companies in their portfolios, according to a recent analysis by campaigning organization Share Action. Both companies’ own reporting and disclosure on their social and environmental stewardship lacks the sort of transparency and meaningful information they purport to champion in the marketplace. This may be because a pernicious tension is built into the entire stakeholder capitalism construct. A question of purpose and prosperity “We’re not trying to disrupt a company or destroy their footprint or business,” Fink said. “I know some people would like for us to do that, but that is not our fiduciary responsibility. Our fiduciary responsibility is to maximize profit.” “State Street Global Advisors is looking to get the best risk-adjusted return for investors, and we come at ESG from a perspective of value, not values,” Taporevala said. “It’s not up to us as a fiduciary to decide what the right values are.” Therein lies the conundrum: What’s best for the social and environmental systems on which our economy depends won’t always align with an individual company’s profit maximization. Companies, investors and shareholders will have to reckon with this reality. Rick Alexander, founder and CEO of The Shareholder Commons, expounded on this point in a February article : Most investors hold broadly diversified portfolios and rely on their job as their primary financial asset. They need a healthy economy and planet in order to have solid portfolio returns, decent wages and good lives. They know that some companies need to surrender shareholder value in order to preserve the critical systems we all rely on (think coal, oil, tobacco and, not coincidentally, large financial institutions that threaten systemic stability). A recent study determined that publicly traded companies create annual social and environmental costs of $2.2 trillion. While any given company may profit by ignoring costs that it can externalize, its diversified shareholders ultimately pay the price. Moynihan emphasized that the world’s problems cannot be solved without leadership from the private sector. He pointed to the SDGs, noting that all the charitable spending in the world doesn’t amount to the estimated cost of delivering on those goals. “You could go to governments, but they’re running huge deficits, and they don’t have the money,” Moynihan said. The three CEOs talked at length about the importance of coalescing around a common set of metrics and data, but that’s only a partial solution. If the objective is truly to assure our ongoing prosperity, then everyone involved in capital markets must prioritize the vital systems upon which a thriving economy depends, rather than profit margins at any one company. At the end of the day, only that approach will serve both shareholders and stakeholders. Pull Quote We’re not looking for short-term blips as a shareholder but rather durability. Standardized disclosure will cascade down the system, even to a middle-market private company where employees and customers will ask, ‘Where’s our disclosure?’ Topics Finance & Investing Reporting TCFD GreenFin Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off “The Fearless Girl” statue facing Charging Bull in Lower Manhattan, New York City (June 2017) Shutterstock Quietbits Close Authorship

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BofA, BlackRock and State Street CEOs talk stakeholder primacy — and fall short

Following the money: A sustainable finance odyssey

December 8, 2020 by  
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Following the money: A sustainable finance odyssey Joel Makower Tue, 12/08/2020 – 02:11 I’ve been following the money this past week. “The money,” in this case, is the sprawling and spiraling world of sustainable finance. The occasion, as you may have guessed, was our announcement  Nov. 30 of our newest annual event:  GreenFin , taking place in April. It drew the attention of a number of friends, colleagues and veritable strangers who wanted to discuss the event’s themes, tracks and topics. The ensuing conversations — and, no doubt, many more to come — are a continuation of the learning journey I’ve been on for the past few years, seeking to understand the role of the financial sector in advancing sustainability solutions and a clean, decarbonized economy. For someone who’s quickly out of his depth when it comes to money matters, it’s been a steep learning curve. Even still, last week’s conversations were a real eye-opener. Let me explain. In 2019, when we first started holding our GreenFin Summits — the precursor events to GreenFin 21 — the focus was relatively narrow: the role of environmental, social and governance (ESG) data in the investing world. Specifically, the alignment of company ESG reporting with the needs of investors, particularly institutional investors and pension funds, which are increasingly viewing high ESG scores as a proxy for good management and reduced risk. This by itself is a complex topic. There is a lack of consistency among various ratings methodologies, a cacophony of ESG standards and frameworks, and a lack of clarity about which data is, in fact, material. “So, sustainable finance is about aligning and harmonizing the needs of both investors and companies,” I concluded some time ago. Not so fast. It was soon evident that the topic of sustainable finance was bigger than just ESG and investors. Hence, the addition of sustainability-linked finance — bonds and loans with terms tied to environmental (and, in some cases, social) outcomes. That’s the realm of banks and other financial institutions. “OK, then,” I ventured. “Sustainable finance covers how ESG scores are being used by investors as well as by financial institutions to determine risk and, thus, capital allocation.” I was getting warmer, but just getting going. For one thing, ESG data is just that: data. It must be sourced, verified and scored consistently across companies to be meaningful to investors, banks and other interested parties. We’re just not there yet. Did I mention the cacophony? Implements of instruction ESG data, it turns out, isn’t being used solely by investors and lenders. It is increasingly becoming a management tool as companies take ESG data, both structured and unstructured, and apply artificial intelligence to assess potential business decisions. “They create a virtuous ESG Loop, where goal-setting, bench-marking and course-correcting reinforce sustainability,” wrote Richard Peers, founder at ResponsibleRisk Ltd, a London-based consultancy, in the blog Finextra . Me again: “So, the ESG data that serves as the foundation for sustainable finance is increasingly driving not just investment decisions but also management decisions.” Yes, but sustainable finance is far bigger than just the companies seeking capital to expand their operations or invest in clean technologies and other things. In fact, companies may represent a relative pittance compared to what’s needed to finance public infrastructure: all those airports, highways, ports, water districts and other critical needs for which cities, states, provinces and nations routinely drop a billion dollars here and there. Can ESG data help ensure that they are built in a manner that makes them resilient in a climate-changing world, even mitigate the threats of droughts, floods, hurricanes, wildfires and all of the other calamities in the first place? Sustainable finance can help. There’s gold in all that green: a bond’s quarter- to a half-point lower interest rate for a green 30-year, billion-dollar bond could translate into tens of millions of dollars in lower costs, money that could go to any number of other worthy causes, or into taxpayers’ pockets. Me: “OK, I think I’m finally getting it. Sustainable finance is a way of deploying investment capital to create sustainable outcomes at a societal and economy-wide level.” Well, almost. Financing the transition If you broaden the aperture a bit more, you’ll see a much, much bigger opportunity: to finance the transition of the global economy to achieve the United Nations Sustainable Development Goals. According to a 2019 report, Climate Finance Strategy 2018-2023 , from the Hewlett Foundation: To put the world on the path to solving climate change, the current level of funding for climate-friendly activities must be tripled to at least $1.5 trillion annually. Fortunately, the multi-trillion-dollar capital sources needed for climate already reside in the current global financial system many times over. Based on publicly available data, it is estimated there is nearly $250 trillion of commercial capital available globally in five primary capital pools (Asset Owners, Retail Bank Deposits, Development Finance Institutions (DFI)/Multilateral Development Banks (MDB), Private Equity and Venture Capital). That’s a monstrous opportunity, and it broadens the definition of “sustainable finance” even further to include vast pools of capital to take on humanity’s most pressing challenges. In other words, the capital it will take to get from here to sustainability. “So, sustainable finance is how we align capital flows with the opportunity to address the world’s biggest social and environmental problems,” I concluded. I’m still not sure I’ve nailed it, but I’m getting closer. At minimum, I’ve taken a much broader view of what sustainable finance means and what GreenFin could address. To be sure, we won’t be addressing all of these things at GreenFin 21; I’m guessing it will take a couple of event cycles to find our footing. We’ll focus, as my learning journey did, primarily on ESG investing and green bonds and loans. But my quest for understanding has helped to create a roadmap of how this event — and the convening power of GreenBiz and its remarkable community — can meet the moment. Over time, I suspect, much of this will become commonplace, simply the way business and finance are conducted. We’ve seen that in many other aspects of sustainability, from renewable energy purchasing to the circular economy. Visionary ideas become commonplace and, eventually, the status quo. And at that point “sustainable finance” will become, well, just finance. I invite you to follow me on Twitter , subscribe to my Monday morning newsletter, GreenBuzz , and listen to GreenBiz 350 , my weekly podcast, co-hosted with Heather Clancy. Topics Finance & Investing GreenFin ESG Featured Column Two Steps Forward Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off Shutterstock

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Following the money: A sustainable finance odyssey

HSBC invests in world’s first ‘reef credit’ system

December 7, 2020 by  
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HSBC invests in world’s first ‘reef credit’ system Jesse Klein Mon, 12/07/2020 – 01:45 Traditionally, offset markets have been focused on credits for atmospheric carbon sequestration or restoration projects. But there are many other ways industrial and agricultural operations harm the planet. Australian-based environmental project developer GreenCollar decided to tackle one problem by creating a new type of credit to address an environmental issue very close to its country’s heart: the degradation of the Great Barrier Reef. Behind climate change, the biggest threat to the Great Barrier Reef is poor water quality. Agricultural runoff from The Great Barrier Reef Catchments, a rural area covering 163,700 square miles of coastal Queensland that drains directly onto the reef, causes high levels of nitrogen and sediment to seep into the ocean and damage the reef ecosystem.  GreenCollar’s new system creates a marketplace for “reef credits” aimed at mitigating those practices. Similar to carbon credits, these reef credits are sold by farmers or project developers to organizations and companies looking to offset their environmental footprints. Those sales help fund improved land management practices. But instead of removing or avoiding carbon in the atmosphere, reef credits go toward helping improve water quality in this very specific area to protect the reef.  One reef credit in the GreenCollar system is equivalent to one kilogram of nitrogen, or 538 kilograms of sediment avoided from the ocean. Unlike carbon credits, which are focused on helping companies or individuals make removal claims, reef credits are about the abatement of pollution at the edge of the system. There is no scheme for removing nitrogen currently in the water system. Behind climate change, the biggest threat to the Great Barrier Reef is poor water quality. GreenCollar said it worked with farmers and verification auditors, including the Reef Credit Secretariat and EcoMarkets Australia , as well as the Queensland government and private sector buyers. including financial services giant HSBC, to develop, authorize and sell these new credits. “It was really important that the farmers were part of building the process itself,” said Carole Sweatman, general manager of water quality at GreenCollar. “No point in building this beautifully shiny architecture if you roll it out on the ground and find out people just can’t use it or it just doesn’t make sense to them.” The thousands of farmers in the Great Barrier Reef Catchments use fertilizer to grow sugar cane, bananas, avocados, mangos and tomatoes. But the high degree of rainfall in the area produces intense agricultural runoff into the ocean near the reef. Selling the reef credits funds investments in more efficient fertilizer practices such as matching the application to the needs of specific crops and removing compact soil to decrease excess runoff, according to GreenCollar. “Sometimes that means restructuring your whole farm,” Sweatman said. “Buying new equipment, installing GPS. Those kinds of things can add considerable costs.” In the grazing and ranching areas near the wetlands, erosion and gullies have allowed nitrogen and sediment to bypass the wetlands drainage system and enter directly into the sea. The revenue from the reef credits will help repair the landscape, manage drainage systems and combat cattle overgrazing to protect these areas, GreenCollar said.  GreenCollar created the credit architecture, including a standard set of rules for the credits and three approved methodologies vetted by the audit firms. To ensure the standard meets goals for additionality, ensuring that the credits lead to pollution mitigation that would not have happened without the money from selling the credits; and leakage, the unintended consequences that could lead to higher pollution by shifting demand from a protected area to an unprotected area, GreenCollar said it worked with third parties to create the verification system. The goal is to create a system that makes a real and significant impact on the reef while creating a marketplace for corporations, farmers and environmental achievements to intersect. I think people were skeptical that we’d actually bring corporates in. Any of those pessimistic views we’ve been able to dispel quite quickly. “The auditors themselves draw up the framework that they utilize to undertake the audit,” Sweatman said. “We’ve shared our own technical work, but they have to create their own templates and run that [verification] process.”  For example, leakage is a big concern for GreenCollar. While a farmer is making improvements in some areas on the land, it is possible for reverse outcomes to occur on the rest of the property. According to Sweatman, GreenCollar requires farmers to record information across the entire property so auditors know what is happening all over the farm. GreenCollar is working with 50 farmers and hopes to increase that to 180 over the next three years This is the first credit system created specifically to protect a UNESCO World Heritage Site, and understanding how farming practices can affect the health of the reef isn’t always straightforward, according to GreenCollar. “People are used to forest-type credits,” Sweatman said. “You can go out and count trees or use aerial photography to really understand what the potential is in a landscape and then just go and physically count things. In the nitrogen space, it’s not countable in that sense.” Similar to the marketplaces that support soil carbon credits, the GreenCollar reef credits rely on farmers sharing the personal records of practices on their properties, including how much fertilizer they apply and the systems they use to calculate that fertilizer amount.   GreenCollar also is faced with educating buyers about this new concept, not a simple feat when you consider that the traditional carbon credit market is already extremely confusing to potential buyers.  “I think people were skeptical that we’d actually bring corporates in,” Sweatman said. “Any of those pessimistic views we’ve been able to dispel quite quickly.” The first corporation GreenCollar brought in as a buyer was HSBC. The financial services firm recently completed the purchase of the first tranche of reef credits and plans to continue buying them as part of its net-zero commitment. HSBC is targeting net-zero in operations and supply chain by 2030; it also seeks to align its portfolio of investments with the Paris Agreement goal to achieve net-zero emissions by 2050. According to Greencollar and investment of $4 billion Australian is required to meet water quality targets for the Great Barrier Reef. “These nature-based solutions are going to become increasingly important,” said Hamish Kelly, managing director of global banking, Australia at HSBC. “We feel that these sorts of schemes are very clear demonstrations that nature-based solutions can support communities, and also facilitate the transition to net-zero carbon. And for us in Australia, what’s more, iconic than the Great Barrier Reef.” HSBC’s climate commitments include investing at least $750 billion in sustainable financing over the next 10 years. HSBC paid $36.40 per credit, and GreenCollar estimates that the market for reef credits could be worth over 6 million credits by 2030.  Pull Quote Behind climate change, the biggest threat to the Great Barrier Reef is poor water quality. I think people were skeptical that we’d actually bring corporates in. Any of those pessimistic views we’ve been able to dispel quite quickly. Topics Pollution Prevention Regenerative Agriculture Water Conservation Farmers Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off A new reef credit marketplace hopes to save the Great Barrier Reef with corporate and government investment.// Courtesy of GreenCollar.

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HSBC invests in world’s first ‘reef credit’ system

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