Hundreds of companies around the world have made ambitious promises to purchase only wind, solar and other types of clean electricity to power their operations. But many of these corporations aren’t buying actual physical electricity from renewable sources. Instead, they are snapping up incredibly cheap instruments known as unbundled renewable energy certificates, or RECs, which allows them to make “100% renewable power” claims while continuing to emit greenhouse gases as before. The practice is also problematic because it does little to encourage the establishment of new wind or solar farms —not a good outcome in the broader fight against climate change.   In this episode, we talk to Max Scher, head of clean energy and carbon programs at software giant Salesforce, which used to buy RECs but no longer does so.   “My general fear here is that if we are hyper-focused on… purchasing RECs, we’re going to miss the hard work, the important work, on reducing energy consumption, thinking about siting of facilities on cleaner grids” and other real-world steps to lower the carbon footprint of corporations,” Max tells us.  We also hear from an analyst at Lazard Asset Management, and from Matthew Brander, a carbon accounting expert at the University of Edinburgh who cautions that buying RECS instead of actual renewable power can be “a very low-cost easy way of making it appear to have reduced emissions.” Photo credit: Getty images

As countries across the world set out plans to bring their emissions to net zero by 2050, financial institutions are increasingly setting their own carbon neutrality goals. Limiting global warming to 2°C by 2050 will require $3 trillion annually in investment, according to an estimate by the Intergovernmental Panel on Climate Change, and banks will play an integral part in channeling that financing. To find out what banks are doing to get to their lending portfolios to net zero, we talk to Amit Puri, global head of environmental and social risk management at U.K.-based Standard Chartered, about the bank’s net zero ambitions. “We are really trying to figure out on a sector-by-sector basis, on a geography basis, where are we today, where is the baseline, and therefore what do we need to do to reduce emissions in line with the commitment that we have made?” Amit says. We also hear from executives at Natixis about a tool the French investment bank created to make its lending portfolio more sustainable. That approach “should help us to drive the entire portfolio of the bank toward a net zero balance sheet,” says Karen Degouve, head of sustainable business development at Natixis.   To learn more about our ESG Thought Leadership, visit the new S&P Global Sustainable1 website.   Photo credit: Getty Images

Major oil and gas companies are beginning to set aggressive decarbonization targets, but the path ahead for them is riddled with challenges. The latest episode of S&P Global's ESG Insider podcast takes a deep dive into what net-zero goals mean for those energy companies.   We'll hear from Ed Daniels, an executive vice president and the head of strategy at Royal Dutch Shell plc, about the company's plan for achieving net zero across its direct and indirect emissions. We also talk with Natasha Landell-Mills, the head of stewardship at Sarasin & Partners, a U.K.-based asset manager with more than £15 billion under management, about why the firm recently divested from Shell after years of engagement. And Simon Redmond, a senior director at S&P Global Ratings, explains the rating agency's decision to bump down the credit ratings of some companies in the oil sector, including Shell.   Photo source: Getty Images

Heading into the 2021 proxy season, investors are increasingly focused on equity issues, climate change, and the broader role of companies in society. Shareholders filed at least 435 ESG-related shareholder proposals for the 2021 proxy season, according to the respected Proxy Preview report.   In this episode, we explore three emerging shareholder proposals.   One asks companies to give investors a “Say on climate,” a variation on “Say on pay” resolutions that gained traction after the 2008 financial crisis. To learn more, we talk with Chris Hohn, a British billionaire hedge fund manager and philanthropist behind the “Say on climate” resolution.   We also hear from Tejal Patel, corporate governance director at CtW Investment Group, which is behind a resolution asking companies to perform racial equity audits.   "Even the most well-meaning board might be missing certain ways that their policies affect communities of color," Tejal says. Financial institutions, in particular, need to look for those blind spots "because they play such a critical role in our economy and in our society."   And we look at a proposal that asks companies to become "public benefit corporations" to further advance stakeholder capitalism. Stakeholder capitalism posits that companies are responsible for their role in society in addition to making money for shareholders, and the idea has gained traction in recent years. To read S&P Global's 2021 proxy report, click here.  Photo credit: Getty Images

Last week, State Street Global Advisors released its annual asset stewardship report. With nearly $3.5 trillion in assets under management, the firm is one of the world’s largest asset managers. In 2020, it voted in more than 19,000 meetings and engaged with over 2,400 companies. In this episode, we hear from Ben Colton and Rob Walker, co-heads of the firm’s asset stewardship program. They tell us about the themes the firm focused on in shareholder engagements in 2020, like COVID-19 response, supply chain resilience and racial and gender diversity. And they say that last one is poised for rapid change. "I believe that in the next six to 12 months, you're going to see a revolution in the quality and the quantity of data related not only to racial and ethnic diversity, but human capital management more broadly,” Ben says. They also talk about the emerging themes they’re engaging on in 2021 proxy season. The Taskforce on Climate-related Financial Disclosures, or TCFD, has become widely adopted. Now, Ben and Rob say investors are shifting their focus from baseline climate disclosures to the governance of environmental issues. State Street Global Advisors' latest asset stewardship report can be found here: https://www.ssga.com/library-content/pdfs/asset-stewardship/asset-stewardship-report-2020.pdf Photo credit: Getty Images

World Water Day was March 22nd, and we’re marking the occasion by looking at the looming threat of water scarcity and the lack of investor appetite for financing water-related projects. According to the United Nations, 2.2 billion people globally lack safely managed drinking water, and 4.2 billion people do not have safely managed sanitation. The U.N. also warns that water scarcity could displace 700 million people by 2030. Access to clean water has become even more vital with COVID-19, which created a worldwide need for constant hand-washing. Water management is a risk for companies, too. S&P Global Trucost data shows that more than half of companies’ water usage comes from supply chains, so even companies operating in water-abundant regions can be affected by scarcity given the global nature of suppliers.  In this episode, we hear from Will Sarni, founder and CEO of water consultancy Water Foundry. Will says the world struggles to value water, which makes it difficult to secure capital investments in water technologies and solutions. To learn about some of the solutions that do exist, we talk to Emilio Tenuta, Chief Sustainability Officer at Ecolab, a provider of water and hygiene solutions. “We're seeing that disruptions and challenges to our water resources from climate change can have significant operational risk to businesses,” Emilio says. “It really impacts businesses and communities, whether it be operational costs for business, supply chain disruptions, growing constraints related to reputation and brand. Clearly, there's a growing concern for ESG investors who are investing in companies facing these challenges.” Ecolab just released an enhanced version of the Smart Water Navigator, a free, publicly available online tool that helps companies manage water risk using S&P Global Trucost data. Read a white paper co-authored by Ecolab and S&P Global Trucost on the topic of corporate water management here: https://ecolab.widen.net/s/8mlk7dwnsp/smart-water-navigator-working-paper Photo source: Getty Images

New sustainable finance disclosure regulations came into force in Europe on March 10 as part of the EU’s push towards making the economy greener. The new Sustainable Finance Disclosure Regulation, or SFDR, is expected to drastically change the scope of sustainable investing by providing greater clarity and transparency and increasing disclosure. Fund managers will now have to disclose environmental, social and governance risks in their portfolios, marking the first step in a vast EU plan to drive capital to meet sustainable goals. In the episode we talk to Nathan Fabian, Chairperson of the European Platform on Sustainable Finance and Chief Responsible Investment Officer at the Principles for Responsible Investment, or PRI, a United Nations-backed network of investors. He heads up the platform, a group of experts from industry, finance and civil society who advise the European Commission, the executive arm of the EU, on the future of sustainable finance policy in Europe. Listen to a previous episode of ESG Insider to learn more about Europe's new green taxonomy for sustainable activities. another ESG push by the EU: https://podcasts.apple.com/us/podcast/banks-big-green-eu-taxonomy-challenge/id1475521006?i=1000511776202

Investors, customers and employees are paying increasing attention to corporate diversity. That was true for gender in the wake of the #MeToo movement, and it has been increasingly true of race following the death of George Floyd in the U.S. But data is lacking, especially around racial and ethnic diversity. In this episode, we explore a first-of-its-kind diversity report that provides a much-needed window into corporate diversity. This new report is the result of an Illinois law that requires public companies headquartered in the state to report on the gender, racial and ethnic representation among corporate leaders and boards of directors. In March 2021, the University of Illinois used the disclosures from this law to publish the first report card evaluating how companies are faring on diversity. You can access the report here. We interview Illinois Speaker of the House Chris Welch, who sponsored the diversity law. He called the report “a goldmine of data.” Speaker Welch said this data will help drive informed decisions. It will also put companies on public notice. “These companies spend a whole lot of money on their brands,” he said. “Having this information out there, companies know that they can be publicly shamed. It shows where their values are, and their customers are paying attention.” You can listen to our previous interview with Speaker Welch, from October 2020, here.

Investors and banks have less than a year to comply with the European Union’s new taxonomy for sustainable activities. In this episode, we explore the challenges financial institutions face in applying the taxonomy to their portfolios — something the Biden administration is sure to be watching as it tackles its own climate goals. Starting in January 2022 investors must explain how they use the taxonomy to assess the sustainability of their investments. They will also have to disclose what percentage of their investments are in line with the taxonomy. The new regulation is expected to radically change how investors and companies report on their environmental performance.   We hear from Daniel Bouzas, a policy adviser at the European Banking Federation. We also talk to Hans Biemans, head of sustainable markets at Dutch bank ING Group, which took part in a recent study on how banks can apply the taxonomy to their lending.     Photo credit: Getty Images

Investor pressure is growing for companies and financial institutions to assess and disclose their exposure to climate risks such as wildfires, sea-level rise, hurricanes and other extreme weather events. But in a new report, a handful of climate scientists in Australia warn that many existing climate models are extremely nuanced and were not designed with a business-specific application in mind. In this episode of the ESG Insider podcast, we explore the challenges of using climate models in physical risk assessments. We speak with two authors of the report: Tanya Fiedler, who is a lecturer in the discipline of accounting at the University of Sydney, and Andy Pitman, a professor at the University of South Wales. We also talk with Steve Bullock, Global Head of ESG Product Innovation and Analytics at S&P Global Trucost. Trucost assesses risks relating to climate change and natural resource constraints with aim of translating those climate models and other data into information companies can use. Steve says financial market participants need some insight into the magnitude of these risks so that they can begin to take action. "Given the urgent need for action, having a blurry photograph of risk exposure is certainly better than having no visibility at all," Steve tells us.