Report Report: Banking, blind spots, carbon capture and climate risk
A new BlackRock report on assessing climate-related risks is among the standouts in the latest research.
The Report Report is a monthly wrap-up of recent research on sustainable business and clean technology, produced by Corporate Eco Forum, a by-invitation membership organization comprised of large, global companies that demonstrate a serious commitment at the senior executive level to sustainability as a business strategy issue.
Advancing Inclusion Through Clean Energy Jobs (Brookings Institution) explores the role of clean energy jobs in addressing economic inclusion challenges in the United States. The report finds that workers in clean energy jobs earn higher and more equitable wages when compared to all workers nationally, with mean hourly wages for clean energy jobs exceeding national averages by 8-19 percent.
Banking on Climate Change 2019 (Rainforest Action Network) finds that 33 global banks have provided $1.9 trillion to fossil fuel companies since the adoption of the Paris climate accord at the end of 2015. The 10 biggest global bankers of fossil fuels since 2016:
- JPMorgan Chase ($195.66 billion)
- Wells Fargo ($151.6 billion)
- Citi ($129.49 billion)
- Bank of America ($106.69 billion)
- RBC ($100.54 billion)
- Barclays ($85.18 billion)
- MUFG ($80.04 billion)
- TD ($74.15 billion)
- Scotiabank ($69.57 billion)
- Mizuho ($67.71 billion)
The Blind Spot in Corporate Sustainability Rankings: Climate Policy Leadership (Environmental Defense Fund) examines eight popular sustainability rankings to assess whether companies’ policy engagement activities were considered in the methodologies. The report finds that only one — InfluenceMap’s Climate Policy Engagement A-List — recognizes companies for lobbying or other activities in favor of public policies that protect the climate. The report also finds that only two rankings — InfuenceMap’s Climate Policy Engagement A-List and Corporate Knights Global 100 — penalize or disqualify companies for lobbying or activities against public policies to protect the climate.
Business Success and Growth Through LGBT — Inclusive Culture (U.S. Chamber of Commerce Foundation) offers best practices for implementing LGBT-inclusive policies and programs based on insight from 70 corporate respondents. The report also highlights research demonstrating the benefits of LGBT-inclusive policies on a company’s employees and bottom line.
Carbon Capture & Storage in the United States Power Sector (Clean Air Task Force) estimates the scale of carbon capture and storage (CCS) deployment in the U.S. power sector by 2030 as a result of the new corporate income tax credit that incentivizes CCS deployment. The report estimates that nearly 49 million metric tons of CO2 could be captured and stored annually by 2030 through CCS on U.S. coal- and gas-fired power plants.
The ESG Global Survey 2019 (BNP Paribas) analyzes survey responses from 347 global asset owners and managers to better understand how they are embedding ESG into their decision-making processes and portfolios. Key findings include:
- 75 percent of asset owners and 62 percent of asset managers state that 25 percent or more of their investments are invested in ESG/responsible investment funds.
- A majority (78 percent) of respondents state that ESG is either playing a growing role or becoming integral to what they do as an organization.
- 65 percent of respondents have aligned their investment framework to the SDGs.
- The top three motivations for ESG investing: Improved long-term returns (52 percent); brand and reputation (47 percent); and decreased investment risk (37 percent).
- The top barriers to ESG integration: Data (66 percent); costs of technology (32 percent); advanced analytical skills (30 percent); and the risk of greenwashing (21 percent).
- The top three challenges in transforming data into insights: Inconsistent data across asset classes (32 percent); conflicting ESG ratings (27 percent); and ineffective data for scenario analysis (22 percent).
Evaluating Progress on the SDGs (GlobeScan and SustainAbility) analyzes survey responses from more than 450 experienced professionals to assess the progress being made toward each Sustainable Development Goal (SDG), rank the relative urgency of addressing each SDG and understand which SDGs are being prioritized over others. Key findings include:
- Nearly 50 percent of survey respondents feel that society’s progress on sustainable development has been poor.
- Most experts rate progress as poor on seven of the 17 SDGs, particularly around the goals of "Reduced Inequalities" and "Life Below Water." However, the number of experts that view progress on individual SDGs positively has increased over the past two years.
- The proportion of experts rating progress on Partnerships for the Goals as "good" has doubled since 2017.
- Respondents view the performance of NGOs, social entrepreneurs, the United Nations and independent research/academic organizations as mostly positive. In contrast, two-thirds of experts view the performance of investors and national governments as "Poor." Action by the private sector broadly is also viewed negatively by almost 50 percent of respondents, while only one in seven experts view its contribution as "Good."
- Most survey respondents (62 percent) stated that "Climate Action" should be society’s top priority and is the most urgent SDG.
- Survey respondents (43 percent) stated that "Climate Action" is also the top SDG-related priority within their respective organizations.
Five Reporting Trends for 2019: Insights on the Future of Reporting (BSR) highlights five innovations that could improve reporting and disclosure in 2019:
- Reporting practitioners play an essential role in shaping the future of reporting, including through the work of the Corporate Reporting Dialogue.
- Continued effort from companies and investors to meaningfully quantify and report on impact, including related to the SDGs.
- Increasing efforts to apply the TCFD Recommendations, including undertaking and reporting on scenario analysis.
- More involvement and oversight of ESG disclosures at the Board level will help raise the profile of sustainability efforts as a contributor to long-term value for companies and society.
- More sustainability information included in mainstream financial disclosures (including the Form 10-K), and more detailed issue specific sustainability reporting targeted at specific audiences.
Getting Physical: Scenario Analysis for Assessing Climate-related Risks (BlackRock) assesses the potential impact of climate-related risks on U.S. asset classes, including municipal bonds, commercial real estate, commercial mortgage-backed securities (CMBS) and utilities. Key findings include:
- Municipal bonds: An estimated 58 percent of metropolitan areas face climate-related GDP hits of 1 percent or more by 2060–2080 under a "no climate action" scenario. Florida will be affected the most, with Naples, Panama City and Key West seeing likely annual GDP losses of up to 15 percent or more, mostly driven by coastal storms.
- Commercial real estate and CMBS: The median risk of a building that backs a CMBS bond being hit by a Category 4 or 5 hurricane today has increased by 137 percent since 1980, and is projected to increase 275 percent by 2050 under a "no climate action" scenario.
- Utilities: Stock prices typically come under pressure for a period of about 40 days after an extreme weather event, and incur a loss of about 1.5 percent relative to the sector index. However, utility stocks tend to recover quickly, suggesting investors perceive an "over-reaction" to the hurricane impacts and eventually "forget" the event.
Health & Wellness Progress Report 2019 (Deloitte) measures progress Consumer Goods Forum member companies have made against commitments to improve the health and wellness of their consumers, their communities and their employees. Key findings include:
- Over 98 percent of responding companies said that they had reformulated at least some part of their product portfolio in accordance with their own health and wellness policies.
- Over 70 percent of companies offered low-salt or low-sugar versions of their products.
- 79 percent of companies declared that 81 percent-100 percent of their food and beverage products display key nutrient information.
- 84 percent declared that 81 percent-100 percent of their personal care and hygiene portfolio clearly display proper product use.
- Respondents partnered with education authorities on health and wellness initiatives for over 550,000 schools.
- At least 2 million employees participated in health and wellness programs in 2018 — up from 1.6 million in 2017.
How AI Can Enable a Sustainable Future (Microsoft and PwC UK) finds that using AI for environmental applications could contribute up to $5.2 trillion to the global economy in 2030, a 4.4 percent increase compared to the business as usual scenario. The report also finds that AI could reduce worldwide GHG emissions by 4 percent in 2030.
HP Workforce Sustainability Survey (HP Inc.) highlights the impact that sustainable business practices have on recruiting, hiring and retaining top talent. Key findings include:
- 61 percent of survey participants believe business sustainability is mandatory.
- 58 percent said environmentally conscious practices are key to engaging future workforce.
- 46 percent said they would work only for companies with sustainable business practices.
- 56 percent believe that ignoring environmental impact in the workplace is as bad as ignoring diversity and inclusion.
Investing in a Time of Climate Change — The Sequel 2019 (Mercer) sets out a climate scenario model for assessing the effects of climate-related physical damages (physical risks) and the transition to a low-carbon economy (transition risks) on investment return expectations. The report models a 2-, 3- and 4-degree Celsius scenario over three timeframes — 2030, 2050 and 2100.
State of Integrated and Sustainability Reporting 2018 (Sustainable Investments Institute (Si2)) analyzes the U.S. S&P 500 to better understand how many companies report on sustainability performance and strategy, issue stand-alone integrated reports and include voluntary sustainability information in financial reports. Key findings include:
- 78 percent of the S&P 500 issued a sustainability report for the most recent reporting period, with 95 percent offering environmental performance metrics and 86 percent offering social performance metrics.
- Only 36 percent of reports included external assurance in 2018.
- 106 companies (27 percent) reference and loosely follow just one framework, while 46 percent reference two or more reporting models.
- 97 companies (25 percent) do not reference any reporting models.
- Fourteen S&P 500 companies issued an integrated report in 2018, twice the number in 2013.
- Many more integrated reporters (71 percent) have a board committee overseeing sustainability issues than do general reporters (42 percent).