The Sillion Briefing 17.07.2024
Need-to-know corporate sustainability and ESG news, delivered fortnightly
In this edition...
UK General Election
TNFD sector guidance
SBTi CEO resigns
ISO Global Net Zero Standard
Google scraps offsets
New: Sillion's Annual Investor Sustainability Report 2024/2025
Earlier this week, we released the fourth edition of Sillion’s Annual Investor Sustainability Report, a guide for UK-listed companies to understand what investors want from corporate sustainability disclosures and communications.
Our insights from interviews with 15 asset managers, including Amundi and Standard Chartered, reflecting a total of over £4.9 trillion AuM, capture:
Investors are raising standards for companies, especially in high-emission industries, and want transparency in data assumptions.
The global focus is on CSRD and ISSB standards, urging companies to align with these guidelines.
Investors demand tangible actions and costed transition plans, spurred by the Transition Plan Taskforce (TPT).
Greenhushing is increasing, as organisations avoid sharing progress due to discomfort with sustainability issues
Click here to read the full report.
Government
General Election: Reds plan for green
‘Change’ was the clear message from voters during last week’s General Election, and judging from the stream of announcements since Sir Keir Starmer entered number 10, Labour look set to hit the ground running on its hefty green mandate. We've summarised the key climate actions that have been taken since last Friday's results below.
Former Labour Party leader Ed Miliband has returned to the top team as the Secretary of State for Energy Security and Net Zero. He is one of a handful of individuals with previous experience in top Government roles, having previously served as Energy Secretary under Gordon Brown where he notably oversaw the Climate Change Act in 2008. He’s set out six strategic priorities for DESNZ under the new Labour Government:
Deliver the mission to boost energy independence and cut bills through clean power by 2030
Set up Great British Energy
Upgrade Britain's homes and reduce fuel poverty
Reform the energy system to benefit consumers
Create good jobs in Britain's industrial heartlands, including through a 'just transition' for industries based in the North Sea
Lead on international climate action
Chancellor Rachel Reeves has addressed business leaders for the first time, and announced the ‘de facto’ ban on new onshore wind farms in England has been lifted, meeting a key manifesto promise. Onshore wind will now face the same planning rules as other infrastructure projects, effective immediately, aiming to make it easier for new projects to get off the ground.
An immediate ban on new drilling in the North Sea, a decision likely to trigger a swathe of legal action from oil companies according to the Times.
Chris Stark, Former Chief Executive of the Climate Change Committee, will lead ‘first of its kind’ Mission Control centre to co-ordinate action on Labour’s 2030 decarbonisation target across energy companies and industry bodies.
Disclosures
TNFD announces 30% increase in adoption, releases sector guidance
The Taskforce on Nature-related Financial Disclosures (TNFD), which publishes reporting recommendations on nature-related impacts and dependencies, has announced a 30% increase since January in the number of companies committed to reporting using the framework – bringing the number to a global total of 416. Note that this is the number of those who have committed to adopting the framework, not the number of those currently reporting. Still, the rate at which the recommendations have been taken up is encouraging, given the relative novelty of thinking, measurement and reporting on nature for many companies. The increased uptake coincides with movements elsewhere, with GRI releasing biodiversity standards in January this year, CSRD’s new E4 standard covering biodiversity and ecosystems, and ISSB stating that it will consider how to include TNFD in its standards.
Separately, the TNFD has published sector-specific standards covering eight real economy areas including mining, food and chemicals.
If you’re considering your own position and reporting on nature and biodiversity and are thinking about where to start, then please be in touch.
SBTi CEO steps down amid controversy
Citing personal reasons, SBTi CEO Luiz Amaral stepped down last week following dispute at the organisation concerning the use of offsets for scope 3 targets. A new CEO will now be sought by the Board, with Chief Legal Officer Susan Jenny Her stepping in as interim CEO. The controversy, which you can read about in a previous Briefing here, centred on the release of a statement that implied a future version of the organisation’s core target-setting standard would allow companies to use more offsets to meet scope 3 targets than had previously been allowed – a concession which made many unhappy. The announcement caused chaos, with many senior members reportedly not being aware of it prior to release, and resulted in calls for the CEO’s resignation.
The SBTi is the world’s leading emissions reduction target standard, and the central body for target verification. A public consultation on the next version of its Corporate Net-Zero Standard (CNZS) will be launched in Q4 2024.
Despite disruptions, it’s promising to see that the SBTi’s rapid global growth continues, with the total number of companies with targets increasing by 102% in 2023 alone.
Median support for environmental shareholder proposals at US companies is 21 per cent, according todata provider ISS-Corporate. No diversity, equity and inclusion (DEI) proposals have broken above 50% support (based on companies in the Russell 3000 index).
While ESG-related shareholder proposals aren’t a perfect indicator of the overall levels of sustainability focus in the US, this type of ESG activism has certainly fallen off since the heady heights of 2021, when a record 12 environmental proposals were passed. You may remember activist hedge fund Engine No.1 winning seats on the Board of energy giant ExxonMobil.
One number:
21%
Corporate
ISO announces Global Net Zero Standard
During London Climate Action Week earlier this month the International Organisation for Standardisation (ISO) confirmed that is has begun developing the first independently verifiable and international net zero standard. The best-practice guidance is anticipated to include robust requirements applicable across all sizes, sectors, and geographies. It will also support with the credibility of any green claims to protect against greenwashing, though the details remain minimal at this stage. Expected to launch at COP30 in November 2025, the standards will be an evolution of the ISO Net Zero Guidelines first launched during COP27. ISO has indicated that thousands of experts are expected to participate through national standards bodies across more than 170 countries, with a public consultation to open in 2025.
Carbon neutral claim hit as Google ditches offsets
Tucked within Google’s 2024 Environmental Report is an announcement that it has ceased maintaining operational carbon neutrality as of 2023, in a notable shift for the tech giant’s sustainability strategy. Google has upheld its carbon neutrality claim since 2007, primarily through what it terms “high quality carbon avoidance credits” that match the volume of emissions from its buildings, data centers, and business travel. It is these credits that will no longer be used moving forward. While there is something to be said for a company strengthening its sustainability criteria by shifting its approach in response to changing market consensus – the scrutiny on offsets isn’t dying down – the eagle-eyed will spot Google’s emissions are now 48% higher than they were five years ago. This increase is largely attributed to the resource-intensive demands of AI data centres. Google acknowledges that its "extremely ambitious" goal of reaching net zero emissions by 2030 is now significantly uncertain, given the complex and unpredictable future of AI technologies.
Lidl and WWF team up on supply chain impact
The partnership with the conservation group will span the supermarket group’s value chain in 31 countries, and focus on nature impacts including biodiversity, water management, and responsible sourcing of materials like palm oil and cocoa. It’s the latest move in WWF’s mission to address the impact on nature made by food production. At COP26 the group launched an initiative to halve the environmental impact of the average UK shopping basket by 2030, a goal supported by Tesco, Lidl, and four other retailers.
Energy
Shell pauses biofuel project
Shell has announced it is temporarily pausing on-site construction at one of its biggest energy transition projects – its 820,000 tonnes-per-year biofuels facility in the Netherlands – to “address project delivery and ensure future competitiveness given current market conditions”. The site was originally scheduled to start production in April but has faced a number of technical delays and is now expected to be operational in the latter part of the decade. The FT notes how the current oversupply of biofuels is creating a market pinch point. While demand remains low currently, these technologies will become increasingly crucial for the energy transition over the next decade, especially for industries like aviation with limited alternative options.
Calendar
Q4 2024 | SBTi: Draft Corporate Net-Zero Standard V2 Public Consultation
December 2024 | EU Deforestation Law due diligence obligations imposed
Q1 2025 | UK Sustainability Reporting Standards (SRS) published
FY24 reporting | CSRD: EU firms already subject to NFRD (and large non-EU subsidiaries) to report ESRS
FY25 reporting | CSRD: Large private companies to report ESRS
FY25 reporting | CSRD: Non-EU companies (incl. UK) to report ESRS for large subsidiaries
FY26 reporting | ISSB S1 and S2 standards become effective in the UK
FY26 reporting | Transition planning, likely through TPT framework, to potentially become mandatory through UK SRS
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