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Investors Aviva, BMO Toughen the Line on Net Zero Pledges

Claudia Baldwin

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Environmental campaigners may remain sceptical over the investment industry’s ability to translate its myriad net zero pledges into real world action, but pressure from institutional investors on corporates that do not have credible net zero strategies is continuing to move in only one direction.

Just days after BlackRock CEO Larry Fink reiterated his view that CEOs needed to embrace a new form of stakeholder capitalism that would allow them to turn the net zero transition into the “greatest investment opportunity of our lifetime,” two of Europe’s leading investors stepped up warnings that they would vote against boards that fail to deliver ambitious and effective climate strategies.

First up, Aviva Investors announced updates to its sustainability expectations, alongside its annual letter from CEO Mark Versey to the 1,500 companies in its $354 billion portfolio. In the letter, Versey stressed that the company wanted to see firms step up action on biodiversity and human rights, as well as climate change. “We will hold boards and individual directors accountable where the pace of change does not reflect the urgency required,” he warned.

“We want to encourage companies to consider the whole picture of sustainability because this is how they will create the greatest return for shareholders, while helping to build a better future for society,” he said. “Companies must now turn their pledges into concrete and measurable plans of delivery. Our letter sets out clear expectations as to how they should do this, and what those plans must address across climate impact, biodiversity and human rights.”

He particularly stressed the need for climate strategies to incorporate plans for protecting and enhancing nature. “Simply cutting emissions but allowing the destruction of the rain forest to continue will do little to reverse global warming,” he argued. “Companies need to adopt an integrated approach for maximum benefit.”

Growing numbers of investors have pledged to deliver net zero investment portfolios, with various coalitions totalling trillions of dollars of assets under management joining forces at last year’s COP26 Glasgow Climate Summit to reiterate their support for accelerating the transition to net zero emissions. However, environmental groups have repeatedly accused many of the world’s largest investment firms of continuing to invest in carbon intensive companies and failing to apply adequate pressure to ensure such firms really do accelerate efforts to decarbonize.

However, Aviva Investors insisted its engagement with carbon intensive firms had “teeth.” The company said it undertook 1,277 substantive engagements with investee companies in 2021, voted at 6,648 shareholder meetings and voted against 26 percent of management proposals tabled. It also stressed that it wanted to see all executive compensation structures and performance targets reflect sustainability goals and would “divest in cases where companies consistently fail to meet its requirements.”

Specifically, the company said it was executing a new 1.5-degrees-Celsius-aligned engagement program focused on 30 of the world’s worst carbon emitters, which was introduced last year and includes an “ultimate sanction of divestment if expectations are not met over one to three years.”

The news came the same day as BMO Global Asset Management (EMEA) outlined its 2022 engagement priorities, underscoring its focus on climate change, biodiversity and human rights, and similarly stressed that firms had to be held accountable for their environmental pledges.

“The events of the past year, including the ongoing COVID-19 pandemic and extreme weather events, have reinforced the importance of creating a more resilient future,” said Claudia Wearmouth, co-head of BMO GAM (EMEA)’s Responsible Investment team. “Climate change, biodiversity loss and human rights are all issues that require urgent action. Active ownership is a key cornerstone of our work and we have a role to play as a conduit to concentrate and amplify our clients’ voices with companies. It can take time to build consensus for change within a business and to develop the tools to do so. We support companies on that journey, but in 2022, a key focus of our work will also be holding companies accountable on their commitments.”

The company said its engagement priorities for the coming year were delivering a phase out of unabated coal power in developed economies by 2030 and in the rest of the world by 2050; holding companies to account on their net zero pledges, with a particular focus on ensuring financial institutions have net zero strategies, including a carefully managed decline of coal, oil and gas within their lending and underwriting portfolios; curbing biodiversity impacts and risks across the most critical sectors including food and beverage, extractives, materials, transportation and finance; and working with chemicals companies to enable a sustainable transition.

The company said it would also continue to call for executive remuneration to be linked to the achievement of climate-related objectives and would directly engage with companies across industries including oil and gas, mining, materials, electric utilities, transportation and automotive and financial institutions about their executive pay policies.

Alice Evans, co-head of BMO GAM’s Responsible Investment team, said the company was well aware of the risk of “net zero-washing” where firms make bold net zero commitments but then fail to produce credible plans for delivering on their goals. “COP26 in November last year served to further highlight the scale of the challenge in addressing climate change,” she said. “But it also proved a catalyst for action, with the push for private sector commitments resulting in over 3,000 corporates and financial institutions, representing $130 trillion in assets, taking on net zero commitments. Concerns on net zero-washing abound and our 2022 engagement agenda will have a sharp focus on implementation, ensuring that these commitments are backed up by concrete actions to decarbonize.”

And in related news the UK’s biggest pension fund, the Universities Superannuation Scheme (USS), today announced it is to shift $6.76 billion of assets into an index that excludes some of the worst polluters, slashing the emissions of its portfolio by 30 percent in the process.

USS Investment Management said it would introduce a climate “tilt” to a portion of the Global Developed Markets Equity component of the Defined Benefit and Defined Contribution funds. It said the move, to be managed by Legal & General Investment Management (LGIM), would initially reduce emissions compared to the broad equity market by at least 30 percent and further decrease its carbon intensity by 7 percent each year thereafter.

USS said the approach would effectively reward companies that can demonstrate they are on the path to lowering greenhouse gas emissions by giving them a higher weighting, while the converse will be true of companies that lack credible decarbonization plans. “Today’s news is a natural progression to our investment strategy following our announced ambition to be net zero for greenhouse gases by 2050 if not before,” said Simon Pilcher, CEO of USS Investment Management. “We think we will be one of the first major U.K. pension schemes to do this and is a significant step towards achieving our net zero ambition. The move will also inform our thinking on the way we approach investment more widely in both the Defined Benefit and Defined Contribution segments of the Scheme.”

Innes McKeand, head of strategic equities of USS Investment Management, said the firm was confident the new approach would deliver competitive returns. “We believe investment in more climate-friendly assets — those positioned to adapt or benefit as the world transitions to a low-carbon economy — offer upside return potential, while lower exposure to companies poorly positioned to adapt to such a world reduces our exposure to downside risk,” he said.

However, the new plans again underscored the challenge investment firms have in the face of growing calls from campaigners to more quickly divest from fossil fuel assets.

Paul Kinnersley, an emeritus professor at Cardiff University and a coordinator of the group Divest USS, told the Guardian that many academics paying into the fund wanted to see a more aggressive divestment strategy. “Any shift by USS to decarbonize or clean up their investments is obviously a step in the right direction,” he said, “but they’ve been slow about changing and they’ve been slow about sharing detail on the target of net zero by 2050. We’re welcoming it, but there’s a long way for them to go.”

Investment firms of all types can expect calls for them to strengthen their net zero, engagement and divestment policies to intensify with each passing year. And in truth the industry has not always helped itself over the past few years, with too many investment firms touting ESG and climate strategies that demand far too little of carbon intensive businesses. But at the same time, as today’s announcements highlight, many of those same investment companies are steadily ratcheting up the pressure on the firms they own. On the same day as COP26 President Alok Sharma calls on governments to deliver on the pledges they made through last year’s Glasgow Climate Pact, the message from top investors to listed firms is increasingly clear: We will hold you to your climate promises.

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Original Article: greenbiz.com

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Is Climate Tech the Hottest Corner of the VC Business in the 2020s?

Claudia Baldwin

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This is an excerpt from “Climatenomics: Washington, Wall Street, and the Economic Battle to Save Our Planet” (Rowman & Littlefield, 2022). Reprinted by permission of the publisher.

While government policies and leadership from Washington can help accelerate change, there’s another place that can accelerate change much faster: Silicon Valley.

In 2003, as a national technology reporter for a chain of newspapers, I visited the Mountain View, California campus of Google to meet with cofounder Sergey Brin. At the time, Google was still a private company, though there was widespread speculation that it would launch an initial public offering soon. The moment I pulled into the company parking lot, I got a taste that Google wasn’t a typical company. Covering many of the parking spaces were canopies made from solar panels, something that’s commonplace today but back then was pretty unusual. Even more unusual were the thick power cords hanging down from the panels over nearly every parking space, something that didn’t make sense until Brin and team later explained it to me. At the time, electric vehicles were even more uncommon than solar parking lot canopies (the first Tesla wouldn’t hit the streets for another five years). But Google knew EVs were coming someday soon, and it wanted to be ready. Google also wanted employees and other visitors to think about the possibilities that could come with solar-powered parking lots and cars that you could plug in to refuel.

Two of the forward-thinking people responsible for Google’s early solar deployment were Chris Sacca, who as the company’s corporate counsel and later head of special initiatives was involved in Google’s energy purchase agreements, and Andrew Beebe, who was chief commercial officer at solar company Suntech, which helped Google go solar.

“There really wasn’t any corporate interest until those guys stepped up and said, ‘Please build solar arrays all over our campus,'” Beebe recalled during a GreenBiz VERGE [climate] tech conference in October 2021. “But (Google executives) also said, ‘Set it up so we can have Walmart and Cisco and Microsoft and all of our competitors come over and see what we have done.’ They obviously had a hugely catalytic role in making all this happen.”

Both Beebe and Sacca would go on to become successful venture capitalists, Beebe with Obvious Ventures, the firm that helped launch companies such as Medium, Beyond Meat and electric bus maker Proterra, and Sacca with his firm called Lowercase Capital, which funded companies such as Twitter, Uber and Instagram. For about three years, Sacca also was a “guest shark” on the ABC television show “Shark Tank,” where budding entrepreneurs bid for the favor — and the funding — of millionaire investors. But it didn’t take long before Sacca was feeling unfulfilled by funding kitchen gadget start-ups on “Shark Tank” or electronic-gaming companies back in Silicon Valley. He, like Beebe, turned his attention almost fully toward clean-energy and climate-related investments.

Sacca and Beebe represent one of the hottest corners of the venture capital business in the 2020s: climate tech. Some of the companies that investors like them are backing today will likely become the Googles of tomorrow. Only instead of changing the way we search for stuff on the Internet, climate tech companies will change the way we source and store our energy, grow our food, and move from point A to point B, whether on land, water, or air. In doing so, they’ll not only transform our economy, but help save the planet.

In 2021, investments in climate tech companies hit more $31 billion, according to deal tracking firm PitchBook. That was 30 percent more than in 2020 and more than 2.5 times what it was in 2019. Those big numbers will likely only get bigger as federal, state and international clean climate and clean-energy policies are implemented. Quite simply, government policies and funding help reassure venture capitalists and other private investors to put more of their money at risk.

In 2021, investments in climate tech companies hit more $31 billion, according to deal tracking firm PitchBook.

Climate-tech and clean-tech investing is no longer just about solar or wind or even batteries anymore. Those businesses now attract plenty of mainstream investors. They’re almost like investing in restaurants or real estate — they’re too passe for venture capitalists who are more interested in finding more disruptive technologies that can scale quickly and create big returns.

“What we look at every day are energy innovations that are just insane, some of which are doing things that Einstein declared literally would not be possible,” Sacca said at the VERGE conference. “We see stuff happening in synthetic biology, for instance, that’s just nuts.”

Amid the hellish fires in the West, back-to-back hurricanes in the East and scientists everywhere warning that things were only going to get worse, Sacca in August 2021 stepped away from Lowercase Capital, quit “Shark Tank,” and with wife Crystal turned his attention specifically toward figuring out how to fund and support companies trying to do more to address climate change. The couple launched a new investment fund called Lowercarbon Capital. In a matter of days, they raised more than $800 million that Lowercarbon Capital could deploy to try to “un— the planet,” in Sacca’s terms. The fund was so popular, Sacca wrote on Lowercarbon Capital’s blog, that it had to turn investors away. “It turns out that raising for a climate fund in the context of an unprecedented heatwave and from behind the thick clouds of fire smoke probably didn’t hurt,” he wrote.

Since then, Lowercarbon has invested in companies that capture carbon dioxide and turn it into consumer products, reduce carbon emissions from livestock and fertilizers on the farm, and mine materials that are key to batteries and storage in ways that don’t destroy the environment. One such company is Twelve, a Bay Area start-up that “upcycles” carbon dioxide captured from industrial emissions and turns it into everything from jet fuel to sunglasses lenses, replacing fossil fuels and plastic. Another company Sacca was particularly excited about in 2021 was Lilac Solutions, which has raised $150 million to commercialize its lithium-mining technology. Lilac claims it can produce the essential element for batteries 10,000 times faster than conventional methods, using 90 percent less land and water. Lowercarbon Capital has also made numerous major investments in companies at the intersection of agriculture and climate, including start-up Formo, which is following the Beyond Meat and Impossible Burger model to make fine European cheeses that don’t require dairy or cows; Entocycle, which has figured out how to speed up the gestation period for black soldier fly larvae which happen to be some of the world’s fastest converters of food waste to protein; and Nitricity, which uses solar-powered modules placed around farms to literally make fertilizer out of thin air by converting and processing nitrates found in the atmosphere.

If garbage-eating fly larvae and fine cheeses bioengineered in a sterile laboratory don’t sound like appealing business models, think again. According to research group Climate Tech VC, food-and-water-related climate tech was the biggest sector for climate venture funding in 2021, followed by mobility, consumer goods, and clean energy. Tech investors’ take on food and agriculture is yielding new high-tech twists in one of the world’s oldest and most established economic sectors. Seattle-based clean-agriculture start-up Nori, for instance, got its start in 2017 when its cofounders entered a hackathon contest for coders to figure out new ways to use blockchain technology for social good. Far from the nearest farm, what they came up with was a way to use blockchain technology to monitor and track low-carbon agriculture practices and then monetize that by selling farm-based carbon-removal offsets.

In doing so, Nori is incentivizing farmers to use more climate-friendly agriculture practices that don’t just reduce carbon emissions but actually increase the ability of soil and crops to store carbon, while also creating a new marketplace for carbon removal and trading. In 2020, Nori raised more than $5 million in seed funding to launch its platform. “We call it climate-smart agriculture — thinking of carbon removal like a crop,” Christophe Jospe, a Nori cofounder, told E2.

This excerpt has been updated since publication.

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Original Article: greenbiz.com

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Walmart Begins Search for Sustainable Packaging

Claudia Baldwin

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“We don’t have time to waste.” With this imperative tagline, American retail giant Walmart launched its Circular Connector this spring.

The goal: to accelerate innovation in the field of sustainable and circular packaging, creating a bridge between companies looking for packaging that has less impact on the environment and those with new solutions to offer.

Searching for sustainable packaging

That the world’s largest retail multinational is launching an online platform to encourage the circular economy of packaging — even while accounting for some form of greenwashing — is undoubtedly great news.

After all, it’s a fact that consumers are becoming increasingly sensitive to the problem of plastic pollution and in general to any aspect related to the sustainability of products. And Walmart, the retail chain of over 10,000 stores around the world, is held accountable by consumers on a daily basis.

Hence the ambitious commitment that the multinational has set for itself by 2025: to achieve that 100 percent of packaging on its shelves would be either recyclable, reusable or industrially compostable. And hence the rush to find solutions to reach the goals.

It’s a fact that consumers are becoming increasingly sensitive to the problem of plastic pollution… And Walmart is held accountable by consumers on a daily basis.

The Circular Connector was therefore created as an online tool to connect packaging designers and manufacturers with companies in various sectors, from food to cosmetics, from fashion to toys. “Basically,” explains a statement on Walmart’s website, “it’s a platform to accelerate packaging innovation and implementation. We want to make it easier for suppliers and brands to find sustainable packaging solutions, thus enabling all of us to move faster toward waste reduction.”

How does the Circular Connector work?

The Circular Connector is accessed from the multinational company’s sustainability policy site, the Walmart Sustainability Hub. To participate, sustainable packaging manufacturers or designers must fill out a special questionnaire with a series of questions about the functions, materials and recyclability of the candidate packaging. Each proposal will then be reviewed according to Walmart’s packaging sustainability goals and, if compatible, will be posted on the site and made available to brands for possible supply contracts.

Reiterating, pragmatically, that they “don’t have time to waste,” the project leaders also made available the company’s Recycling Playbook, based on the two principles of recyclability established by the Ellen MacArthur Foundation. Namely: 1. Is there, in practice, a system for large-scale recycling of this category of packaging that guarantees at least a 30 percent recycling rate for over 400 million people? 2. Do the packaging components fit into that system?

Walmart’s handbook also contains valuable guidance on materials, such as those that are difficult to recycle and therefore tend to be excluded from sorting: metallic films, multi-layer materials, PVC or PVDC, PETG in rigid plastic packaging, oxo-degradable plastics and colored PET.

“We need to work together to promote innovative solutions on a large scale,” states Walmart. “Companies with reusable, refillable, recyclable and other sustainable packaging solutions should therefore come forward. There are hundreds of brands striving to achieve their own packaging sustainability goals, just like Walmart, and the Circular Connector is one tool available to them in this journey.”

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Original Post: greenbiz.com

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Episode 317: Conversations About Circularity

Claudia Baldwin

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This week’s run time is 1:03:05.

CONSIDERING CIRCULARITY (8:50)

Featuring a recap of interviews and stories from Circularity 22, held this week in Atlanta.

INTERVIEW: Jon Smieja, vice president of circularity and senior analyst for GreenBiz, reflects on hot topics and themes
STORY/AUDIO HIGHLIGHT: Planet vs. plastic: Three steps to solving the global plastics crisis (Featuring Keiran Smith, co-founder and CEO of Mr. Green Africa, on how to encourage decisions made at the local level.)
STORY/AUDIO HIGHLIGHT: John Warner: How to do the materials economy right (Featuring John Warner, senior vice president and research fellow of Zymergen, on how green chemistry could enable the leap to a regenerative, circular economy … if we educated chemists.)
CHITCHAT: Textile recycling tech startup triumphs in Circularity 22’s Accelerate competition
AUDIO HIGHLIGHT: Suzanne Shelton, founder and CEO, Shelton Group (On the importance of shifting context; and what that disturbing baby wrapped in cellophane image teaches us about marketing circularity.)

FEATURE
More sustainable consumer goods (47:30)

Interview with new CEO Christy Slay of The Sustainability Consortium, about priorities, circularity and engaging nimble innovators.

*Music in this episode: Lee Rosevere: “Not My Problem” and “Let That Sink In”; ItsWatR: “Awakening Instrumental”

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Original Post: greenbiz.com

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