Welcome to the Sustainable Money Mail! We think investing should be about trying to beat the market while providing capital to companies that make the world a better place. From Bill Gates to Norway, here are six stories that caught our eye this week.
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Why you should care about energy transmission
Bill Gates announced in a recent blog that the key to the future of energy lies in building and supporting electricity transmission lines. He explained that extreme weather conditions over the past few years have increasingly made people more aware of power grids and how they can fail.
He recalls how hundreds of people died, and millions were without power for days as a result of the local grid failure in Texas two years ago due to continuous snow storms. Gates warns that this may happen again as just last month, extreme cold across the United States once again pushed power grids to the brink.
He believes the solution is clear: We need to upgrade our grid, build more high-voltage transmission lines that can carry electricity long distances, and use those transmission lines to better connect regions and communities to one another.
He assures that this way, we will make sure people always have power when they need it. And in the process, this can unleash the potential of affordable and abundant clean energy.
“Since the beginning of the electric grid, power companies have placed most power plants close to cities,” he states. “That model doesn’t work with solar and wind, because many of the best places to generate lots of electricity are far away from urban centers.”
For the U.S. to reach its net-zero carbon emissions goal in 2050, the country is going to need an upgraded energy grid that can handle the estimated 40 to 60 percent increase in electricity demand because of the proliferation of electric vehicles, electric stoves, and other electric-powered appliances and infrastructure. Therefore, the country needs to build more high-voltage power lines, especially where the wind blows (the midwest) and the sun shines (the southwest), and making them longer as well so they can reach dense population centers.
“Put simply: Transmission is key to our clean energy future. If we address the barriers standing in the way of that future, it will lead to lower emissions, cleaner air, more jobs, fewer blackouts, more energy and economic security, and healthier communities across the country.”
Consumers say they care about sustainability – and their wallets prove that is the case
A joint study from McKinsey and NielsenIQ analyzed five years of US sales data, from 2017 to June 2022. The data covered 600,000 individual product stock keeping units (SKU’s) representing $400 billion in annual retail revenues. These products came from 44,000 brands across 32 food, beverage, personal-care, and household categories.
The study revealed that ESG-related claims are indeed attracting more consumers, and consumer products that made ESG-related claims on their packaging grew faster over a five-year period than products that made no claims (28% cumulative growth vs 20%). A caveat here: the study does not demonstrate a causal relationship that definitively indicates whether consumers bought these brands because of the ESG-related claims or for other reasons. It mainly explores the correlation between ESG-related claims and sales performance.
Among other findings from the study: ESG-related claims boosted sales across varied product categories and brand sizes, and less-common claims tended to be associated with larger sales effects. Products that made the least prevalent claims (such as “vegan” or “carbon zero”) grew 8.5 percent more than peers that didn’t make them. Products making medium-prevalence claims (such as “sustainable packaging” or “plant-based”) had a 4.7 percent growth differential over their peers, while the most prevalent claims (such as “environmentally sustainable”) had the smallest growth differential.
Senior partner Steve Noble and coauthors argue that consumer-packaged-goods companies could benefit from accelerating the development of environmentally sustainable and ethically produced products. Moreover, the authors suggest that companies will likely have a greater ESG impact and a better chance of achieving outsize growth if they incorporate high-impact ESG-related claims across multiple categories and products.
Shell's board of directors sued over climate strategy
ClientEarth, an environmental law organization, announced last week that it has launched legal action against the board of directors of energy giant Shell in the UK. ClientEarth claims that the company’s “flawed” energy transition strategy puts shareholder value at risk. The company asks the court to order the board to strengthen the company’s climate plans.
This lawsuit marks the latest in a series of shareholder and legal challenges facing Shell regarding its energy transition strategy, including a complaint filed earlier this month to the SEC by advocacy group Global Witness which accuses Shell of greenwashing by misleading investors about the amount of investment it is directing towards renewable energy.
Several institutional investors announced support for the action by ClientEarth, including UK Government-backed pension scheme Nest. In a statement following the lawsuit's announcement, Mark Fawcett, Chief Investment Officer of Nest said: “We hope the whole energy industry sits up and takes notice.”
Norway wealth fund declares they we won't back boards who fail on climate
Norway's $1.35 trillion sovereign wealth fund, one of the world’s largest investors, has declared that they will vote against board members who are not doing enough to manage climate risk.
“We will now vote against board members if a company has experienced material failures in the oversight, management or disclosure of climate risk," the fund said in its annual report on responsible investments.
Having invested into over 9,000 companies in 70 countries, Norway’s wealth fund has an enormous influence in the financial landscape. The fund plans to step up its already stringent policy on climate investing, where last year, it voted against the re-election of 61 directors at 18 companies due to failures in adequately managing climate risk. This number is planned to increase this year.
Advanced Emissions Solutions (ADES) Closes On Controversial Acquisition After Skipping Shareholder Vote
The US chemicals company Advanced Emissions Solutions (ADES) has closed on the surprisingly the controversial acquisition of environmental tech company Arq Limited after eliminating the requirement to obtain shareholder approval.
Arq has developed and patented new and innovative technologies with the potential to revolutionize the performance of carbon-based materials, which also provide a unique solution to reduce the need for the extraction of virgin hydrocarbons.
This is part of ADES’ strategy to expand collective operations, enhance product portfolio, and pursue higher margins. As two leading environmental technology companies, they hope to implement patented technology solutions to reduce the environmental footprint while creating a more sustainable future for their customers. The acquisition hopes to accelerate the Company’s presence in the structurally under-served North American activated carbon market.
However, analysts have warned that this may significantly increase capex requirements and heighten execution risks to an already turbulent company. As Arq has not generated any revenue as of yet despite constructing a $80 million processing plant and receiving investments from Peabody Energy (BTU), Vitol and Mitsubishi (OTCPK:MSBHF), substantial, additional capex will be needed over the next couple of years to "enable growth".
Due to material, near-term capex requirements and expectations for the company to lose money in both 2022 and 2023, ADES will have to deploy the majority of its cash hoard over the next couple of years. This is definitely something to keep an eye on.
Comcast Issues its First $1 Billion Green Bond
Comcast Corp., the US’ largest broadband provider announced last Thursday its first green bond offering, raising $1 billion. The proceeds from the 10-year bond aim to support the company’s environmental sustainability goals, especially its target to be carbon neutral by 2035 in Scope 1 and 2 emissions, which includes slashing direct emissions from its global operations and indirect emissions from purchased and imported electricity consumption. That will mean eliminating or offsetting approximately 1.8 million tons of carbon dioxide equivalent (per 2021 data), equivalent to removing 500,000 passenger cars from the road, according to Comcast’s green financing framework.
Proceeds from the bond issuance will be allocated to eligible green investments that may include funding renewable energy projects, green buildings, clean transportation and waste prevention, reduction and recycling, according to the company.
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All opinions are the author’s own. This is not investment advice. Please consult your financial advisor before making investment decisions.
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