It’s time for a rethink on carbon emission reduction

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Hello reader,

I always thought that although ESG is not a perfect system, it is the best option we have to help us achieve net-zero goals. Perhaps it’s because the three letters are so ingrained in public consciousness now that we have to stick to it and look past its flaws.

However, some experts believe that we need to rethink the way we approach carbon emission reduction because the issues with the ESG framework are fundamental. These conversations have opened up a debate on how we can measure corporate accountability in a more effective way.

As we’re thinking about the best approach for reducing carbon emissions, if you’re considering getting on board with environmental disclosures, you can get started by filling out this survey. It’s part of a joint initiative from CDP and Tech in Asia.

Happy reading!

DEEP READS

Image credit: Timmy Loen

ESG should be boiled down to one simple measure: emissions

Environmental, social, and governance, also known as ESG, has become an important way to gauge the contribution of corporations to the fight against climate change. The concept is so widely accepted now that it has become a US$35 trillion industry.

Yet, the ESG framework is far from perfect. One of its fundamental problems is that it lumps such a wide array of objectives that it provides no coherent guide for investors and businesses. Moreover, the scoring systems are inconsistent and filled with loopholes that allow for greenwashing.

“Although ESG is often well-meaning, it is deeply flawed. It risks setting conflicting goals for firms, fleecing savers and distracting from the vital task of tackling climate change. It is an unholy mess that needs to be ruthlessly streamlined,” a recent article in The Economist argues.

Instead of focusing on three factors, the article suggests to zero in on the E – not environmental factors, but emissions. Narrowing down the focus of ESG on one key factor will help standardize it. The more standardized ESG scoring systems are, the easier it will be to assess which companies are large carbon emitters.

However, focusing only on emissions would allow for the export of responsibility for the reduction of those emissions, argues Lubomila Jordanova, co-founder and CEO of carbon accounting startup Plan A.

Similarly, the obsession over personal carbon footprints is starting to become a distraction, writes editor Simon Mundy in his recent Financial Times article. He says that personal carbon footprints are “leading the climate conversation in strange and, in some cases, disturbing directions.”

He also cites a recent study showing that almost 40% of young people suffer from climate anxiety. Campaigns that focus on individual voluntary actions are distracting from progress toward real policy changes, which needs to come from governments and corporations.

TRENDING NEWS

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Photo credit: Luo Lei / Unsplash

1️⃣ China drives global renewables spending to record 1st half
Global investment in renewable energy for the first six months of the year hit a record US$226 billion, up 11% compared to the same period in 2021, a recent report by BloombergNEF shows. China, which tripled its investments in large-scale solar projects from the same period last year, accounted for 43% of the funding worldwide.

Why it matters:
Chinese manufacturers are dominating key parts of the solar and wind energy supply chain, which some analysts argue could leave the trade of renewable energy materials vulnerable to geopolitical tensions.

2️⃣ The new US climate law will reduce carbon emissions and make electricity less expensive, economists say
The bulk of the spending in the country’s US$770 billion Inflation Reduction Act is going into tackling climate change. The new bill includes US$370 billion spending in clean energy, mainly through tax credits for developers and producers.

Why it matters:
The Inflation Reduction Act is touted to be the most aggressive climate investment ever taken by the US Congress. Environmental analysts expect the new law to accelerate decarbonization and bring the country’s greenhouse gas emissions down about 40 percent below 2005 levels by 2030.

Photo credit: Nathana Reboucas / Unsplash

3️⃣ Google accused of airbrushing carbon emissions in flight search results
In July, Google quietly tweaked how it estimates carbon emissions for each flight. Instead of reporting carbon dioxide equivalent, the search engine began showing only the carbon dioxide emitted on each journey. The change effectively halved the stated environmental footprint of any given flight.

Why it matters:
Critics argue the change as airbrushing the environmental impacts of air travel because the new measurement leaves out other types of emissions from the plane such as water vapor, which can have a significantly higher warming effect than carbon dioxide.

4️⃣ Amazon says carbon emissions rose 18% in 2021 as Covid drove upsurge
The ecommerce giant’s carbon emissions soared 18% in 2020 largely due to the pandemic-driven ecommerce boom, according to its annual sustainability report.

Why it matters:
Amazon announced its ambition to reach net zero by 2040, but its emissions are up 40% since 2019. Previously, the company faced backlash over the way it measures its environmental footprint.

5️⃣ BlackRock Real Assets to buy out Australian battery developer Akaysha Energy
A fund under the management of BlackRock Real Assets is set to acquire Akaysha Energy, an Australia-based firm that develops battery storage and renewable energy projects. The asset manager plans to commit over US$700 million in capital to support the construction of the company’s planned energy storage plants, including near-term projects in Japan and Taiwan.

Why it matters:
Battery storage scale-up is becoming increasingly important because the supply of renewable energy is not constant. These facilities help balance the fluctuations in energy demand and supply.

STARTUP WATCH

1️⃣ Lunar Energy lights up with $300m for smart-home tech
Lunar Energy, a California-based clean energy startup, has raised US$300 million over two rounds in the past two years, the company announced after emerging from stealth mode.

Investors that participated in the fundraise include South Korean telecom giant SK Group and San Francisco-based solar company Sunrun.

Founded by former Tesla executive Kunal Girotra in 2020, Lunar Energy has grown to a team of nearly 250 employees.

2️⃣ Advanced geothermal heats up with $138m round for startup Fervo Energy
Fervo Energy, a California-based geothermal energy startup, has raised US$138 million in a series C round led by DCVC. Other investors include CPP Investments, Liberty Energy, and Macquarie.

Last year, the startup signed an agreement with Google to develop a geothermal power project to support the tech giant’s data centers in Nevada.

3️⃣ Carbon Direct caps $60m round to coach companies on cutting emissions
Carbon Direct, a carbon management startup, has closed a US$60 million series A round led by Decarbonization Partners – a partnership between Temasek and BlackRock – and Quantum Energy Partners.

Founded in 2019, the New York-based startup provides a platform through which companies can invest in sustainability initiatives to offset their carbon emissions.

4️⃣ Hydrogen startup Utility Global raises $25m in series B funding
Utility Global, a Texas-based sustainable hydrogen startup, has secured US$25 million in a series B round led by Ara Partners with participation from Samsung Ventures, NOVA, and Aramco.

Founded in 2020, the startup has developed a zero-electricity electrolysis process to convert sustainable waste streams into hydrogen.

5️⃣ Amasia, Active Fund lead $9.6m funding of Clarity
Clarity, a California-headquartered environmental sensing and data company, has raised US$9.6 million in a series A+ round co-led by Amasia and Ayala Corporation Technology Innovation Venture Fund.

Other investors in the round include Spero Ventures, SOSV’s HAX program, Launch Fund, and The Climate Syndicate.

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