Business Travel's Green Gap: Desire for Sustainability Outpaces Action

ESG Policy Roundup: A Week of Significant Strides and Challenges

This week witnessed a flurry of activity in the ESG policy landscape. From major acquisitions to innovative funding mechanisms, the world's leading organizations are making significant strides towards a sustainable future. However, the journey is not without its challenges, as the need for systemic reform and increased private sector participation becomes increasingly evident.

• Exxon's Carbon Capture Leap: Exxon Mobil Corporation made a significant move in the carbon capture space by acquiring Denbury Inc., a company focused on carbon capture utilization and storage (CCUS). The $5 billion deal is expected to enhance Exxon's carbon capture capabilities, a crucial step towards meeting its emission reduction goals.

• Coca-Cola's Green Venture: Coca-Cola launched a venture capital fund focused on decarbonization solutions. The fund, named "Coca-Cola Climate Solutions Fund," will invest in companies and technologies that aim to reduce greenhouse gas emissions.

• Sustainability vs. Convenience in Travel: A study revealed that only 16% of business travelers prioritize sustainability in their trip planning, despite a strong desire for more eco-friendly travel options. This highlights the need for more accessible and convenient sustainable travel alternatives.

• The Storm of Reform: A call for reform in Multilateral Development Banks (MDBs) has been made to effectively crowd in private investment targeting climate action and Sustainable Development Goals (SDGs) in Emerging Markets and Developing Economies (EMDEs). The reform aims to address the lack of ambition, trust, support, and cooperation undermining the climate agenda.

• EU's Clean Tech Investment: The EU Commission is investing over €3.6 billion in 41 large-scale clean tech projects through the EU Innovation Fund. The projects spread across 15 EU Member States and Norway, aim to green significant sectors of the European economy, particularly those difficult to decarbonize.

The week's events underscore the urgent need for systemic reform and increased private sector participation in the ESG space. While significant strides are being made, the journey toward a sustainable future is fraught with challenges. The need for more accessible sustainable options, effective crowding in of private investment, and systemic reform in MDBs are some of the pressing issues that need to be addressed. As we move forward, it is clear that a collaborative approach, involving both public and private entities, will be crucial in navigating the path to sustainability.

ExxonMobil's $5 Billion Bet on Carbon Capture: Acquires Denbury

ExxonMobil, the energy behemoth, has announced a $4.9 billion acquisition of Denbury, a company specializing in carbon capture and CO2 utilization. This strategic move is aimed at accelerating ExxonMobil's low-carbon initiatives and offering carbon capture services to industries that are challenging to decarbonize.

• Denbury's core business revolves around oil production, particularly developing stranded reserves from depleted reserves via the injection of captured industrial-sourced CO2. The company claims to have achieved net negative Scope 1 and 2 emissions and aims for net zero across all scopes by 2030.

• Denbury owns and operates the world's largest 1,300-mile CO2 pipeline network and has a growing portfolio of properties for carbon sequestration, making it a significant player in carbon capture, utilization, and storage (CCS) solutions.

• ExxonMobil's acquisition of Denbury aligns with its plan announced last year to invest over $15 billion in the next six years to reduce greenhouse gas emissions in its operations and in lower-emission business opportunities.

ExxonMobil's acquisition of Denbury underscores the energy giant's commitment to the energy transition and its strategy to grow its Low Carbon Solutions business. The deal could potentially enable ExxonMobil to reduce emissions by over 100 million metric tons per year, marking a significant step in the company's journey toward a sustainable future. The impact of this acquisition on ExxonMobil's carbon capture capabilities and the broader energy sector will be closely watched.

Coca-Cola's Bold Leap: A Venture Capital Fund for Decarbonization

The Coca-Cola Company is making a significant stride in sustainability with the launch of a new venture capital fund. This fund, with a focus on sustainability, aims to invest in startups that offer solutions to reduce the carbon footprint of the Coca-Cola System, encompassing the company and its bottling partners.

• The fund is launching with a capital of $138 million, including a series of $15 million investments from the company and eight of its bottling partners, representing nearly half of Coca-Cola's global system volume.

• The fund will target companies at the point of commercialization, focusing on solutions in areas such as packaging, heating and cooling, facility decarbonization, distribution, and supply chain.

• The fund will be managed by Greycroft, a venture capital firm known for its seed-to-growth investments in enterprise and consumer solutions across various industries and life cycles.

Coca-Cola's new venture capital fund signifies a strategic move towards achieving sustainability goals and reducing carbon emissions. By investing in startups with innovative solutions, the company is not only fostering green innovation but also setting a precedent for other corporations to follow. The fund's success could potentially influence the broader global transition to sustainable business practices.

Sustainability in Business Travel: Intentions vs Actions

The global leader in spend optimization, Emburse, recently unveiled the findings of its research on sustainability attitudes among British business travelers. The study, which surveyed over 1,000 employees and 250 employers, revealed a significant gap between sustainability aspirations and actual practices in business travel.

• Despite 71% of businesses having a formal sustainability policy or guidelines, only 37% actively enforce these during travel bookings and expense approvals.

• Only 16% of employees prioritize sustainability when planning travel, ranking it below cost and convenience. However, 71% believe their employer should do more to enable sustainable travel.

• Employee demand for sustainable travel incentives has risen by 19% since Emburse's 2021 survey. Yet, only 26% would proactively reduce travel to lessen their carbon footprint.

• Despite the environmental concerns, 76% of employees would opt for a more sustainable mode of transport if incentivized by their employer.

The research underscores the need for businesses and employees to bridge the gap between sustainability intentions and actions in business travel. While the establishment of sustainability policies is a positive step, their active enforcement and the provision of incentives for sustainable travel choices are crucial. As business travel volumes approach pre-pandemic levels, the onus is on both companies and their traveling employees to turn good intentions into concrete actions for a sustainable future.

MDBs in the Eye of the Storm: A Call for Reform

The global financial system is on the precipice of a significant transformation. Investors and governments are urging Multilateral Development Banks (MDBs) to enhance their effectiveness in mobilizing private investment for climate action and Sustainable Development Goals (SDGs) in Emerging Market and Developing Economies (EMDEs). The call for reform is gaining momentum, but the path to change is fraught with challenges.

• The United Nations Secretary-General António Guterres has criticized the lack of ambition and cooperation in the climate agenda. He has called for MDBs to adapt their business models to leverage more private finance for investment in renewables.

• MDBs play a crucial role in providing catalytic capital for global projects, thereby incentivizing private-sector investment. However, the blended finance market is currently underperforming, leading to a cycle of blame and finger-pointing among private-sector, MDBs, and their shareholders.

• MDBs need to reform their risk tolerance, as overly conservative measures of risk are reducing their lending capacity by hundreds of billions of dollars. MDBs also need to enhance their project preparation to attract more private investment.

• MDBs are being urged to share their deep experience of investment and project development in emerging markets. This would help lower the cost of financing in many parts of the world and better enable institutional investors to assess risks and opportunities.

The reform of MDBs is a critical step in the broader transformation of the global financial system. While the discussions have been slow, they are finally gathering pace. MDBs need to evolve from maximizing their own investments to acting as catalysts for total investment in developing countries. The road to reform is long and complex, but the growing consensus among governments and the finance sector is a promising sign of progress. The upcoming 2023 SDG Summit will be a crucial platform for further discussions on MDB and financial architecture reform.

EU's €3.6 Billion Clean Tech Boost: Emissions Trading Revenues Fuel Innovation

The European Union Commission is set to invest over €3.6 billion in 41 large-scale clean tech projects, financed through the EU Innovation Fund. This move is part of the REPowerEU Plan aimed at reducing Europe's dependency on Russian fossil fuels.

• The projects span various industries including cement, steel, advanced biofuels, sustainable aviation fuels, wind and solar energy, and renewable hydrogen. These initiatives will contribute to the decarbonization of key sectors of the European economy.

• The projects are located in 15 EU Member States and Norway, all expected to be operational before 2030. They have the potential to avoid 221 million tonnes of CO2 emissions in their first decade.

• The projects were chosen following the third call for large-scale projects, covering four topics: general decarbonization, industry electrification and hydrogen, clean tech manufacturing, and mid-sized pilots.

• The selected projects were evaluated based on their ability to reduce greenhouse gas emissions, level of innovation, operational, financial, and technical maturity, scalability, and cost-effectiveness.

This significant investment by the EU Commission underscores the union's commitment to fostering innovation in clean technology and accelerating the transition towards a sustainable economy. The move also highlights the potential of emissions trading revenues as a significant source of funding for green initiatives. The impact of these projects on the EU's decarbonization goals will be closely monitored in the coming years.