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Europe and Delta-8: How Will the Country Respond to the Craze?

Just like the U.S., Europe will also have to figure out how to deal with the growing trend of Delta-8 cannabis products, and it’s clear that the controversy is only just beginning. There is a new cannabinoid in town on the U.S. side of the cannabis conversation these days. If you haven’t heard about Delta-8 at this point, you are probably living under a rock. The cannabinoid is being marketed as the “lighter” if not “less paranoid” version of Delta-9 THC. Even better, at least initially to intrepid entrepreneurs determined to beat the odds if not jump the shark into multi-state distribution, Delta-8 can be chemically extracted from hemp. There is only one problem with all of this, of course, and that is where this argument bumps into science. Delta-8 can be created by merely oxidizing (exposing to air) good old Delta-9 THC, and from any kind of plant. The delta between the deltas, in other words, is very small. Just because Delta-8 (like Delta-9) can also be extracted from hemp, the cannabinoid has been reported to give consumers similar psychoactive effects of Delta-9, while existing in a legal grey area.In the middle of the hoopla, American states have begun to take notice as the craze has spread in the aftermath of the passage of the 2018 Farm Bill legalizing hemp on a federal level. Kentucky and Vermont have both warned hemp farmers that trafficking in Delta-8 may land them in federal hot water. Another dozen states have already issued regulations about mixing this cannabinoid with food, cosmetics and other consumables.So far, however, this discussion has not made its way to Europe. What is the likelihood that it might, and what forms might this take? It could be all a storm in a teacup, or it could flip the equation in some interesting ways, particularly across borders.ShutterstockEurope, Extraction and CBD There is every chance that a major legal battle may be triggered by Delta-8, somewhere in Europe, particularly in a market like Switzerland, if not Portugal, Luxembourg, Holland or even Italy. This is because the CBD market is indeed moving ahead thanks to the European Commission’s (EC) decision on cannabidiol (namely that it is not a narcotic) last fall. And these countries are all in the midst of either embarking upon or formalizing their recreational cannabis experiments or have formalized the CBD market, somehow.Beyond this, of course, there is another moving piece that is unknown in the U.S. Right now, almost all extractions from CBD are going the Novel Food route (see both the battles in the U.K. and Europe of late on this topic). However, Delta-8 is not “just” another CBD extract. Indeed, because of the chemical similarities to Delta-9, there is every reason to believe that the extract would automatically be labeled a narcotic by the EC. Furthermore, because it is also an extract of the hemp plant, it might well also get labelled as a “Novel Food”—just like CBD so far has been.In places where there is clearly going to be a recreational cannabis market domestically in Europe, or already is (see Holland), such issues will be left up to local regulators. There is no reason to believe they will not automatically slap narcotic labels on such products if not ban them altogether, just like their American counterparts before they even get to the “Novel Food” discussion.But is this the whole story?Delta to Delta: The Oxidation Discussion and ImportsOne of the more fascinating aspects of the cannabis revolution is the chemical procedures that occur during the life of the plant as cannabinoids themselves are formed. The fact that Delta-8 can be “manufactured” from Delta-9 cannabis also means that there are going to be potential medical implications for the same if not cross-border importation discussions. Specifically, a GMP-certified producer could also produce large quantities of cannabis that in fact could travel over national borders, aging as they go, and bound not necessarily for medical markets in other European countries but rather nascent recreational ones. This means that, until there is a specific effort to close this loophole, producers in Portugal, Greece and other feeder countries could easily ship product to say, Switzerland, and further, bound for not the medical, but recreational market that is also about to start in the country.It is also likely that in some markets where only CBD has been legalized, that black market if not grey market Delta-8 will make its way into the market. That is less likely in Europe just because of the strictures of narcotic and pharmaceutical labelling, but it certainly could slip through the cracks temporarily.The Delta-8 conversation could also finally trigger a conversation about organic production in Europe. EU-BIO has not been in the forefront of such discussions, but Delta-8 could well put it there, especially because extraction regulations including HACCP fall under this regulatory umbrella across the region.For the present, however, this is all conjecture. It is unlikely that the European Commission will stand down on classification of Delta-8, any more than it has on the other cannabinoids that it has begun to define and parse. However, it is likely that Delta-8 will make its debut in Europe, perhaps as early as next spring, and further push the envelope, if not overall discussion, forward, even if there is no quick and easy resolution.

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Ceres Launches Investor Initiative Targeting the Largest Food Sector Emitters

Sustainability non-profit Ceres announced the launch of Food Emissions 50, a new initiative to lead institutional investors to engage the highest greenhouse gas (GHG) emitting companies in the North American food sector to disclose and reduce GHG emissions.

Addressing the climate footprint of the food sector is key to accelerating the transition to a net zero future, according to Ceres, with the global food system is responsible for a third of all global GHG emissions. The sector contributes significantly to the Scope 3 supply chain emissions of other companies and organizations that buy, distribute or sell food and ag products.

Julie Nash, Director of Food and Forests at Ceres, said:

“High-emitting food companies have a significant role to play in achieving a net zero emissions economy. Moving top North American food companies to disclose and reduce supply chain emissions will have considerable ripple effects in the global food and agriculture sector.”

The initiative will target 50 of the largest food and agricultural companies in North America, including McDonald’s, Starbucks and Kraft Heinz. Ceres released results of a study indicating that 60% of the companies do not currently include Scope 3 emissions in their existing climate targets, 70% do not disclose emissions from agriculture, and 80% do not disclose emissions from land use.

The companies will be asked to commit to a series of actions including disclosing GHG emissions across their value chains, set 1.5 °C-aligned science-based emissions reduction targets, and to develop, disclose, implement and report progress on climate transition action plans.

Leslie Samuelrich, President of Green Century Capital Management, one of the first investor signatories to the new initiative, said:

“We are thrilled to be an investor signatory to Ceres’ Food Emissions 50. Deforestation and land conversion are the single largest contributors to the emissions generated by the food system, and we look forward to bringing our expertise on shareholder advocacy on deforestation to rapidly reduce agricultural sector emissions.”

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Prudential Links $4 Billion Credit Facility Terms to Climate and Diversity Goals

Global insurance and financial services company Prudential Financial has joined the ranks of companies tying the cost of capital to progress on ESG goals, with the introduction of a sustainability-linked credit facility.

The new credit facility was created with the renewal of its prior $4 billion facility with the addition of terms linking borrowing costs to the company’s greenhouse gas emissions targets and initiatives to increase the diversity of senior leaders.

Margaret Foran, Chief Governance Officer and Corporate Secretary for Prudential Financial, said:

“We are committed to ensuring that sustainability runs through everything we do. This transaction is another important step forward to integrate our ESG and liquidity framework, and to ensure greater accountability around our commitments for all of our stakeholders.”

Prudential’s announcement marks another step in the surging use by companies globally of sustainability-linked debt instruments. In a study released earlier this week, credit ratings, research, and risk analysis provider Moody’s Investors Service reported that that sustainability-linked loans reached record levels in Q2, with loan volumes reaching $156 billion, up 54% over the prior quarter.

Nandini Mongia, Treasurer of Prudential, added:

“We continually look for opportunities to align our liquidity framework with Prudential’s broader commitment to sustainability. This credit facility is the natural next step in our journey.”

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Leading Investors Push for Vote on Company Climate Strategies

A group of 53 major investors representing over $14 trillion of assets have issued a call for greater accountability and transparency from companies on their climate strategies, in order to progress their net zero aligned-investing efforts.

In a statement published by the Institutional Investors Group on Climate Change (IIGCC), the investors, including J.P. Morgan Asset Management, GAM Investments and BT Pension Scheme, released an Investor Position Statement requesting that companies provide disclosure on their efforts to reach net zero goals, and offer investors the ability to vote on their plans and progress.

Stephanie Pfeifer, Chief Executive, IIGCC, said:

“In order for investors to do their job as stewards of capital, companies must establish effective mechanisms to demonstrate their net zero transition plans to shareholders and outline how they will be achieved. It is clear that shareholder voting and director oversight is needed to hold companies to account on their commitments to achieving a net zero future.”

While the investors acknowledge that many companies have announced commitments to reach net zero emissions, including more than half of the major emitters targeted by the Climate Action 100+ initiative, they note that the plans presented lack standardization and consistent data reporting.

Yo Takatsuki, EMEA Head of Investment Stewardship, J.P. Morgan Asset Management, said:

“If we stand any chance of closing the gap between current carbon emissions and meeting the goals of the Paris Agreement, the transition to net zero has to be scientifically credible. Responsibility, accountability and delivery of a credible net zero transition plan, coupled with the provision of good quality data, must therefore be implemented by the Board of investee companies. And there’s no time to waste.”

To address these issues, the statement urges companies to undertake a series of key actions to improve consistency, transparency and accountability. Specifically, the  investors request listed companies to disclose a climate transition plan, provide a routine vote on the implementation of the net zero transition plan (where permissible), and identify the director responsible for the plan. Disclosure should be aligned with the Taskforce on Climate Related Financial Disclosures (TCFD) climate reporting recommendations and utilizing the Climate Action 100+ Net-Zero Company Benchmark.

The IIGCC noted that several major companies have already implemented the measures outlined in the investor statement following engagement, including Shell, Unilever, Nestle, Glencore, Iberdrola and TotalEnergies.

Stephanie Maier, Global Head of Sustainable and Impact Investment, GAM Investments, said:

“Transparency and accountability are critical to the effective delivery of net zero commitments. Putting corporate net zero alignment plans to the vote will allow shareholders to send a clear message to the Board on the scale and pace of implementation.”

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LGIM America, EDF Partner to Engage Emitters on Climate Action

Asset Manager Legal & General Investment Management America (LGIMA), and the US-based nonprofit environmental advocacy group Environmental Defense Fund (EDF) announced today a new collaboration aimed at fostering emissions reductions across industries and business sectors by promoting climate-aligned investing and corporate engagement for action towards net zero goals.

Through the new collaboration, LGIMA and EDF will call on business leaders to advocate effective policies and regulations to deliver at-scale emissions reductions, push for increased corporate climate action in areas ranging from methane emissions and flaring to vehicle electrification, and help to meet the increasing demand for ESG-aligned investment options.

Ben Ratner, Associate Vice President of EDF+Business, EDF’s corporate engagement division, said:

“Investors have a tremendous opportunity to accelerate corporate climate progress by aligning their voices and choices with the concrete actions needed to actually achieve net zero.”

LGIMA and EDG stated that they will initially prioritize opportunities for corporate climate engagement within the on oil and gas, and transportation sectors. Looking forward, they will also explore the creation of net zero aligned funds to deliver attractive returns and help lower emissions.

John Hoeppner, Head of US Stewardship and Sustainable Investments at LGIMA, said:

“LGIMA and EDF share the conviction that asset managers have the opportunity and the responsibility to use their market power to accelerate climate pledges into climate progress, shifting the needle towards a net zero future. With shareholders and regulators increasingly demanding transparency and leadership from the private sector, climate action has become a business imperative.”

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Bain to Slash Emissions from Business Travel 35%

Global consultancy Bain & Company has committed to cut emissions from business travel by 35% over the next five years, as part of a new set of sustainability goals announced today.

Business travel is typically a primary source of Scope 3 emissions for professional services firms. Bain has also unveiled new targets to reduce the climate impact of its own operations, aiming to further cut emissions from activities such as powering and heating its offices by 30% over the next five years.

The company stated that it will also continue to invest in high-quality carbon removal projects, both nature-based reforestation and the implementation of green technologies.

Torsten Lichtenau, Bain partner and global head of the firm’s Carbon Transition impact area within its Sustainability & Responsibility consulting practice, added:

“Like most businesses, the pandemic gave us a chance to step back and reimagine the ways we’ve historically worked. One area where we’ve decided to go above and beyond is optimizing carbon emissions associated with travel. The pandemic proved there are times when we can still be extraordinarily effective with our clients by leveraging technology to collaborate in a hybrid work environment.”

According to Bain, the new goals come on top of the firm’s achievements of reducing Scope 1 and 2 emissions by 68% over the past decade and converting to 100% renewable electricity. The firm has also turned its attention to initiatives aimed at helping clients follow their own sustainability journeys and pursue opportunities from the emerging green economy.

Sam Israelit, Bain’s Chief Sustainability Officer, said:

“We are long past picking low-hanging fruit, and we are following the same advice we give to our clients: setting audacious goals that are realistic and measurable. Our firm is hyperfocused on mitigating the impact of our emissions on the environment and accelerating our carbon transition. We continue to lead the way in our own industry while also equipping our clients and nonprofit partners to do the same.”

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Canada Bids to Host International Sustainability Standards Board HQ, Offers Seed Capital

The Government of Canada announced its support for the International Financial Reporting Standards Foundation’s (IFRS) proposed International Sustainability Standards Board (ISSB), and has offered to host the ISSB’s Board of Trustee’s headquarters, according to a letter to IFRS Chair Erkki Liikanen by Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland, representing a coalition of 55 public and private institutions in Canada.

Freeland wrote:

“Canada recognizes the importance of effective disclosures based on high-quality data in addressing climate change and nature degradation, improving opportunities for women, visible minorities, and other underrepresented groups, and enhancing public and private sector governance.  Canada is a reliable, multilateral partner dedicated to promoting sustainable outcomes that would be respectful of an organization whose objective is to develop global sustainability standards on behalf of over 140 member countries.”

The International Financial Reporting Standards Foundation (IFRS) is looking to establish the ISSB in order to address the emerging need for global sustainability reporting standards. In October 2020, the IFRS initiated a consultation process seeking input on the potential formation of a global sustainability reporting standards board, and on the Foundation’s own place in that process. After receiving positive responses to its consultation paper, the IFRS launched a working group including other sustainability and standards-focused organizations, and released its views towards the strategic direction to be taken in the formation of the new ISSB, focusing on information that is material to the decisions of investors, lenders and other creditors, beginning with climate-related issues, and extending to other ESG matters. 

Freeland’s letter cites Canada’s credentials as a leader in the fight against climate change, along with key attributes including the country’s diverse and developed economy, central location, and its longstanding support for IFRS Standards.

The Deputy PM also promised financial support for the ISSB operations, including a “significant ‘Welcome Fund,’” to be provided by a coalition of Canadian public and private institutions, aimed at supporting the ISSB’s initial period of operations.

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L.E.K. Consulting Ramps Climate and Sustainability Focus with New Center of Excellence

Global management consulting firm L.E.K Consulting announced today the launch of the Sustainability Centre of Excellence, aimed at supporting clients in addressing key sustainability issues including net zero strategy development and climate solutions development.

Stuart Jackson, L.E.K. Global Managing Partner said:

“Climate change and resource consumption affect all of society and the totality of a business organization.As a result of increasing regulatory and stakeholder pressure, and the inherent risks of climate change and unsustainable production and consumption, decisions about sustainability permeate every aspect of strategy and operations. The rapid growth of ESG funds is a clear statement of investor intent.”

According to the company, the launch comes in response to the growing urgency of climate and sustainability issues, with organizations addressing strategy and operations in order to meet these emerging challenges. L.E.K. will work with clients on the determination of key elements of their sustainability strategies and areas of focus, as well as on identifying sources of competitive advantage. The center will also generate proprietary research focused on key sustainability themes and emerging trends.

The center will bring together L.E.K.’ partners and outside experts from a wide range of practice areas including energy, industrials, life sciences, transportation, and consumer. Focus areas will include net zero strategy development, commercial assessment of new technologies, growth strategy and corporate strategy development for new products and services to address climate change, and commercial due diligence on ESG issues for transactions.

John Goddard, a London-based Partner in L.E.K.’s Industrials practice and a founding member of the Centre’s Executive Board, said:

“Organizations are asking, ‘How do we become a more sustainable business? The answer is in the strategic and operational details — it’s in the choices you make about strategy, market participation, footprint and supply chain. Sustainability is a fundamental societal change — and if you embrace it on those terms and look at it from a full-organization perspective, there will be opportunities. The Centre is here to help clients find their way to those opportunities and in the process, we hope, help create a more sustainable future and mitigate climate change.”

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Parker Hannifin Targets Carbon Neutrality by 2040

Motion and control technologies company Parker Hannifin announced today new sustainability commitments, with plans to reduce emissions in its operations and supply chain, and to achieve carbon neutral operations by 2040. 

The new goals were introduced with the release of the company’s 2020 Sustainability Report, highlighting Parker Hannifin’s progress on climate action, including a 42% decline in energy intensity and a 50% greenhouse gas intensity reduction since 2010. Additionally, the company reported recycling more than 85% of the waste generated by manufacturing operations, reducing the recordable incident rate of its team members by 72% in the past five years, and donating $64 million since 2010 through its Parker-Hannifin Foundation.

Going forward, Parker Hannifin’s new climate commitments include reductions of Scope 1 and 2 emissions by 50%, as well as Scope 3 emissions by 15% by 2030 and by 25% by 2040. The company stated that its new targets will be submitted for approval by the Science-Based Targets Initiative (SBTi).

In order to reach these goals, the company stated that its strategy includes initiatives to reduce energy consumption, collaboration with suppliers to reduce energy use and emissions, and plans for investments in the renewables sector.

Tom Williams, the Chairman and Chief Executive Officer of Parker said:

“Parker has made great progress on our sustainability journey and we recognize the need to do even more. Our technologies enable customers around the world to be cleaner and more efficient, and this commitment to reducing our own carbon emissions is another important step we are taking to create a more sustainable future for generations to come.”

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SEC Chair Eyes Mandatory Climate Disclosure Rules Proposal By End of Year

The U.S. Securities and Exchange Commission’s (SEC) Gary Gensler is aiming to have proposed rules in place for mandatory climate risk reporting by companies by the end of this year, according to a speech by the SEC Chair on Wednesday.

Speaking at the Principles for Responsible Investment’s “Climate and Global Financial Markets” webinar, Gensler said that mandatory rules would bring greater clarity to climate risk disclosures, with benefits including consistency and comparability of the information provided, and ensuring that investors are equipped with “decision-useful” levels of qualitative and quantitative data.

Gensler said:

“Companies and investors alike would benefit from clear rules of the road. I believe the SEC should step in when there’s this level of demand for information relevant to investors’ decisions.“Thus, I have asked SEC staff to develop a mandatory climate risk disclosure rule proposal for the Commission’s consideration by the end of the year.”

The SEC Chairs remarks come as the commission undergoes a re-examination of the role of sustainability disclosure in company reporting. In February, SEC Acting Chair Allison Herren Lee announced a review of the commission’s guidance for public company obligations for disclosures related to climate change risk, citing increased demand by investors for material, comprehensive and consistent information, including the extent to which such reporting should be mandatory for companies.

Gensler also cited investor demand as the key driver of the move towards revamped reporting rules, saying, “investors increasingly want to understand the climate risks of the companies whose stock they own or might buy.” According to the SEC Chair, the SEC received more than 550 responses to Herren Lee’s review, with roughly 75% supporting mandatory climate disclosure.

Gensler said:

“The basic bargain is this: investors get to decide what risks they wish to take. Companies that are raising money from the public have an obligation to share information with investors on a regular basis.”

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Robeco Launches US-Focused Green Bond Fund, Anticipating Major Market Growth

International asset manager Robeco announced today the launch of RobecoSAM US Green Bonds, one of the first US-focused green bond strategies in Europe. Robeco partnered with Quintet Private Bank on the launch of the new fund, with Quintet targeting an initial commitment of €125 million.

According to Robeco, the new strategy is being introduced ahead of an anticipated boom in green debt issuance in the US, as the Biden administration ramps climate action over the next several years, including plans for massive investments in renewable energy and sustainable infrastructure.

A recent report from the Climate Bonds Initiative indicated significant growth in the US sustainable debt market, but noted that the market is highly concentrated, with mortgage financing company Fannie Mae’s green MBS issuances accounting for 39% of overall volume, while local and state-backed government entities green US Municipal bonds making up another 23%. The Biden administration’s renewed climate focus and opportunities for billions in clean energy spend are expected to drive meaningful market proliferation and growth.

Christoph von Reiche, ExCo Member and Global Head of Sales at Robeco, said:

“The RobecoSAM US Green Bonds strategy perfectly fits Robeco’s strategic ambitions in sustainable investing in general and our focus on climate-related risks in particular. We are excited to have Quintet as our launch partner and look forward to providing our other clients with an excellent opportunity to participate in the largest economy in the world opening up to greener investments.”

RobecoSAM US Green Bonds will be managed by Robeco’s Michiel de Bruin, Executive Director, Global Fixed Income Macro and Peter Kwaak, Portfolio Manager, Executive Director, Credit Investments. The fund will invest in USD-denominated green bonds issued by corporates, government-related agencies and governments, utilizing a proprietary screening process to ensure the green credentials of the securities.

Jakob Stott, Group CEO at Quintet, said:

“As the recent floods in Europe demonstrated with devastating clarity, mitigating the impact of climate change is an urgent, universal challenge. At Quintet – where we place sustainability at the heart of our business and as the driving force behind our clients’ investments – we are very pleased to partner with Robeco’s experienced team as we continue to bring our sustainability strategy to life, meeting client needs and contributing to a brighter future.”

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