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ESGTREE

The Greenhouse Gas Protocol & its Scope 1, 2 & 3 Emissions Classification Explained

The International Sustainability Standards Board (ISSB) announced recently that it would mandate the reporting of Scope 3 greenhouse gas (GHG) emissions – or emissions resulting from a company’s supply chain – as part of its ESG disclosure standards currently under development. Given how tricky such emissions can be to assess, the move signals the criticality of carbon footprint reporting to both investors and regulators. The ruling was unanimous.

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ESGTREE

The Inflation Reduction Act of 2022:  A Summary of its Climate and Energy-Related Provisions

Signing the 730-page Inflation Reduction Act into law last month was by no means inevitable.
The bill passed muster in the United States Senate only by the slimmest of margins, itself a pared down version of what was originally envisioned as a $2 trillion dollar climate spending law. Nevertheless, the US climate bill, as it is colloquially known (about 85% of it focuses on climate), has been heralded as a genuine gamechanger, described as both “sweeping” and “historic” in most media commentary.

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ESGTREE

A Brief Guide to SFDR Reporting and Compliance

When the European Union’s Sustainable Finance Disclosure Regulation (SFDR) came into force in March 2021, it signalled to the world that the EU was ready to take a global lead on ESG reporting and sustainable finance. The move impacted all financial market participants and financial advisors based within the EU. Along with the European Green Deal (which aims to see the bloc carbon neutral by 2050), and the EU’s “green taxonomy” (an industry-based classification system of what can and cannot be marketed as a sustainable product), a potent mix of regulatory mechanisms is set to usher Europe towards an economy in line with the Paris Agreement and the United Nations Sustainable Development Goals (SDGs). Things are messier in North America. While Canada has opted for mandatory climate disclosures for Crown corporations starting in 2024, its powerful southern neighbour has shown a more chaotic approach to ESG. On the one hand, the US Securities and Exchange Commission proposed compulsory climate reporting for publicly listed US companies, yet the Supreme Court also ruled against the Environmental Protection Agency’s powers to curb greenhouse gas emissions. Europe’s proactive stance could provide guidance or “lessons learned” for North American responses to the inevitable mainstreaming of ESG. Indeed, SFDR should matter to anyone interested in building the post-pandemic “economy 2.0.”
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ESGTREE

What We’ve Learned Automating the ESG Data Convergence Initiative (EDCI) for Clients​

Last year, private equity firm the Carlyle Group and pension fund the California Public Employees Retirement System (CalPERS) announced what could become a game changer for the private equity industry. The ESG Data Convergence Initiative, or EDCI, seeks to standardize ESG reporting for general partners (GPs) by creating a single framework for them to follow. The aim is to generate a critical mass of comparable information on how GPs’ portfolio companies are performing on ESG relative to each other, as well as to promote greater reporting transparency for limited partners (LPs). The data will be aggregated into an anonymized benchmark by the Boston Consulting Group (BCG). Thus far, 59 leading LPs and 121 GPs have agreed to participate in the project, or perhaps what at this point one can termed an experiment, that together represent over $8 trillion in assets under management. If successful, EDCI would be a breakthrough for the industry. Harmonizing ESG disclosures for private markets has conventionally been a gap in the financial market and is essential for sustainability efforts to be credible. In this case, the very investors demanding ESG are setting the parameters of what that means to them, and benchmarking that data to produce an overall picture of the ESG health of the industry.

On the other hand, EDCI does not (so far) provide guidance on how companies can best produce this data. What its benefits will be for GPs, who must now take on an additional reporting burden, will become clearer in the fullness of time.

ESGTree has had the privilege of automating the EDCI framework for its clients to ease this reporting burden. In the process, we have learned three key lessons about implementing the EDCI framework and the significance of it:

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ESGTREE

ILPA : An Overview and Why it Matters

Investor demand for meaningful ESG policies and genuine transparency is undeniable. Coupled with oncoming regulation, it is a demand the private equity industry must satisfy in order to flourish in a new economy that expects socially responsible businesses.

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ESGTREE

Carbon Accounting 2022 and Beyond

In February of this year, private equity multinational The Carlyle Group publicly committed to hitting net zero greenhouse gas emissions by 2050 across its entire portfolio. The commitment makes much sense; private equity and venture capital firms are ideally suited to lead the charge towards net zero. Unlike their public market asset management peers, they are more directly involved in their portfolio companies, often holding board seats, and therefore able to influence ESG strategy. Because their role is to help their companies grow, we believe it is imperative for private capital firms to build carbon accounting into the DNA of their investments.

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ESGTREE

Three Things We’ve Learned Working with Impact Investors on ESG Reporting

By market size alone, impact investing might be far smaller than ESG investing, but its unique profile makes it a critical part of sustainable finance. Its obligation to actively “do good” and contribute towards a positive net change in the communities it engages, rather than concern itself purely with risk mitigation, means that the pursuit of ESG isn’t left to the machinations of pure capitalism. In fact, its unique “do active good” mandate serves as an important “best practices” guide when it comes to ESG reporting and measurement in general. This is because we’ve learned that impact investors can optimize their ESG data using the three major methods below: