Spark Newsletter – September 2022

Sphera

Sphera creates a safer, more sustainable and productive world.

Published Sep 21, 2022

Regulators are calling for greater transparency into environmental, social and governance (ESG) performance, and investors are choosing to invest in companies that align with their values and goals. When ESG factors are integrated into the investment process, it reduces risk and creates value for investors and for companies. To explore these topics, this issue of the newsletter focuses largely on sustainable finance, but we also give you something to chew on with a look at a climate-conscious approach to our diet.

This month’s newsletter examines:

What ESG investing is and why it’s important
The EU Sustainable Finance Disclosure Regulation (SFDR)
Dietary impacts on climate change
How to avoid greenwashing in finance
6 data characteristics for achieving net zero emissions targets

What Is ESG Investing and Why Is It Important?

The rise of environmental, social and governance (ESG) investing has shown that doing what’s beneficial for the environment and for companies’ bottom lines don’t have to be at odds with one another. In fact, they often go hand in hand.

The term “ESG” was coined in 2005 in a study called “Who Cares Wins.” Fast forward to today, and total global ESG assets are estimated to exceed $41 trillion by 2022 and $50 trillion by 2025. This amounts to one-third of projected total assets under management globally, according to a report by Bloomberg Intelligence.

Understanding the EU Sustainable Finance Disclosure Regulation

Do no significant harm: This principle underlies the EU’s sustainable finance framework. And—to the dismay of those who agonize over acronyms—the principle is so deeply embedded in sustainable finance that its acronym (DNSH) is widely used.

The EU’s sustainable finance framework includes the Sustainable Finance Disclosure Regulation (SFDR), which applies to financial market participants (FMPs) and financial advisers (FAs), as well as the Corporate Sustainability Reporting Directive (CSRD), which applies to large and listed companies.

Recent months have seen much activity around these frameworks, including the release of proposed European Sustainability Reporting Standards and rules under the CSRD. SFDR-related developments include the July publication of Regulatory Technical Standards (RTS).

Something to Chew On: Dietary Impacts on Climate Change

When you reach for a doughnut, do you hear a scolding voice in your head reminding you—You are what you eat? That’s your doctor’s voice warning you that steady doughnut consumption will likely lead you to look round and pudgy, just like a doughnut.

Now listen closely and you might hear a second voice. That’s Mother Nature, who also has something to say about what you eat. Our food choices not only have an impact on our health, but also on the health of the planet as well. As climate change continues to affect us and our planet, we need to start taking a climate-conscious approach to our diet.

How to Avoid Greenwashing in Finance: Embracing ESG & Transparency

Sphera’s chief product officer, Mike Zamis, and Sharlene Key, Sphera’s director of ESG product management, join the SpheraNOW podcast for a conversation on greenwashing. They look at why greenwashing happens, how regulations can be used to combat it and how standardized ESG metrics can help prevent it.

When discussing whether some factors are easier to control from a business perspective than others, Mike explains:

“Companies can always control their data. Now, whether they can get good data, that’s another question. One of the fundamental challenges we’re seeing in the marketplace is companies being able to operationalize this ESG data. How do we not make it a once-a-year data-collection exercise and actually embed it in our business operations that we execute every single day? Think of financial reporting. We don’t wait until the year end to see what the company financials are. Every day, every week, every month, every quarter, every year—we have financial professionals working against defined frameworks. These are accredited professionals, who are then audited by third parties to make sure the data is correct. I think that is the same kind of environment we need in place in ESG and sustainability reporting to prevent greenwashing.”

Listen to the podcast now to learn about avoiding greenwashing in finance.

6 Data Characteristics for Achieving Net Zero Emissions Targets

We have all seen how, despite reductions in travel and consumption as a result of our response to the COVID-19 pandemic, the Greenland ice sheet is melting at a faster rate than ever before and how wildfires have raged throughout California, Oregon and Washington state among many other locations worldwide. Now, the goal of achieving net zero emission reduction targets is all the more prescient for the planet.