Sustainability, Resiliency and Risk Mitigation

April 18, 2021April 18, 2021 by Brad A. Molotsky

ESG: Carbon Footprint Labels – Helpful or Green Washing?

Major Fortune 100 and 500 companies and others continue to focus on their ESG efforts in various forms and arenas, including the continued evolution of carbon emissions disclosures on various products.

As noted by Saabira Chaudhuri in her Wall Street Journal column, consumers, investors, Boards and regulators are becoming more and more interested in emission levels in the context of growing concerns over climate change and its impact.

Unilever PLC – intends to introduce carbon footprint details on 70,000 of its products, given that sales of sustainable products are growing faster than their lines of non-sustainable products. They are currently working on obtaining direct information about their carbon footprint for each ingredient supplier that provides products that are used in Unilever products.

Colgate- Palmolive – continues to work with their supply chain providers of various ingredients that are inputting into their products in an effort to avoid allowing estimates of amounts of impact in favor or real numbers. Colgate continues to work on ways to measure and verify their footprint, and to require that their supply chain actually measure and verify these impacts.

Quorn/Monde Nissin Corp – began displaying carbon-dioxide/kilogram on-package carbon footprint details in 2020 for certain of their meatless products.

Oatly AB, Upfield Holdings BV and Just Salad brands have also started listing carbon emissions figures on both their packaging and menus.

Logitech International began listing carbon emissions figures on their computer keyboard products.

Having labelled and provided on line environmental impact numbers for its Garnier hair products already, L’Oréal SA announced it will be adding carbon labels for all of its “rinse off” products, including shampoos, in 2022.

To date, there is no market based, agreed upon, uniform way to report or measure these various GhG impacts but, each of the above mentioned companies, have attempted to outline their methodologies and have given their rationales on how they measure and report – an excellent first step. As others either desire to join them or feel the pressure from consumers, their Board and/or stakeholders to measure and report as well, one can only hope that a quasi uniform methodology for monitoring, measuring and reporting is agreed upon and utilized so that consumers can measure apples to apples rather than apples to oranges or kilograms to pounds.

The Triple Bottom Line: While personally I am a big fan of labeling (whether this be nutrition or calories on a menu or ingredients in a chemical mixture to enable the consumer to review the information and make an informed decision), and, in my view, the growing use of “carbon labeling” represents a good step in the right direction to enable better, more informed consumer choices, I am just not so sure that everyone’s motivation and nomenclature is the same when using phrases like “net-zero”, “carbon emissions” and “greenhouse gas impact”. As such, the reported results will not be comparable as between products, at least not yet. Again, I am very much in favor of solid attempts by various organizations to self report their impacts, I just look forward to the day when everyone is measuring outcome in a similar fashion so that real comparisons by brand and product will be possible, rather than merely smart marketing by some with a lack of a verifiable real methodology for measuring and reporting. As such, I will put “carbon labeling” in the “growing in interest” category, likely to become more and more real and relevant as time and measurement systems are put in place during 2021 and 2022 and, very likely that regulators like the EU, the SEC or trade associations like the SASB continue to push for more required and verifiable disclosure. As such, an area to continue to pay attention to and keep attuned to the market dynamics that continue to push for more and better information.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. Contact your Duane Morris attorney for more information.

If you have any questions about this post, please contact Brad A. Molotsky (bamolotsky@duanemorris.com), Christiane Schuman Campbell, Darrick Mix, Dominica Anderson, Nanette Heide, David Amerikaner or the attorney in the firm with whom you are regularly in contact.

April 11, 2021 by Brad A. Molotsky

ESG – Lending Costs Tied to Internal Diversity, Equity and Inclusion Goals – a Coming Trend?

Mid week last week, Dawn Lim reported in the Wall Street Journal that BlackRock Inc. had cut a 5 year, $4.4 Billion dollar deal with its lending consortium that ties its lending costs on its credit facility to BlackRock’s ability to meet certain diversity, equity and inclusion goals (“DEI”).

The deal, as reported, ties its borrowing costs to meeting targets for women in senior leadership and to meeting numeric goals regarding Black and Latino employees within its work force. The stated goals for Black and Latino individuals as a percentage of its workforce are 30% of its workforce by 2024. Their goal on women in senior management is to increase numerics by 3% each year through 2024.

BlackRock also is focused on growing its environmental, social and governance assets under management from $200 Billion currently, to over $1 Trillion (with a “T”) by 2030. The goals noted are focusing on aligning its own practices with that of the companies BlackRock invests in as CEO Larry Fink continues to push the envelope on ESG investing and increasing workforce DEI.

The result of the credit facility loan covenants will seek to more closely align the company’s ESG investing goals with its internal corporate goals and impose costs on its asset managers via higher costs in its revolver by not achieving their stated goals.

The Triple Bottom Line: A bit too early to call this evolution of tying lending costs to internal ESG goals as a trend (vs. a reaction to public scrutiny elsewhere), but in my view, it is a big step and a signals to the broader market that such self imposed costs can be achieved and that BlackRock is willing to take this type of risk, that align its investment decisions with its internal policies. Big and bold steps indeed.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. Contact your Duane Morris attorney for more information.

If you have any questions about this post, please contact Brad A. Molotsky (bamolotsky@duanemorris.com), Nanette Heide, Darrick Mix, Michael Schwamm, David Amerikaner or the attorney in the firm with whom you are regularly in contact.

March 30, 2021 by Seth v.d.H. Cooley

A Look Back at the Trump EPA and Enforcement

On January 13, 2021, one week prior to the end of the Trump administration, the Environmental Protection Agency released its annual enforcement report for the prior year – “EPA Enforcement Annual Results FY 2020.” https://epa.maps.arcgis.com/apps/Cascade/index.html?appid=9dfe57199392498f872bac6bf2e4867c In keeping with the rhetorical style of the former president, EPA claimed that it had achieved “tremendous results for the public and the environment.” When one looks below the surface, however, a different picture appears.

EPA’s FY 2020 report identifies the following as the “highlights” of its “National Compliance Initiatives” (NCI) efforts to address “the most serious environmental violations,” violations on which EPA “focuses” its enforcement and compliance resources:
Continue reading “A Look Back at the Trump EPA and Enforcement”

March 16, 2021March 16, 2021 by Brad A. Molotsky

ESG – Global ESG funds flow increases to $80.5 B in Q3 of 2020 and $2.5 Trillion in ESG AUM

Per a neat article in Funds Fire last week, Moody’s Investor Services issued a February 2021 report that showed Global ESG flows increased to $80.5 billion in the third quarter of 2020, up 14% from the previous quarter, with sustainable fund assets under management reaching a new high of $1.23 trillion.

In the third quarter, U.S.-based sustainable equity funds saw net inflows of $3.8 billion, even as overall U.S. equity funds saw net outflows of $118.5 billion, the Moody’s report shows.

Clean energy was the top-performing U.S. equity sector, with a total cumulative return of 185%, followed by consumer discretionary, which returned 48.3% last year. Meanwhile, despite entering 2020 with a low valuation, the energy sector lost 33% last year.

President Biden’s focus on renewable infrastructure, along with key political appointments that are likely to influence investment regulations, are likely to have further impact on ESG investing, according to Moody’s.

Per the report, Invesco, which manages $1.37 trillion and oversees $35 billion in dedicated ESG mandates, has targeted 2023 for full ESG integration. BlackRock aims to increase its $200 billion in sustainable investment assets to $1 trillion by the end of the decade.

Further, according to the report, AllianceBernstein was among the firms that had positive momentum in ESG in 2020. At the end of 2020, the firm’s suite of ESG strategies jumped to $16.5 billion, an increase of 60% over the prior year.

According to Funds Fire, Institutional ESG flows, as tracked by eVestment, increased to $109 billion in 2020 from $27.6 billion in 2018. Institutional ESG assets increased to $2.55 trillion from $1.79 trillion over the same period.

The Triple Bottom Line: While numbers can sometimes be manipulated to make a point, in this instance, the sheer numbers and upwards trajectory speaks for itself. An increase from $27 Billion to over $109 Billion in 3 years; and an increase in ESG assets from 1.79 Trillion to over $2.55 Trillion is significant no matter how you chose to view ESG investing.

March 15, 2021March 15, 2021 by Brad A. Molotsky

ESG – Calvert tightens its proxy voting standards to require Diversity by Gender and by Color on Boards

In a post earlier today, the President and CEO of Calvert Research and Management, Jon Streur, discussed his view on why Calvert “raised” their standards for proxy voting on board diversity. Calvert, with over $31 Billion in assets under management, is one of the foremost fund managers who have been utilizing an ESG lens within which to evaluate companies for decades.

Per John, “[a]t Calvert, we have used the power of our proxy vote to hold boards accountable for their attention to diversity for three decades. This year, expectations for corporate diversity are rising, and we are more aware than ever of the value of diverse leadership for long-term corporate performance. For this reason, we are increasing our standards for board diversity.”

As a result of their change in voting standards, Calvert will vote AGAINST the nominating/governance committees of public companies that have fewer than 2 women on the board.

Previously, they voted against the nomination of directors for company boards that lacked representation of women.

They also indicated that for companies in the US, the UK, Australia and Canada, Calvert will also vote AGAINST the nominating/governance committee at public companies that have fewer than 2 people of color on the Board or are less than 40% diverse.

Previously, Calvert’s minimum standard was 1 person of color and a board that was 30% diverse.

Research indicates that diversity is a financially material ESG issue. In research begun in 2019 and continuing currently, Calvert found that in “evaluating the financial materiality of gender diversity factors” that gender diversity factors are associated with improved equity returns for both the U.S. and non-U.S. markets.

Per their data, companies with at least 2 women on the board outperformed when compared to those with fewer women on the board, and U.S. large-cap companies with more than 2 women saw even greater improvement. In the U.S. and certain like markets, similar results were found for ethnically diverse boards.

The Triple Bottom Line: According to Jon and Calvert, “proxy voting is a vital way to hold companies accountable for their commitments to board diversity. This and other tools of structured engagement can help encourage positive change”.

If you have any questions about this post, please contact Brad A. Molotsky (bamolotsky@duanemorris.com), Nanette Heide, Darrick Mix, David Amerikaner or the attorney in the firm with whom you are regularly in contact.

March 15, 2021 by David Amerikaner

Green Infrastructure Stormwater Management Rules Take Effect in New Jersey

Amendments to New Jersey’s Stormwater Management Rules, N.J.A.C. 7:8, requiring the use of “green infrastructure” measures for stormwater management took effect on March 2, 2021.

Green infrastructure encourages the infiltration of stormwater into the ground, promoting natural filtration of pollutants and sediment and thereby reducing discharge impacts on streams, rivers, and other waterways. The new rules make green infrastructure the preferred and predominant method for managing stormwater for all regulated residential and non-residential projects.

Previously, the state’s Stormwater Management Rule had allowed projects to use traditional engineered structures such as pipes and culverts to manage stormwater, although the Department of Environmental Protection (NJDEP) had encouraged property owners and project proponents to make use of green infrastructure through financial and technical assistance. The rule change formalizes the state’s requirement that new projects implement green infrastructure measures, such as rain gardens, bioretention basins, vegetated swales, pervious paving, and green roofs, as part of project planning and design.

NJDEP adopted amendments to the Stormwater Management Rule on March 2, 2020; the amendments allowed a year before the rule took effect to allow projects in the system to proceed under existing rules, and to allow municipalities to adopt revised local ordinances and to train municipal review staff.

Going forward, any application for a residential development in the state will be reviewed under the revised Stormwater Management rules. Any application for a non-residential project will be reviewed for compliance with the local stormwater control ordinance, which is required under a municipality’s Municipal Separate Storm Sewer System (MS4) permit. Under the MS4 permit, the stormwater control ordinance must be at least as stringent as NJDEP’s Stormwater Management rules.

Additionally, any applications submitted to NJDEP under its Flood Hazard Area, Freshwater Wetlands, and Coastal Zone Management programs will be reviewed by NJDEP under the new rules.

By making green infrastructure a requirement in new development, New Jersey is taking decisive action to advance Governor Murphy’s stated commitment to improving the management of the state’s watersheds. The change will improve the sustainability of the state’s waterways and will reduce the runoff of harmful pollutants and sediments.

February 26, 2021 by Duane Morris

ESG Webinar Series Replay Available

A webinar replay of the Environmental, Social and Governance (ESG) Webinar Series session, What It Is, What It Means for Business and Why It Should Matter to You, is available.

February 25, 2021 by Brad A. Molotsky

Governor Murphy Selects 20 Member NJ Council on the Green Economy

Early today, February 25, 2021, Governor Phil Murphy announced his 20 picks to the newly created NJ Council on the Green Economy (“NJCOGE“).

This Council on the Green Economy and the umbrella organization of the Office of Climate Action and the Green Economy are focused on “building a roadmap for transitioning the workforce into high-quality, family-sustaining clean energy jobs that will provide opportunities for all New Jerseyans” per Governor Murphy.

As announced in the 2021 budget discussions, various state leaders believe that NJ’s recovery from the pandemic will be partly driven by the clean energy economy – one centered around clean power sources and offshore wind and on shore solar.

Governor Murphy’s $44.8 billion plan discussed in his Budget Address on February 23rd calls for $200 million to be invested in an “offshore wind port” in Camden County along the Delaware River. This wind port is intended to serve as a staging area for supply chains related to the growing wind industry and provide a place to ship wind turbines across the country.

Separately, NJ is enjoying a bit of a renaissance in the solar installation arena given its current TREC program.

The 20-members of the NJ COGE are:

Honorary Chair: First Lady Tammy Murphy
Executive Director: Jane Cohen, executive director, Office of Climate Action and the Green Economy
Co-Chair: Shawn LaTourette, acting commissioner, New Jersey Department of Environmental Protection
Co-Chair: Robert Asaro-Angelo, commissioner, New Jersey Department of Labor and Workforce Development
Co-Chair: Joseph Fiordaliso, president, New Jersey Board of Public Utilities
Donnel Baird, founder, BlocPower
Tom Churchelow, president, New Jersey Utilities Association
Francisco Cortes, president, NJ State Veterans Chamber of Commerce and Corporate Advisory Board Member of the Statewide Hispanic Chamber of Commerce New Jersey
Dave Daly, president, PSE&G
Kim Gaddy, environmental justice organizer, Clean Water Action
Aisha Glover, vice president of urban innovation, Audible
Lisa Jackson, former Environmental Protection Agency administrator and vice president of environment, policy, and social initiatives, Apple
Sean Jackson, chief executive officer, Isles
Andrea Jung, president and chief executive officer, Grameen America
John Kennedy, chief executive officer, New Jersey Manufacturing Extension Program
Kevin Lyons, associate professor of supply chain archaeology, Rutgers University
Debra Coyle McFadden, executive director, New Jersey Work Environment Council
Bill Mullen, president, New Jersey Building and Construction Trades Council
Alli Gold Roberts, director of state policy, Ceres
Charlie Wowkanech, president, AFL-CIO

The goal of the NJ COGE will be to provide sustainable energy career options for thousands of NJ workers.

Just this past September, Governor Murphy signed a first of its kind “environmental justice” bill which will focus resources and attention environmentally on many lower-income, minority neighborhoods long plagued by some of the worst pollution in the state according to NJ BIZ.

That measure requires large-scale projects – whether new construction or an expansion to an existing building – that produces heavy pollution in lower-income, typically African American and Latino communities, to report on and consider the local impact.

If you have any questions about this post, please contact Brad A. Molotsky, (bamolotsky@duanemorris.com), Seth Cooley, Lori Mills, David Amerikaner or the attorney in the firm with whom you are regularly in contact.

February 24, 2021 by Brad A. Molotsky

Cannabis and Social Justice (the “S” in ESG) in New Jersey

Given NJ Governor Murphy’s signature to legalize adult use recreational cannabis in NJ earlier this week, yesterday, 2-23-21, NJ Attorney General Gurbir S. Grewal announced that he has directed local law enforcement officials to drop all outstanding marijuana cases that were based on the now-legal recreational use of pot, a move that came a day after the NJ decriminalization bill and a regulatory framework for an adult cannabis market were signed into law.

The Administration was negotiating with the NJ Assembly and Senate over various decriminalization efforts, including this one, and had reach a point of agreement. While a compromise, it represents a big step forward in the social justice arena for those charged with previous cannabis related offenses.

If you have any questions about this post, please contact Brad A. Molotsky (bamolotsky@duanemorris.com) or the attorney in the firm with whom you are regularly in contact.

If interested in ESG issues, please join us for next months FREE ESG panel where we will focus on the Built Environment – March 24 at 12-1 EST.

February 24, 2021 by Brad A. Molotsky

ESG Series – Monthly Free ESG Discussion with Industry Thought Leaders Kicks Off to over 200!

We are soo excited to report on the first of our monthly ESG (Environmental, Social and Governance) zoom webinars focusing on various and sundry ESG and Sustainability issues and topics.

Scheduled for the 3rd week of each month, these FREE webinars will gather “thought leaders” from around the globe to engage in discussion, answer questions and provide their views on what is going on in the arena, what they are planning and how they are executing.

Today’s session featured thought leaders Sara Neff, SVP of Sustainability at Kilroy Realty Trust, Dr. Chris Pyke, SVP at Arc Sokoru and Uma Pattarkine, VP of ESG at Centre Square and was a tour-de-force regarding defining Sustainability, juxtaposing it with ESG and showing how they are different.

We then ventured into a discussion of what are ESG focused companies and how their “alpha” compares vs. non-ESG companies, identified the lack of transparency in the real estate sector regarding others reporting on ESG and followed this up with sharing various “S” reporting methodologies.

Thereafter, we broke down the differences between GRI, CDP, GRESB, SASB, and the reporting of goals and outcomes. Spent some time on how folks are measuring and reporting ESG outcomes. We wrapped up the discussion focusing on how and why LEED and other third party certification methodologies are critical to showing and measuring success.

Key takeaways:

Sustainability – now becoming more carbon focused especially at the building level; measures social impact; provides a lens within which to view long term value creation and survival capabilities and resource allocation

ESG – more focused on disclosures of material, non public information, a set of practices companies should consider following; metrics to measure sustainability through

ESG Performance – ESG focused companies continue to show demonstrable outperformance metrics; the data is now more readily available and is indeed being measured; ESG centric companies have/continue to rebound faster, better and more efficiently than non-ESG focused companies in the face of the pandemic.

More C-suite, Boards, investors, employees and customers are asking ESG and Sustainability related questions and demanding answers on the ESG front than ever before.

Real Estate is currently ranked dead LAST in terms of disclosure and reporting on ESG, behind even the Energy Sector.

LEED continues to help set an aspirational tone for the sustainability movement and continues to require better results in order to score their certifications (v4 is now the standard) and operates and provides an impartial judge to call “balls and strikes” to show real action in buildings.

More and more public companies are reporting ESG goals and what they are doing, where they are doing it and how they are doing it – i.e., over 80% of the S/P 500 are reporting their ESG metrics.

We will publish a link to the webinar in the near future and all are welcome to listen and comment back and ask questions.

Next months panel will focus on the Built Environment and will be held on March 24 at 12-1 EST.

If you have any questions about this post, please contact Brad A. Molotsky (bamolotsky@duanemorris.com) or the attorney in the firm with whom you are regularly in contact.