Environmental, Social, and Governance are a set of standards that socially conscious investors use to evaluate potential investments in organizations. Here are some of the details and how they apply to various industries.
1) ENVIRONMENTAL
These criteria assess how organization performs as a steward of the natural environment. Examples:
a) Carbon footprint - Measures greenhouse gas (GHG) emissions using various methods and tools, depending on the specific gases being monitored and the scale of the measurement (e.g., local, regional, global). Here are some common approaches:
i) Direct Measurement - using instruments to directly quantify the concentration of GHG in the atmosphere. The most common gases measured include carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O). using instruments such as gas analyzers, spectrometers, and chromatographs.
ii) Remote Sensing - using satellites, aircraft, or ground-based sensors to observe and measure GHG concentrations over large areas. These methods provide valuable data for understanding global trends and regional variations in emissions.
iii) Emission Inventories - compile data from various sources - industrial facilities, transportation systems, and land use practices, to estimate total GHG emissions within a specific geographic area or sector. These inventories often rely on statistical models and emission factors to estimate emissions from different sources.
FAQ
1.1 What is the safe and hazardous level of greenhouse gases in the atmosphere?
There is no universally agreed-upon "safe" level as their impact depends on factors such as the specific gas, its concentration, and its effects on climate and ecosystems.
However, many scientists and policymakers use pre-industrial levels of GHG as a reference point for assessing changes. e.g.
Pre-industrial CO2 concentrations were around 280 parts per million (ppm), and current levels have surpassed 400 ppm.
The concept of "hazardous" levels of GHG often relates to their contribution to climate change and associated impacts such as more frequent and severe heatwaves, storms, and sea-level rise. Significant increases in greenhouse gas concentrations, particularly CO2, methane, and nitrous oxide, are considered hazardous as they can lead to disruptive and potentially irreversible changes in Earth's climate system.
1.2 How to measure greenhouse gases accurately?
Commonly specialized instruments are gas analyzers, spectrometers, and chromatographs. They are designed to detect specific gases with high precision and sensitivity. Additionally, advanced monitoring networks and satellite-based systems provide valuable data for tracking global greenhouse gas emissions and understanding their impact on the environment.
Involve assessment of various aspects of its energy consumption and procurement practices. These factors should be considered when conducting a comprehensive evaluation, stakeholders can gain insights into the extent to which a organization utilizes renewable energy sources and its overall commitment to sustainability and environmental responsibility
i) Direct Renewable Energy Use - Determine the proportion of renewable energy sources directly used by the organization for its operations. This may include electricity generated from solar panels, wind turbines, hydroelectric facilities, or other renewable sources installed on-site or directly contracted by the organization.
ii) Purchase of Renewable Energy Certificates (RECs) - Organizations can purchase RECs to offset their conventional electricity consumption with renewable energy production elsewhere. Evaluate the volume and percentage of RECs purchased by the organization relative to its total electricity consumption. Note that while RECs support renewable energy projects, they do not necessarily guarantee that the electricity consumed by the organization comes directly from renewable sources.
iii) Power Purchase Agreements (PPAs) - Assess whether the organization has entered into PPAs with renewable energy developers to purchase electricity directly from renewable energy projects. PPAs provide long-term commitments for purchasing renewable energy and can significantly increase the share of renewables in a organization's energy mix.
iv) Renewable Energy Goals and Commitments - Review the organization's publicly stated renewable energy goals, targets, and commitments. This may include pledges to achieve specific percentages of renewable energy use by certain dates or to become carbon-neutral or powered entirely by renewable energy.
v) Investments in Renewable Energy Infrastructure - Consider whether the organization invests in or owns renewable energy infrastructure, such as solar or wind farms, either independently or through partnerships and joint ventures.
vi) Transparency and Reporting - Evaluate the transparency of the organization's reporting on renewable energy usage and efforts to transition to renewable energy sources. Look for comprehensive disclosure of data and progress towards renewable energy goals in sustainability reports, annual reports, or other corporate communications.
vii) Comparative Analysis - Compare the organization's renewable energy efforts with industry peers and competitors to assess its relative performance and position within the sector.
1.4 Waste management – How to examine the efficiency of organization managing its waste, including recycling and disposal practices?
The assessment should focus on various aspects namely waste handling processes. To evaluate the efficiency of waste management practices. By examining the following aspects of waste management practices, stakeholders can evaluate the efficiency, effectiveness, and sustainability of a organization's approach to managing its waste streams, including recycling and disposal practices.
i) Waste Reduction Strategies - Determine whether the organization has implemented measures to minimize waste generation at the source. This may include initiatives such as product redesign to reduce packaging, process optimization to minimize material losses, or implementing reuse and repair programs.
ii) Waste Segregation - Assess how effectively the organization segregates different types of waste streams to facilitate recycling and proper disposal. Look for clear and well-defined waste segregation practices at the source, such as separate bins or containers for recyclables, organic waste, and hazardous materials.
iii) Recycling Programs - Evaluate the organization's recycling programs and initiatives to maximize the recovery of valuable materials from waste streams. This includes assessing the availability of recycling infrastructure, such as recycling bins and collection systems, as well as the extent to which employees are educated and encouraged to participate in recycling efforts.
iv) Waste-to-Energy and Recovery Technologies - Consider whether the organization utilizes waste-to-energy technologies or other recovery processes to extract energy or valuable resources from waste streams. Evaluate the efficiency and environmental performance of these technologies, taking into account factors such as energy recovery rates, emissions reductions, and resource recovery.
v) Compliance with Regulations - Ensure that the organization complies with applicable waste management regulations and standards set by regulatory authorities. Review permits, licenses, and other regulatory documents to verify compliance with waste disposal requirements, emissions limits, and environmental impact assessments.
vi) Monitoring and Reporting - Assess the organization's monitoring and reporting practices related to waste management performance. Look for comprehensive data on waste generation, recycling rates, disposal methods, and waste diversion metrics in sustainability reports, environmental management systems, or other corporate disclosures.
vii) Continuous Improvement Initiatives - Determine whether the organization has established mechanisms for continuous improvement in waste management practices. This may include setting targets for waste reduction, conducting regular audits and assessments, implementing corrective actions, and engaging stakeholders to identify opportunities for improvement.
Sample Industries
1.5 Among industries where environmental criteria are significant are energy (renewable vs. non-renewable), manufacturing (pollution control measures), and transportation (fuel efficiency, emissions).
a) Renewable vs. Non-Renewable Energy
i. Renewable energy comes from sources that are naturally replenished on a human timescale, such as sunlight, wind, rain, tides, waves, and geothermal heat. These sources are abundant and do not deplete over time. Examples of renewable energy include solar power, wind energy, hydropower, biomass, and geothermal energy.
ii. Non-Renewable Energy comes from sources that are finite and cannot be replenished in a short period. These sources include fossil fuels like coal, oil, and natural gas, as well as nuclear energy derived from uranium. Non-renewable energy sources are limited and contribute to environmental pollution and climate change through greenhouse gas emissions and other harmful pollutants.
iii. Environmental Criteria - Renewable energy is often favored from an environmental perspective because it produces fewer greenhouse gas emissions and pollutants compared to non-renewable energy sources. Therefore, in terms of environmental criteria, organizations that prioritize the use of renewable energy contribute positively to reducing their environmental impact.
b) Pollution Control Measures (Manufacturing)
i. Emission Reduction Technologies - Manufacturing organizations employ various technologies to control and reduce emissions of pollutants into the air, water, and soil. These technologies include installing scrubbers, filters, and catalytic converters to remove pollutants from industrial processes and emissions.
ii. Waste Management Practices - Manufacturers implement waste management practices to reduce, reuse, and recycle waste generated from production processes. This includes treating wastewater, segregating and recycling materials, and disposing of hazardous waste properly to minimize environmental impact.
iii. Energy Efficiency Improvements - Manufacturing facilities implement energy efficiency measures to reduce energy consumption and associated emissions. This includes upgrading equipment, optimizing processes, and implementing energy management systems to minimize waste and improve resource efficiency.
iv. Environmental Criteria - Organizations that effectively execute pollution control measures in manufacturing contribute to environmental sustainability by minimizing the release of pollutants, conserving natural resources, and reducing their overall environmental footprint.
c. Ensuring Fuel Efficiency and Emissions (Transportation)
i. Vehicle Technology - Transportation organizations invest in fuel-efficient vehicles and adopt advanced technologies such as hybrid and electric propulsion systems to reduce fuel consumption and emissions. This includes improving engine efficiency, aerodynamics, and vehicle weight to enhance fuel economy.
ii. Alternative Fuels - Transportation organizations explore alternative fuels such as biofuels, compressed natural gas (CNG), and hydrogen to reduce greenhouse gas emissions and dependence on fossil fuels. Transitioning to cleaner fuels can help improve air quality and reduce the environmental impact of transportation.
iii. Emission Control Systems - Vehicles are equipped with emission control systems such as catalytic converters and particulate filters to reduce harmful pollutants emitted from exhaust gases. Regular maintenance and inspection of vehicles ensure that emission control systems are functioning effectively.
iv. Environmental Criteria - Transportation organizations that prioritize fuel efficiency and emissions reduction contribute to mitigating climate change, improving air quality, and reducing environmental pollution. Therefore, environmental criteria for transportation include measures to minimize fuel consumption, greenhouse gas emissions, and other harmful pollutants associated with vehicle operations.
Next : Part 2 : ESG - Social Element
