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Week in Impact: Unilever adds to fossil fuel pressure

Does BlackRock's watershed CEO letter suggest the finance industry is finally taking climate risk seriously?

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🗞️ Writing in the FT, former Labour Change UK LibDem MP Chuka Umunna takes aim at ESG sceptics, arguing it is "nonsense" that stakeholder capitalism undermines returns.

🏁 The figures back him up. According to Trustnet, the first eight months of 2020 saw sustainable funds beat their traditional counterparts by as much as 20% in most sectors.

⚖️ Those returns aren't going unnoticed. The NYT calls this year "a turning point" that has incentivised investors in both public and private markets to rework their portfolios.

💰 Unsurprising, then, that money into sustainable index funds has just pushed past $250bn, according to Morningstar. Is passive finally catching up with active?

💸 A new focus on ESG issues is changing the shape of the investment industry and the industries with which it engages, reports the FT. (See: recent pressure on oil majors.)

📮 Not too soon, though. Asset managers have urged the EU to delay its sustainable investing rules, arguing the deadline is too ambitious for the reporting task at hand.

⚗️ Unilever is cutting oil from all cleaning products and investing €1bn into developing renewable alternatives by 2030. Could the move catalyse the bioeconomy?

🏛️ Fund managers’ unwillingness to criticise western governments is holding back sustainable government bond funds, Morningstar research suggests.

Company spotlight: Unilever

 

Unilever

On Wednesday, Unilever (LON: ULVR) announced plans to cut fossil fuels from its laundry and cleaning products. Over the next decade, the Anglo-Dutch group will funnel €1bn into developing renewable or recyclable alternatives to the fossil fuel-based chemicals currently found in products such as Persil and Domestos, which currently account for 15% of its revenue.

It proves Unilever is ready to put its money where its mouth is. Back in June, it pledged to halve the greenhouse gas impact of its products across the lifecycle by 2030 and reach net zero emissions by 2039. The €1bn investment is a critical step towards meeting these goals.

Speaking to the FT, Carole Ferguson, head of investor research at CDP, said the initiative is exactly the type of project "which will give investors confidence they are truly trying to tackle the problem [and which] gets away from greenwashing.”

A significant commitment, then, and one with far-reaching ramifications.

Unilever became the most valuable company in the FTSE100 in July, after its shares rose more than 8% on the back of stronger-than-expected second-quarter results. As the UK's biggest listed company, its actions carry weight. The shift away from fossil fuels is likely to have a big impact in the consumer goods industry—and further.

Speaking to Business Green, Professor Peter Styring, who partnered with Unilever on the initiative, said the move could "catalyse a transition away from fossil fuel derived petrochemicals: a lesser understood but necessary element of the move towards a net zero economy." Advances made by Unilever—which are likely to spark similar investments by competitors and even the the UK government—could slash demand for fossil fuels, "at a time when oil majors are betting on the petrochemicals market to pick up some of the slack as the transition to electric vehicles gathers pace."

In ten years, Unilever could feasibly perform well across the sustainability spectrum. Its latest actions show not just what consumer and investor pressure can do, but also how powerful a tool is research and development.

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