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August 16, 2022 Today, President Biden will officially sign the Inflation Reduction Act and enable the country to transition towards a low-carbon, sustainable, and equitable future. The IRA hopes to reduce greenhouse gas emissions (GhG) by about 1 gigaton in 2030, or a billion metric tons . Approximately $374 billion in energy and climate-related provisions including tax incentives for green energy projects, a $7,500 tax credit for purchasing new electric vehicles and a $4,000 credit for used EVs. However, there are limits imposed on supply chain sourcing for EVs that qualify. The IRA also reinstated the Superfund tax on oil and petroleum companies, which is expected to raise $11.7 billion . The Superfund tax includes an oil excise tax to fund Superfund toxic waste site cleanups nationwide. Our Greenhouse Gas Emissions by Congressional District dashboard assesses direct GhG emissions by congressional district. Meanwhile, there’s more to celebrate - Recovering America’s Wildlife Act of 2022 and Massachusetts’ "Act Driving Clean Energy and Offshore Wind". The Recovering America’s Wildlife Act of 2022 (RAWA) has already been passed in the House in June. If the act passes the Senate and gets President Biden’s signature, it will provide $1.39 billion to restore wildlife populations across the country. Last week, Massachusetts Governor Charlie Baker signed the An Act Driving Clean Energy and Offshore Wind bill into law. This bill is the state’s most comprehensive legislation on moving toward its net-zero goal setting and sets the stage for MA to procure its planned 5,600 MW of offshore wind by 2030. The bill would boost MA’s economy and employment along the way as well as decarbonize its transportation sector by heavily focusing on electric vehicles. Responsible Alpha is delighted to welcome Steve Dean as an advisor. Steve currently serves as the Country Manager for Indonesia, Malaysia, and Brunei, for the London Stock Exchange Group (LSEG), a leading provider of financial market data, analysis and news, and the backbone of the FX trading ecosystem globally. He currently resides in Singapore, where he has spent two decades working in corporate banking, trading, and wealth management with organizations that are now a part of JPMorgan Chase, Citi, and now LSEG. At LSEG, he and his team are committed to working with the authorities and with the rest of the industry to support the growth of the FX and financial markets, as well as that of the real economy in the countries in which they serve. Welcome, Steve.

August 12, 2022 The U.S. Plastics Supply Chain shows how plastics are made in the U.S. Click on Responsible Alpha's dashboard and see where and who makes plastics in the U.S. You can trace a bottle back through its production line. Use Responsible Alpha's filters to determine what companies are producing which plastics, where they are made, and what are the majority of types of plastics that are being produced. In 2019, the largest plastics producers included ExxonMobil, Dow, LyondellBasell, Westlake Chemical, and Formosa Plastics. These companies refineries are primarily along the Chemical Coast, along the Gulf Coast of Texas and Louisiana, where 84% of U.S. plastics production, across the sector’s supply chain, is located. The chemicals that make up the plastics used laundry detergent containers, PVC pipes, single-use drink cups, jugs, and plastic wraps - HDPE, PVC, Polypropylene, and LLDPE - are the plastics primarily produced along the Chemical Coast. Finally, since 1950, companies have made more than 8.3 billion tons of plastic, the equivalent of 2 billion African elephants. Discarded packaging accounts for 46% (158 million tons) of total annual plastic waste generation ( Geyer 2020 and UNEP 2021 ) . Most plastic packaging waste comes from household waste. Waste plastic packaging is polluting our oceans, air, and land.

August 2, 2022 Inside the Inflation Reduction Act proposed last week by Senators Manchin and Schumer is a hidden return to normal, a call to pay our fair share, a reinstatement of the Superfund Tax that ceased in 1995 on the production and import of specific petroleum products. These same petroleum products, when produced, often result in toxic chemicals released into our environment. Where these toxic chemicals are released measured by Congressional district are described in Responsible Alpha's latest dashboard Toxic Chemicals and Congressional Districts in the U.S. Beyond the bill’s headline $370 billion in funding to mitigate the climate crisis, there is a fee on the potent climate change gas, methane – up to $1,500 a ton – which is now at 1,896 parts per billion, 162% greater than pre-industrial levels. ExxonMobil, Chevron, and Shell announced a record combined $46 billion in earnings in Q2 ’22. The climate bill also announced needed adjustments to the royalty rate companies pay to the government for oil and gas produced on federal land. Fixed Income Singapore is launching its first sovereign green bond aiming to raise at least $1.5 billion for public transport expansion in the land-locked country. The tenor of the Singapore dollar debt will be between 30 to 50 years with the use of proceeds to support green infrastructure and other environmental benefits. The debt is the first of a growing government mandated pipeline of up to $35 billion in green sovereign debt to be issued under the Singapore Green Plan 2030. Equities The Investment Integration Project ( TIIP ) released a report on how companies can work to create sustainable and long-term value through systems-level changes. The report found that investors are aware that they need to tackle issues such as climate change and income inequality, but they struggle with where to begin with ESG integration. Investors are looking to address the risks and opportunities highlighted by TIIP to fulfill their fiduciary obligation to maximize long-term financial returns to their clients and beneficiaries. Indices, Commodities, and Derivatives Russia announced it is weaponizing its gas exports to the EU by halting flows to Latvia, which has been a critic of Russia’s war on Ukraine. While European gas prices unsurprisingly increased by 6% as a result, Russia has previously halted or decreased fossil gas flows to companies in other European countries including Poland, Germany, and the Netherlands. Russia supplies about 40% of the fossil gas used in the EU. Latvia’s 2020 fossil gas imports from Russia valued at $201 million were only 1% of Latvia’s overall 2020 imports of $19.3 billion . In 2020, 79% of Latvia’s fossil gas imports were from Russia. Markets, and Fiscal and Monetary Policies While it was no surprise that the U.S. Fed raised rates by 0.75% last week, it was surprising to see the European Central Bank raising interest rates for the first time in 11 years by 0.50% . Following Switzerland's central bank surprise with its first increase in 15 years last month, the rates environment in the EU now favors firms positioned to withstand volatile markets with products and services that are built for the new normal, where climate change impacts capital allocation strategies.

July 23, 2022 This year and going forward, companies will face increasing pressure to begin their active transition to a low-carbon, sustainable, and equitable future, pushed by many factors, including last year’s momentous COP-26 climate summit. But overall, companies net-zero commitments globally in aggregate fall well short of needed transition by 2050 to achieve IEA’s Net Zero by 2050. Russia's invasion of Ukraine and surging energy prices could boost demand for wind and solar power as lawmakers seek options to curb Russian energy import. If Europe directs 300 billion euros to wind and solar over 2022-25, power-sector gas use could be virtually eliminated. Fixed income Bloomberg reported that as green lending is expanding, green loans could be 55% of China’s total lending in ten years, by 2032. Global, European and U.S. ESG-weighted corporate bond indexes beat non-ESG benchmarks with similar risk characteristics through June, despite the rise in Treasury yields and inflation, as incorporating ESG considerations has become a beneficial factor during periods of market stress and rising interest rates. Equities U.S. ESG performance though 2022 could be hurt as technology (overweight in many funds) faces a dim outlook on interest-rate risk and the Russia-Ukraine conflict. Commodities and Derivatives In what looks like a positive sign for wind and solar demand, higher carbon prices are raising coal and natural gas power plants' operating costs, making renewables look cheaper. Markets, Fiscal, and Monetary Policy Fed may raise rates again at its next meeting with 50 basis-point move most likely on the table when policy makers gather July 26-27. This could positively impact longer-term ESG investors as markets exit an artificial construct that where rates were too low resulting in unreasonable valuations and price and fundamental distortions that overly favored non-climate aligned strategies and corporations. As rates normalize with the return of the traditional use of U.S. government debt as a risk mitigant, the pathways forward favor a more sustainable destination, that path towards the destination will continue along its bumpy ride. ESG assets surpassed $35 trillion in 2020 and are now a third of the total assets, according to the Global Sustainable Investment Association. Assuming 15% growth, ESG assets may exceed $41 trillion by 2022 and $50 trillion by 2025 ESG Integration™ strategies are growing as investors seek to be informed by and influence corporate strategy discussions and outcomes to influence ESG investment thesis that support a transition to a low-carbon, sustainable, and equitable future. But flows into ESG ETFs fell to $24.7 million in 1Q, half the amount in the same quarter in 2021. At the same time, continued downward pressure on expense ratios are pushing active managers towards ETFs with expense ratios hovering around 0.33% (33 basis points). This makes it more difficult for funds to gather assets that are more complicated ESG investing strategies that are trying to address complex real-world concerns. Responsible Alpha song that tells it all, what we are listening to is or better regulation, as rebranding increases greenwashing risks and dTilutes ESG. The Responsible Alpha song that tells it all, what we are listening to is The Heat Is On by Glen Frey .

July 12, 2022 In a continuation from our dashboard earlier this month on US plastics, this week we analyze where and who makes plastics resins in the European Union. By knowing who makes what and where, the European Union can accelerate its transition to sustainable plastics. Please click on our dashboard and see where and who makes the plastics resins used in the EU. https://www.responsiblealpha.com/eu-plastics You can easily trace a PET bottle back through its production line. You can also our filters to determine what companies are producing which plastics, where they are made, and what are the majority of types of plastics that are being produced. To make this easy to use, we start with the products we use each day, and then show how they are made. Finally, knowing where plastics resins are made empowers the call by the EU plastics trade association Plastics Europe for “faster systemic change towards circularity and net zero carbon emissions”. Plastics Europe and their partners are calling for: Moving quicker and fast enough to align with the goals of the Circular Plastics Alliance, European Green Deal, and the Paris and Glasgow climate agreements. Managing upstream and downstream solutions in a complementary manner via deploying them together. Adopting ambitious circular economy approaches in the plastics value chain – i.e. applying upstream and downstream solutions together – that can drive significant reductions in GHG emissions and waste disposal in the next decade and beyond. Deploying less mature pathways to develop and deploy innovative technologies and approaches that further decrease GHG emissions and tend to decouple plastic from fossil fuel feedstocks. Acting in the next three to five years because these years are critical to both the climate and to industry. Read More...

June 15, 2022 According to the latest report published by the financial thinktank Planet Tracker and co-authored by Gabriel Thoumi, CEO of Responsible Alpha, the answer is a resounding yes. Breaking the Mould: Business-as-Usual is a High-Risk Strategy for the EU Plastic Industry is clear. Workers, fence-line communities, and investors must collaborate and collectively engage regulators and corporate directors to transition their industry to a low-carbon, sustainable, and equitable future that produces the sustainable plastics products our economy wants. The EU plastics sector provides critical career opportunities and knock-on effects for the local economy. For instance, the Trilateral Chemical region, which comprises petrochemical factory clusters in Belgium, the Netherlands, and western Germany, employs more than 350,000 people. The sector employs 94,000 people and 220,000 indirectly at more than 700 companies in Belgium alone. Moreover, the region has the highest per-capital petrochemical sales globally at an average EUR 3,600. This report identifies the companies responsible for 75 percent of capacity across the EU plastic production supply chain operates within the Trilateral Chemical Region and accounts for 45 percent of total EU27 plastic production capacity. However, it is here in the petrochemical clusters of Belgium, Netherlands, and western Germany where pressure is mounting, and that is where change must start. Yet, tens of thousands of jobs hang in the balance as the sector experienced minimal growth over the previous decade, ceding market share to rising competitors. China, for example, increased its market share of chemical production from 26 percent to 41 percent between 2010 and the end of 2019. At the same time, the EU petrochemical industry lacks a uniform vision of a wholesale transition to a sustainable plastics industry. The reality is without a framework for a sustainability-driven transition, this sector risks stranding many of its assets and thus the livelihoods of numerous European households. EU plastics specialists agree that this transition is possible now. The CEFIC (European Chemical Industry Council) has collaborated to produce EU roadmaps for a quick change to a sustainable plastics industry , as shown below (see image). Source: Breaking the Mould The process outlined in the image reveals a steady and achievable path to a more efficient and sustainable plastics complex in the EU27. Improving current technologies, investing in emergent ones, and systematically scaling both are possible. The only missing ingredient is will. Still, this proposed outline is one that other regional plastics industries should follow closely and implement promptly. As Thoumi notes, “The increasing public awareness of and intolerance for the sector’s contributions to climate change, pollution, and negative health outcomes will pressure governments and regulators to implement policies that mitigate the worst aspects of chemical and plastics production.” How can the financial sector participate in the transition? Investors can play a vital role in this transition. Eighty-seven publicly traded European companies make up 75 percent of the plastics production capacity across the supply chain, with the largest cluster in the Trilateral Chemical Region. Just 40 banks, brokers, insurers, and asset managers provide financing for those firms. Thoumi, who co-authored the Planet Tracker report, observes, “Much more can be done to aid these firms in their transition to sustainable plastics production and distribution. Currently, less than one percent of corporate bonds and loans are green. In addition, only nine resolutions calling for implementing sustainability practices have been introduced at annual shareholder meetings in the last five years.” Investors must ask executives how they account for the market’s evolution, the looming changes in the regulatory landscape, the material impact of their operations, and how such externalities will affect their bottom line. Anything less lets the world move closer to the brink of irreversible climate change. For example, the EU27s plastic industry’s current supply chain emitted an estimated 178 million mtCO2e in 2018. Suppose emissions continue to increase as they have over the past decade. In that case, plastic lifecycle emissions from production to incineration could reach 2.75 gigatons CO2e annually, or 56 gigatons total by 2050, equaling 13 percent of the remaining carbon budget within the 1.5°C scenario by 2050. The time for collective action is now.

May 2, 2022 The production and use of plastics is a first-order problem for societies worldwide. The ubiquity of plastic in our daily lives often obscures the powerful impacts on society and the environment. Plastics contribute to global warming, freshwater and marine eutrophication, terrestrial acidifications, ground-level photochemical oxidant formation, particulate matter formation, and human toxicity. The numbers are startling. Since 1950, companies have made more than 8.3 billion tons of plastic, the equivalent of two billion African elephants. Fifty percent of all plastics are thrown away within six seconds of use. Single-use plastics may be the lasting monument of our time. Focusing on climate change, the annual plastics carbon budget is 40 billion tons, the equivalent of six to nine percent of all oil and gas emissions. If business as usual continues unabated, plastics production will climb to 13 percent of the global carbon budget by 2050. It is impossible to meet the 2050 Paris Agreement commitments if we continue at current production levels. What is to be done? In a conversation with Selma Duhović, Ph.D., host and producer of the Activation Energy podcast , Responsible Alpha CEO Gabriel Thoumi, CFA, lays out the challenges and opportunities confronting stakeholders ranging from a transition in mindset to a transformation of the economy. Investors possess an essential role in these conversations. As Gabriel notes, this is an opportunity to develop an iteration process and learn together. Investors sit down with companies they have invested in and ask, “How will we create solutions across the supply chain?” And this is a critical insight – the solution must work for producers, suppliers, and consumers. Analysts can map the COGS (cost of goods sold) across the supply chain. The challenge is to map and implement sustainability policies across the supply chain. The latter would allow producers and suppliers to know what their road rules are and what their goals should be. “The resolution produced by UNEA-5.2 in Nairobi in February is a vital first step to creating an international treaty and holistic framework to address and resolve the complete lifecycle of plastic from production to its eventual depositing in the world’s oceans,” remarked Thoumi. For example, 83 publicly traded companies dominate the plastics packaging sector. Seventy percent of these firms' combined fixed income is turning over in the next four years. This is an opportunity for investors and banks to develop green bonds to encourage the transition to sustainable plastics while lowering the cost of capital for these companies. “There is also much opportunity for small- and medium-size firms and start-ups to develop new technologies, either innovating current plastics productions or moving to novel replacements. The challenge is to create a holistic vision of what sustainable plastics and their supply chain look like while fostering a system that is at once collaborative and competitive,” noted Steven Hyland, Ph.D., Responsible Alpha’s Director of Research and Communications. It is such a space that venture capital outfits like Chemical Angel Network can identify promising technologies that need funds and support to scale and bring to market. The urgency of plastic production and consumption is undeniable. The solutions require the development of business models that cultivate collaboration as much as competition. The keys must travel across supply chains, thus requiring cooperation and coordination across the industry. Most importantly, the solution necessitates the involvement of all stakeholders, ranging from executives to investors, companies to fence-line communities, elected officials to health professionals, and academics to activists. Anything short of such a holistic approach risks delay, effectively ensuring failure.

April 21, 2022 “There haven’t historically been mechanisms to encourage the capital formation necessary to preserve and restore the natural assets that ultimately underpin the ability for there to be life on Earth,” NYSE COO Michael Blaugrund . Climate change and natural capital degradation are an existential threat to capital markets: supply chain uncertainty, increasing greenhouse gas emissions, and declining ecosystem services, puts downward pressures on revenue and margins. Natural Asset Companies (NACs) present a timely market innovation that support investments in natural capital assets that add to the growing financial tools to mitigate climate change and natural capital degradation. The estimated costs to protect the ecosystems we depend on for life range from $300 billion to $400 billion annually yet total conservation funding globally is about $50 billion so NACs may fund the gap. Intrinsic Exchange Group (IEG) is collaborating with a variety of entities, notably the government of Costa Rica , and investors such as the Inter-American Development Bank (IDB) , and the Rockefeller Foundation . ● Natural Asset Companies (NACs) are a new financial product launched in Q3 2021 by the Intrinsic Exchange Group (IEG) and the New York Stock Exchange (NYSE) . ● A natural asset can be anything in nature, such as a forest or marine area. Natural assets have a large intrinsic value, a portion of which is due to the ecosystem services they provide. Ecosystem services include water filtration, pollination, and carbon sequestration. ● Any owner of a natural asset, such as the government or independent farmers, can create a NAC, a specialized corporation that owns the ecosystem services provided by the natural asset. The NAC can subsequently IPO and receive funding from investors through the NYSE. Given that the NAC’s value is based on its ecosystem services, raised funds will be strategically directed toward sustainably increasing the asset’s ecosystem services. ● There are many challenges to the growth of this brand-new asset class: investor interest and trust, government regulations, accurate valuation of ecosystem services, and public acceptance of putting a dollar value on nature Natural Asset Companies: How They Work The first step in creating a NAC is identifying a valuable natural asset . The geographical area of the natural resource must be identified and then defined. The value of the asset must be assessed in terms of its current productivity – ecosystem services – and its fullest potential. The owner then grants the rights to the productive use of the ecosystem’s natural resources to a NAC. The actual ownership of the asset is not transferred––only the rights to the productive use of the ecosystem’s natural resources. After the NAC is established, the NAC leadership team then engages stakeholders to develop a sustainable business plan for its long-term development and/or regeneration. With this plan in place, the NAC can then access capital by issuing an IPO on the NYSE. Investors who believe in the NAC’s ability to sustainably increase the ecosystem services of its asset can invest in the NAC. The NAC then uses the proceeds to implement its sustainable asset management plan with the purpose that the company will accrue more value the longer the asset remains sustainably managed. A NAC’s success depends on its valuation, audit, assurance, accounting, and public reporting, and ultimately, clear and consistent standards. Similar to other publicly traded companies, NAC’s employ U.S. generally accepted accounting standards (GAAP). IEG and the NYSE are currently developing a standardized accounting framework called Ecosystem Service Valuation (ESV) to measure a NAC’s ecological performance, based on a “stock and flow” model – stock of natural capital assets and flows of ecosystem services. Once complete, anyone can establish a NAC or invest in one for financial and environmental benefits. The Inter-American Development Bank and the Government of Costa Rica are currently assessing whether they can employ NACs, starting with public land and eventually extending to private as well. There are concerns about NACs, too. Risks include greenwashing and in the worst-case scenario, land-grabbing, which would effectively convert beloved public spaces and community property into private assets. Furthermore, legal risks such as contracting, recourse, titling, and ecological accounting frameworks need to be resolved for the NAC market to grow. A key counter argument is that some natural areas are beyond our ability to value them, such as biodiverse and rich regions within the Amazon. These have a non-negotiable infinite value to society due to their role in preventing biodiversity collapse and climate change tipping points, so their destruction should be avoided at all costs. Natural Asset Companies: Stay Tuned to This Space NACs provide a promising financial product that may support raising capital to support conservation and sustainable development, as key risks are addressed, and after the NYSE and IEG finalize their accounting frameworks. The details need to be worked out, of course, which requires some iteration via real-world examples. Yet market innovation such as NACs are what markets need to support ESG Integration™.

March 8, 2022 Photo: UNEP / 02 Mar 2022. With society awash with hundreds of millions of tons of single-use plastic, 175 nations yesterday agreed to begin a United Nations led process to write a global plastics treaty legally binding by 2024. The agreement seeks to address “ full lifecycle of plastic from source to sea ”. While plastics support food safety and make airplanes lighter and safer, plastic production also increases global warming. For example, according to the EIA in 2015, 18% of industrial emissions came from plastics production. In fact, CO2 emissions from plastics globally were 1.8 gigatons in 2015 . Plastic production is greater than 1 million tons daily. Microplastics are now found in human placenta . During the production of plastics, toxic chemicals are often released causing cancers such as in Louisiana’s Cancer Alley . Millions of animals die each year Plastics are infamously forecast to outweigh fish in the ocean by 2050. Given this, regulators are beginning to act, creating a clear path forward with the launch of the UN process for a global plastics treaty. From a business perspective, the petrochemical sector is a high-volume business. There are over 350,000 different types of manufactured chemicals in the global market, including plastics. The petrochemical to plastics supply chain is fragmented globally with generally low margins. Supply chains are complex with millions of direct employees. Thus, analysts at Responsible Alpha assessed capital markets participants for their reporting of the current risks and opportunities associated with the plastics supply chain. Focusing only on companies with significant revenue associated with plastics production and limited to companies whose market capitalization is greater than $1 billion dollars, Responsible Alpha analysis of over 360 companies with aggregate market capitalization of $2.8 trillion demonstrated that most companies consistent and comparable reporting of their strategies that address our global plastic waste and pollution problems. For example, very few companies report the following: Their percent of packaging from recycled materials, with a standard, scientifically rigorous definition for recycled materials. Their percent of compostable materials, again with a standard, scientifically rigorous definition for compostable. Their strategy to migrate all their plastic production, use, and sales to sustainable plastics. The opportunity now is for these same companies to develop a standardized reporting structure. With a standardized reporting structure, analysts can then easily integrate corporate actions into their ESG modelling.