Global ESG  
2023 Outlook 
January 2023

Contents 
Executive Summary .................................................................................................................................................. 4 
ESG ETF Sentiment .................................................................................................................................................... 5 
Europe Resilient Despite Weak Global ESG ETF Sentiment ......................................................................................... 5 
ESG Sentiment Holds Up in Europe, Defying Global Slump ......................................................................................... 5 
2023 Recovery Plausible for Global ESG ETF Sentiment .............................................................................................. 5 
Flows to Remain Low Until ESG ETF Sentiment Recovers ............................................................................................ 6 
Momentum Fades With Near-Term Performance Headwinds .................................................................................... 7 
ESG Performance and ETF Growth ............................................................................................................................ 8 
ESG Faces Many Risks, Yet Europe May Show Strength in ETF Growth ...................................................................... 8 
ESG Performance: Factor Exposures a Mixed Bag ...................................................................................................... 8 
US ESG Returns: A Rethink of Typical Sector Allocations Pivotal ................................................................................. 9 
ESG ETF Assets to Continue to Be Fed by Europe ........................................................................................................ 9 
Climate ETFs Face Risk of Oversupply: ESG ETF Flow Tracker ................................................................................... 10 
Article 9 ETFs May Gain Flows as Investors Seek Most Sustainable .......................................................................... 10 
ESG Regulation ....................................................................................................................................................... 12 
More Transparency – and Yet Inconsistency ............................................................................................................. 12 
US Climate Rules Take Shape Amid Delays ............................................................................................................... 12 
Defunding the Climate Police? .................................................................................................................................. 12 
Antitrust Risks in ESG Efforts Are Avoidable .............................................................................................................. 13 
SEC on Shaky Ground ................................................................................................................................................ 14 
New EU Reporting Rules' Strength Hangs on Standards ........................................................................................... 14 
SFDR Standards Improve Products' ESG Comparability............................................................................................. 15 
Synchronizing With ISSB Could Be China's Next Step ................................................................................................ 15 
Increasing ESG Disclosure Is the Megatrend in Asia ................................................................................................. 16 
ESG Scores .............................................................................................................................................................. 18 
Activism Gathering Steam ...................................................................................................................................... 22 
A Turning Point for the Climate? ............................................................................................................................. 25 
Carbon Outlook ...................................................................................................................................................... 27 
Carbon-Emissions Growth May Ease Off in 2023 as Trade, GDP Slow ...................................................................... 27 
Russia Most Exposed to EU Carbon Border Price ...................................................................................................... 29

Financing the Transition ......................................................................................................................................... 30 
HK and China Governance ...................................................................................................................................... 34 
Stewardship Could Rise Despite Dilutive M&A and Audit Concerns .......................................................................... 34 
Labor ...................................................................................................................................................................... 37 
Could 2022 Labor Headwinds Turn to Tailwinds in 2023? ........................................................................................ 37 
Labor Lessons Learned? ............................................................................................................................................ 38 
Green Trade ............................................................................................................................................................ 40 
Analyst Contacts ..................................................................................................................................................... 44 
Disclaimer ............................................................................................................................................................... 47 
About Bloomberg Intelligence ................................................................................................................................ 48 
Bloomberg Intelligence by the numbers. ................................................................................................................ 49

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4
Executive Summary 
 
In politicized times, ESG reframes markets and becomes pivotal. In 2023, we expect more pressure for stewardship 
accountability as activism builds, credible disclosure shifts the focus to performance and regulatory scrutiny in 
Europe prompts stronger products and flows while the US faces rockier roads. Although fossil fuels are hard to quit, 
energy security fuels the green transition, climate commitments and carbon pricing. And, after the Great 
Resignation, employee-friendly companies gain a competitive advantage. 
Greenwashing, energy security and geopolitical concerns raised questions about ESG's efficacy, leading to a two-
year decline in net inflows. However imperfect, we believe ESG comes into a recovery to assess long-term risks and 
changing industry landscapes as markets recognize a key framework in those three letters.

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5
ESG ETF Sentiment 
 
Europe Resilient Despite Weak Global ESG ETF Sentiment 
ESG ETF sentiment in Europe remains positive for 2023, defying a global declining trend of the last two years. Our 
2023 global view remains neutral as SFDR Article 9 funds and a MiFID II sustainability amendment can support 
continued appetite for European funds, while global demand will likely stabilize following weaker short-term flows 
and momentum. 
 
ESG Sentiment Holds Up in Europe, Defying Global Slump 
ESG ETF sentiment remains positive in Europe, while the US has seen a decline mirroring the global trend. 
European ETFs may continue to see inflows, especially with funds seeking Article 9 labels under the European 
Union’s Sustainable Finance Disclosure Regulation (SFDR) and an amendment in MiFID II regulations on disclosing 
investors' sustainability preferences. 
Our sentiment score is based on a regression of flows into ESG and non-ESG global ETFs. The model calculates the 
impact of ESG or sustainability goals on flows while controlling for fund volatility, returns and net asset values. 
Europe vs. US Sustainable Sentiment 
 
Source: BQNT <GO>, Bloomberg Intelligence 
 
2023 Recovery Plausible for Global ESG ETF Sentiment 
The global appetite for ESG ETFs (those incorporating ESG, sustainable or climate themes in their objectives) is in 
the midst of a two-year decline, but a 2023 rebound remains plausible if the long-term growth trend remains intact. 
The ongoing sentiment dip represents a sharp deviation from a longer-term upward trajectory. A 2023 reversion to 
this growth path may be possible as investors globally continue to demand ESG-informed products. 
The current lows in our ESG ETF sentiment metric are likely the result of short-term performance-driven reactions to 
energy prices and economic growth risks. The scores turned negative in early 2022 and continued falling to minus 
0.17 in October, from a 0.28 peak in December 2020.

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Global Sustainable ETF Sentiment 
 
Source: BQNT <GO>, Bloomberg Intelligence 
 
Flows to Remain Low Until ESG ETF Sentiment Recovers 
Negative sentiment scores for ESG ETFs signal that flows may remain weak in the near term, both by historical 
standards and in comparison to peers. Based on our model, we would expect sentiment to return to positive 
territory before a recovery in ESG ETF flows. 
The model produces a strong correlation of 0.75 between sentiment and the following month's ESG ETF flows, 
indicating that depressed current scores will likely weigh on near-term flows. Moreover, the negative figure 
indicates that ESG ETFs may experience weaker flows than their non-sustainable peers. 
Sentiment vs. Next Month Sustainable ETF Flows 
 
Source: BQNT <GO>, Bloomberg Intelligence

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Momentum Fades With Near-Term Performance Headwinds 
Ebbing momentum may also reflect the performance headwinds for ESG ETFs. Their median exposure to 
momentum – a factor that captures the spread between past-year high- and low-performing equities – fell below 
zero in September from a peak of 0.3 in December 2020. The ESG ETFs' momentum tilt no longer exceeds that of 
peers, representing a break from the previous two years when the momentum factor was a key performance driver.  
Momentum Factor Exposures 
 
Source: BQNT <GO>, Bloomberg Intelligence

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8
ESG Performance and ETF Growth 
 
ESG Faces Many Risks, Yet Europe May Show Strength in ETF Growth 
ESG ETF assets and flows could continue to see strength from Europe in the year ahead, driven by favorable 
policies, while the US weakens. Fund launches are slowing, which could continue as the market matures. ETFs 
designated as Article 9, Europe's ESG class with the highest sustainability credentials, will likely drive flows. 
However, the ESG category risks being diluted as the number of funds increases that classify themselves as Article 8 
but don't label themselves as ESG. 
ESG returns have suffered this year largely due to low exposure to the energy sector's outperformance. In the US, 
ESG ETFs could continue to be hurt by a tilt away from the value factor but aided by low volatility exposures if 
market turbulence continues to increase. 
 
ESG Performance: Factor Exposures a Mixed Bag 
US ESG performance could continue to struggle because of the ETFs’ tilt away from the value factor as elevated 
interest rates push a broader rotation from growth into value. Based on Bloomberg Intelligence’s equity strategists, 
value's relative valuations look attractive, potentially setting the stage for a multi-year run. ESG's slightly low 
volatility exposure could benefit funds if market turbulence increases. Yet, if markets bounce back rapidly, as they 
did after Covid's lows, ESG returns could see headwinds. 
US and European ESG indices have underperformed broader benchmarks this year, driven largely by their slightly 
lower exposure to energy. While the MSCI EM ESG Index has performed better over the long term, it trails its non-
ESG variant by almost 400 bps this year. Only 20% of US ESG ETFs beat benchmarks this year, down from 65% in 
2020. 
Performance: ESG vs. Non-ESG Variant 
 
Source: Bloomberg Intelligence

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US ESG Returns: A Rethink of Typical Sector Allocations Pivotal  
US ESG funds tend to overweight technology and underweight energy, which could continue to hurt returns over 
the short term as energy tops the BI equity strategy team's scorecard while tech is in the middle. ESG funds could 
continue to be hurt if tech faces challenges in an economic slowdown, especially if interest rates continue to rise. 
Tech earnings have been knocked down and might not get up until 2024. Underweighting energy could be a 
mixed bag for ESG as an economic slowdown typically doesn't bode well for the sector, but elevated energy prices 
cushion the blow. 
As these typical sector allocations come under criticism, we expect a rethink around ESG being more of a 
fundamental decision, regardless of the sector, becoming increasingly important in the year ahead. 
U.S ESG Sector Relative Weights (Average 15 Funds) 
 
Source: Bloomberg Intelligence 
 
ESG ETF Assets to Continue to Be Fed by Europe 
ESG and values-based ETF assets slid around 16% this year to $395 billion in 3Q, driven by market contraction and 
large one-off outflows that also dominated 1H. We think concentration risks – not skepticism – drove the outflows. 
And while this eased into 3Q, we think the concentrated nature of inflows and outflows may result in continued 
swings in flows, which could slow asset growth in the long run if large investors exhaust allocations. While US assets 
weakened, Europe showed comparative strength. 
Fund launches showed signs of slowing and are likely to continue to deaccelerate as an economic downturn 
dominates fears and the ESG market matures, with most large asset managers having strategies in place.

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ESG ETF Assets by Regions 
 
Source: ETF <GO>, Bloomberg Intelligence 
Climate ETFs Face Risk of Oversupply: ESG ETF Flow Tracker 
The potential liquidations among climate ETFs we have called out are materializing, with at least five shutting shop, 
and could continue as oversupply tests demand and slower flows drive less-competitive strategies to close. Clean-
energy flows spiked in 1Q21 but have cooled, according to our tracker. Flows into low-carbon/fossil-free ETFs have 
slowed, as well. While the Inflation Reduction Act supports clean-energy flows over the long term, we don't think it 
will be enough to sustain last year's pace. About 100 climate ETFs have launched until through 3Q, fewer than the 
180 in 2021, though it's still double any other year. Low carbon/fossil-free climate themes that aren't as impacted by 
the act may face higher liquidation risks. 
Our tracker covers equity flows to various strategies, painting a picture of market demand. 
ESG ETF Flow Tracker 
 
Source: Bloomberg Intelligence 
 
Article 9 ETFs May Gain Flows as Investors Seek Most Sustainable 
ESG and values-based ETF flows slid more than broader funds through 3Q than the same period a year ago, driven 
by weakening in the US as Europe showed strength. Based on our sentiment model, flows could slow further. Funds 
in Europe classified as Article 8 that don't label themselves as ESG will likely grow and risk diluting the category. 
Flows were about $53 billion, with Article 9 taking 36% as investors look to the most-sustainable funds, which could 
continue. However, funds are being downgraded to Article 8, and that may gain pace as more transparency under 
reporting rules invites scrutiny in 2023.

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Under the EU's Sustainable Finance Disclosure Regulation, managers must classify funds into one of three 
categories. Article 8 funds promote environmental or social characteristics. Article 9 targets sustainable investment. 
ESG ETF Flows 
 
Source: Bloomberg Intelligence

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ESG Regulation 
 
More Transparency – and Yet Inconsistency  
More ESG transparency driven by multiple stakeholders is likely next year across the globe, but inconsistencies may 
bring short-term confusion, we believe. The EU will impose new rules to bring greater corporate disclosure on 
climate and ESG while Asia is catching up. But the US will have a rockier road with political opposition from 
Republicans gaining more power in Congress. 
 
US Climate Rules Take Shape Amid Delays 
The SEC's proposed climate disclosure rules will likely be watered down when they go into effect and still have a 
tough path through the courts. A final rule has been delayed by significant public feedback, strained agency 
resources amid aggressive rulemaking and a technical glitch that extended the comment period. We believe the 
rule will be released in the near term with a 2023 effective date – without requiring disclosure of Scope 3 (or 
indirect) emissions – but its journey through the courts may slow implementation. 
The rule will standardize disclosure around the framework of the Task Force on Climate-Related Financial 
Disclosures and mandate the release of their audited Scope 1 and Scope 2 greenhouse gas (GHG) emissions. It may 
also include requirements for making reasonable assurances. 
Proposed Timeline 
 
Source: US Securities and Exchange Commission 
 
Defunding the Climate Police? 
A Republican House could make it more difficult to implement President Biden's climate agenda. Though SEC 
rulemaking is a function of the executive branch, Congress could strip funding for the headcount needed to 
enforce any new or existing disclosure requirements, especially as the government comes up against the debt 
ceiling. The SEC's Division of Corporate Finance has been short-staffed the last few years, requesting funds in the 
most recent budget for seven new attorneys to support rules on climate, human capital and executive 
compensation. 
Republican members of the Senate Banking Committee have already sent letters to the SEC questioning the pace 
of new rulemaking given staffing limits and probing numerous ESG ratings providers.

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SEC Division of Corporation Finance Staff Turnover 
 
Source: Bloomberg Law, US Securities and Exchange Commission 
 
Antitrust Risks in ESG Efforts Are Avoidable 
Warnings from a group of Republican senators over potential antitrust investigations into alleged collusive activities 
on ESG initiatives aren't idle; coordinated activity by competitors, even for a laudable goal, can pose antitrust risk. 
Still, the admonitions are about theoretical – but still avoidable – violations. Many, if not most, competitor 
collaborations on ESG are unlikely to violate antitrust law, which only bars agreements that restrain trade. Rivals can 
coordinate on actions that don't have that effect, for instance, discussions of industry best practices. 
Cooperation among rivals crosses the line where it fixes prices, rigs bids, allocates markets or customers, or 
collectively boycotts a firm or firms. Sharing competitively sensitive information can be problematic as well. 
Key Points: 
 
Source: Senators Cotton, Lee, Grassley, Blackburn and Rubio

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SEC on Shaky Ground 
Recent Supreme Court decisions, such as the June 30 ruling curtailing EPA authority over carbon emissions, bode 
poorly for the SEC and its climate-disclosure proposal from March. In the June 30 ruling and an earlier one 
expanding Second Amendment rights, the high court echoed arguments made by the libertarian Cato Institute. We 
think that happens again with the climate-disclosure rule. 
We expect two arguments will resonate with conservative judges. First, the SEC exceeded its authority because the 
connection between climate-related disclosures and tangible financial impacts is tenuous. Further, Congress' 
delegation of climate-disclosure regulation, including greenhouse-gas emissions, to the EPA in the Clean Air Act of 
1974, suggests the SEC lacks the authority to do the same. And second, that the costs outweigh the benefits. 
‘Greenhouse’ or ‘Climate’ Found in S&P 500 Company Documents 
 
Source: Bloomberg Intelligence 
 
New EU Reporting Rules' Strength Hangs on Standards 
The effectiveness of new EU rules on non-financial disclosure will largely depend on the stringency of standards 
that the European Financial Reporting Advisory Group (EFRAG) is developing and the directive's transfer into 
national laws. Still, together with the more sophisticated classification system brought by the EU taxonomy, the 
updated corporate reporting framework should improve the quantity and quality of the information available for 
investors, broadening the firms' coverage and requiring audits over reported information. 
We calculate that more than 6,000 non-EU companies may meet the criteria to fall under the directive's expanded 
scope, with the largest number of those being US-based and operating in the industrial and financial sectors.

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NFRD, CSRD: Key Differences 
 
Source: CEPS, European Commission 
SFDR Standards Improve Products' ESG Comparability 
The application of the EU Sustainable Finance Disclosure Regulation's (SFDR) technical standards on Jan. 1, 2023, is 
set to increase the transparency and comparability of financial products on offer in the EU, helping investors 
identify funds that fully comply with Article 9 requirements. The new regulatory standards include mandatory 
content and presentation obligations for financial operators that may temporarily increase the number of funds 
being downgraded from Article 9 to Article 8, but that will ultimately support investors keen to discern 
greenwashing practices. 
The European Fund and Asset Management Association estimates the European funds in the scope of SFDR Article 
8 were worth €3.7 trillion at the end of 1Q21. Among them, Luxembourg ranks in the top domicile with 35%, or 
€1.301 billion, at the end of 1Q21. 
SFDR Article 8 Market Breakdown (End of 1Q21) 
 
Source: European Fund and Asset Management Association 
 
Synchronizing With ISSB Could Be China's Next Step 
Adopting international ESG disclosure standards should be China's long-term goal, which may help achieve 
mandatory ESG reporting. Still, a few problems should be addressed first, such as the lack of an established 
process for collecting high-quality ESG data and scant ESG coverage by third-party rating agencies. While the 
China Securities Regulatory Commission is asking A-share companies to report ESG information voluntarily – based

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16 
on various disclosure requirements – synchronizing with global ESG standards such as the International 
Sustainability Standards Board (ISSB) could be the next step.  
Chinese companies provided feedback on the ISSB proposals by June 15 based on their domestic needs, and this 
has been submitted to the ISSB. 
ESG Metrics of Enterprise ESG Disclosure Guidance 
 
Source: Guidance for "Enterprise ESG Disclosure," Bloomberg Intelligence 
 
Increasing ESG Disclosure Is the Megatrend in Asia 
China's first "Guidance for Enterprise ESG Disclosure," issued by the China Enterprise Reform and Development 
Society and effective since June 1, was much needed to lift ESG disclosure standards among the country's 
enterprises given China's rapid development of ESG products. The guidance is based on Chinese laws and 
regulations, fitting in with operating conditions in the country. At least 25 jurisdictions have mandated corporate 
ESG disclosure, according to a study by the European Corporate Governance Institute. Among Asian countries, 
Thailand, China, Singapore, Indonesia and India have made sustainability and environmental information disclosure 
mandatory, but ESG reporting remains mostly optional.

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Timeline for ESG Disclosure / Reporting in Asia 
 
Source: Bloomberg Intelligence

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ESG Scores 
 
ESG Scores Could Signal Better Returns, Growth at Top Performers 
Top ESG scores could signal that firms are addressing risks and reinforcing strategic positions, which can aid 
returns and income growth. US and EMEA have higher ratios of stocks outscoring sector peers in "E" and "S" than 
APAC, which needs to boost disclosure and "G" metrics. We expect ESG disclosure to improve globally as 
frameworks standardize, shifting focus toward ESG performance. 
 
Top ESG Scores May Signal Better Returns 
High ESG scores could signal proficient managements that generate better returns and profit than indexes. Within 
our sample of 1,000 companies, 29 stocks are ranked in the top 10% for environmental, social and governance 
scores. Our analysis shows they have better average total returns, risk-adjusted returns (higher Sharpe ratios) and 
net income growth vs. the MSCI World benchmark. While our study doesn't prove direct causation, it does suggest 
that solid ESG management is linked to enhanced returns and profit. Though most of these top firms have seen 
share-price falls in a turbulent 2022, they have dropped less than the index. Oil-tech giant Schlumberger has seen 
the biggest rise, of 77%. 
The elite group includes no APAC stocks; we think disclosure and performance enhancement are needed to 
nurture more ESG leaders from that region. 
Companies With Top 10% ESG Scores 
 
Source: Bloomberg Intelligence

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EMEA Takes Lead on 'E' Scores by Quartile; US Tops 'S' 
Bolstered by regulation and investor pressure, EMEA outperforms on environmental scores across industries while 
the US leads on social performance. Our analysis of the 1,000 largest-cap stocks in our scoring universe shows 64% 
of EMEA firms are in the top quartile for environmental practices vs. 31% in APAC. The EU's taxonomy of sustainable 
activities, and Europe's Sustainable Finance Disclosure Regulation have improved disclosure and helped boost 
scores in the region. 
The US leads on social performance with 43% in the top quartile. At 17-18%, APAC has the largest proportion of 
companies in the lowest performance quartiles for both 'E' and 'S'. Bloomberg's quartiles compare a company's 
aggregated performance with global-industry peers, ranging 0-100 (100 best). 
Regions’ Relative Performance in Global Ranking 
 
Source: Bloomberg Intelligence 
 
Industrials Lead on 'E' and 'S' Disclosure 
Industrials, materials and energy have the highest median environmental disclosure scores, likely due to sectors 
with larger environmental footprints initially receiving higher ESG scrutiny. Since policies such as the EU taxonomy 
stipulate disclosure across all industries, this discrepancy will eventually diminish, even for financials, a laggard. 
Industrials, materials and energy also score well in social disclosure, alongside real estate and utilities. 
EMEA companies disclose more material environmental information and the US more social information, and APAC 
lags. We expect disclosure to improve globally. In APAC, more countries are likely to adopt the International 
Sustainability Standards Board ESG reporting framework, while the US SEC recently proposed amendments to 
regulate ESG disclosure.

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Environmental and Social Disclosure 
 
Source: Bloomberg Intelligence 
APAC Needs to Boost Women on Boards 
APAC has a lower median score for board composition in 2021 than the US and EMEA, mainly due to weaker 
diversity and independence. The median proportion of women on US boards is 29% and for EMEA it's 36% vs. 
APAC's 13%. Our analysis shows APAC companies have introduced more independent directors on boards in the 
past five years, but its 43% median is still far behind the US and EMEA. APAC also lags in executive compensation, 
mainly due to poor incentive structures; only 30 of 290 sample firms have set up ESG-linked bonuses. EMEA firms 
can improve shareholder rights scores by promoting equal voting rights between common-share classes. All three 
regions score well in audits, but we expect further improvement in auditor ratification and support, as shareholders' 
satisfaction with auditors may signal better audit quality. 
Bloomberg ESG Governance Median Scores by Region
 
Source: Bloomberg Intelligence 
 
Energy Transition Sectors Vary in Raising 'E' Score 
With the world aiming to limit global warming, we identify integrated oils, integrated electric utilities, coal, steel and 
cement as key sectors facing intensified pressure for decarbonization. We believe these sectors' companies 
urgently need to improve their environmental performance and disclosure, given their low 2021 environmental 
scores. Coal and cement saw the largest increases in median environmental disclosure scores between 2015-21, 
implying their improvements in overall environmental scores could have been largely driven by stronger disclosure 
instead of performance.

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Among the other sectors, integrated oils may have engaged in mitigating climate risks at an earlier stage, as 
reflected in its relatively high 2015 environmental median score and slower rise in disclosure. 
Environmental Pillar & Disclosure Median Scores 
 
Source: Bloomberg Intelligence

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Activism Gathering Steam 
 
Asset Managers Seek Cover as Activists Step Up: Proxy Season ‘23 
Environmental and social advocates, as well as anti-ESG activists, will continue to propose shareholder resolutions 
in 2023 to push their agendas. Yet major asset managers – often the arbiters of such debates given their outsize 
ownership – are finding ways to deflect what has become a growing spotlight on their stewardship. 
 
Another Deluge of Resolutions Appears Likely 
Another record year for US shareholder proposals is likely in 2023, we believe, given lower regulatory hurdles and 
growing pressures on corporate behavior from supporters as well as detractors of ESG. The SEC opened the 
floodgates in late 2021, making it harder to keep certain items with "broad societal impact" off proxies, driving a 
52% increase in environmental and social resolutions. This included highly prescriptive proposals from 
environmental and social activists, as well as "anti-woke" proposals. Both sides failed to woo mainstream investors, 
as evidenced by average support levels dropping to 27% in 2022 from 33% the year before. 
Amid a growing chorus on climate change and racial justice on the left and rising anti-ESG rhetoric on the right, we 
expect these resolutions will continue to show up en masse next year. 
E and S Shareholder Proposals (Russell 3000) 
 
Source: Bloomberg Intelligence 
Power to the People ... or Passing the Buck? 
Recent moves by Vanguard and BlackRock to introduce or expand plans allowing fund holders to vote proxies 
directly represent a new element of shareholder democracy. It's no coincidence that the policies came right after 
the SEC finalized rules to "enhance transparency of fund and institutional investment manager proxy voting." By 
passing on voting to fund participants, asset managers can sidestep criticism of ESG engagement policies from 
both sides. Some state officials have accused asset managers of going too far on environmental and social risk 
management, while others have said they haven't gone far enough. 
The moves also help temper accusations that too much voting power is concentrated in a handful of firms. Still, we 
think these shifts may be too little too late to push back the politicization of ESG investing.

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BlackRock Voting Choice 
 
Source: Bloomberg Intelligence 
 
Target of Both ESG and Anti-ESG Factions 
Environmental activists – as well as coal miners – have already expressed dissatisfaction with Vanguard and 
BlackRock. There's been a string of protests as well as articles and columns accusing both firms of being the 
biggest owners of fossil fuels and moving too slowly – or too quickly – on ESG issues. Though Vanguard and 
BlackRock are among the top shareholders of companies such as Exxon Mobil and Chevron, there's little they can 
do about it. Index funds can't sell such stocks as long as they remain in benchmarks. By democratizing the vote, 
Vanguard can now say they are simply voting the will of the people. 
The targeting of active managers might be a more fruitful approach for activists. That could drive down prices of 
energy stocks, leading to lower market capitalizations that may get them ejected from indexes.  
Website 
 
Source: Billy Nauman – Columnist, Financial Times – Feb. 7, 2020 
 
SEC: Investors Seek Climate Goals, Not Meddling 
The SEC emboldened shareholder proposals asking companies to set carbon targets or report ESG data, though

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voting from the recent proxy season showed a limit to how far investors were willing to press such goals. The 
agency's Staff Legal Bulletin says the definition of "micromanagement" previously used to exclude resolutions was 
too rigid. It also says references to established frameworks like the Task Force on Climate-Related Financial 
Disclosures alleviate concerns that these topics are difficult for investors to evaluate. 
The SEC allowed Devon Energy to exclude a 2019 proposal seeking greenhouse-gas targets in line with the Paris 
Agreement, claiming it would micromanage the company by imposing specific methods for setting complex 
policies. But the bulletin makes clear that the current commission would rule differently. 
Government Filing 
 
Source: Shareholder Proposals: Staff Legal Bulletin No. 14L (CF), Division of Corporation Finance, Securities and Exchange 
Commission – Nov. 3, 2021 
 
`Anti-Woke' Resolutions Skew Numbers Lower 
A number of so-called anti-woke proposals emerged this year. Labeled `E’ or `S’ by data providers, they often run 
counter to the policies of ESG investors and corporate boards and received low support. The right-leaning National 
Center for Public Policy Research submitted 11 resolutions for civil-rights audits at Meta, Walmart and Bank of 
America, among others. The proposals – criticizing anti-racism and diversity and inclusion policies adopted by many 
companies – received just 2% of the shareholder vote on average vs. 39% for all other race-related provisions. 
The anti-woke proposals may have been intended to preclude similarly worded but more ESG-friendly resolutions 
from showing up again. The SEC recently proposed clarifications to duplication and resubmission rules to prevent 
that from happening. 
Company Filing 
 
Source: Steven Milloy - Shareholder Proposals, Item 5, ExxonMobil Notice of 2022 Annual Meeting, April 7, 2022

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A Turning Point for the Climate? 
 
Delayed Ambition on CO2 Reduction: Climate Hopes Shift to 2023 
As analysis of ambitions to cut carbon dioxide emissions matures, the most carbon-intensive companies will likely 
step up commitments in 2023. For banks, nascent reporting on financed emissions and associated target-setting 
should give way to improvements. Investors and companies alike will continue to wait for more transparency and 
structure around CO2 offsets. 
 
Moving Beyond Disclosure, a Focus on CO2 Objectives 
Though debates over CO2 disclosures persist in certain forums, the most carbon-intensive companies have largely 
shifted their attention beyond this and toward reducing emissions. In our BI Carbon peer set of over 350 
companies, which represents a cumulative total of almost 6.4 billion metric tons of Scope 1 and 2 emissions, or 17% 
of total global emissions, roughly 95% report CO2 emissions data and nearly 80% have set reduction targets. 
However, only 92 companies have set targets in line with a temperature-aligned benchmark by 2030, suggesting 
increased ambition will be the focus for the year ahead. 
Operational emissions for the 360 companies in our peer set that provide emissions data are expected to decrease 
by almost 20% between the latest year and 2030, and about 50% by 2050, based on our analysis. 
BI Carbon: Forecast CO2 Emissions Reductions 
 
Source: Bloomberg Intelligence 
 
For Banks, Disclosure and Stepped-Up Goals Needed 
Most top global lenders have committed to aligning their lending portfolios with net zero by 2050 as part of the 
Net-Zero Banking Alliance, but 2023 will likely yield improved disclosure on financed emissions and more 
ambitious interim targets. In our peer set of 54 banks, 60% don't report financed-emissions data, making analysis of 
current performance and future ambition difficult. Further, using Bloomberg league-table figures to calculate 
historic financed emissions, as well as publicly stated targets, we find that only 14 have set interim 2030 goals for 
lending toward power generation and oil and gas that are consistent with an IEA Net Zero by 2050 pathway, 
suggesting strategies need to be enhanced in the near term. 
Credit and market losses could be significant for those continuing to accumulate climate risk.

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Power, Oil & Gas Financed Emissions vs. IEA NZE 
 
Source: Bloomberg Intelligence 
 
Offsets Are the Climate Elephant in the Room 
Despite a heavy reliance by companies on CO2 offsets, this market will remain a source of scrutiny and confusion in 
2023. Delegates at COP27 failed to agree on rules for an international carbon market, pushing further deliberation 
to next year. Also, the negotiations didn't provide a clear distinction between carbon reductions/removals and 
avoidance offsets, and what would be eligible for the market. As a result, companies will continue to engage in the 
voluntary carbon markets, which remain opaque for investors. Roughly a third of companies in our BI Carbon peer 
set state a reliance on offsets to achieve at least a portion of their CO2 target. 
Demand for carbon offsets is expected to drive the price of credits to $40-$50 a ton by 2030 and $50-$100 by 
2050 from $2-$6 currently, according to BloombergNEF. 
BI Carbon: Reliance on CO2 Offsets by Industry 
 
Source: Bloomberg Intelligence

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Carbon Outlook 
 
Carbon-Emissions Growth May Ease Off in 2023 as Trade, GDP Slow 
The growth in global carbon emissions might decelerate in 2023 as GDP expansion is likely to moderate in a post-
Covid environment and as the Russia-Ukraine war rages on. Carbon prices might hit new records, spurred by 
higher energy prices and inflation. Food supply and the EU's carbon border adjustment mechanism could be hurt if 
states don't collaborate. 
 
Decline in Trade Might Slow Emissions in 2023 
The increase in global carbon emissions could slow in 2023 if trade continues to decline as economic and 
transportation activities could slacken. The global trade-to-GDP ratio stood at 52% in 2020, the lowest since 2003, 
as the Covid-19 pandemic brought international freighting to a standstill. Russia's invasion of Ukraine in February 
2022 might have compounded the situation. There's a positive relationship between global GDP and emissions, 
looking at 1962-2022 data, with a correlation coefficient of 0.94. Therefore, with market consensus looking for a 
2.3% growth in global GDP for 2023 vs. 2022's 2.9%, the increase in the world's carbon emissions could decelerate 
as well. 
Power, transport, aviation and shipping, manufacturing and construction accounted for 62% of total global 
emissions in 2019. 
Global Emissions vs. GDP; Trade to GDP 
 
Source: WGDPWRLD Index, World Bank 
 
Coal Expansion Might Not Spur Emissions 
China will grow its thermal-coal output by 4% in 2023 to a record 3.8 billion tons, according to Bloomberg 
Intelligence forecasts. Yet, the increase in emissions from coal might be more than offset by a slowdown in 
economic activity amid the government's Covid-Zero measures and a crisis in the property sector. Property 
construction could remain sluggish after land sales plunged 53% in the first nine months vs. a year ago, and we 
have yet to see any signs of a relaxation in China's Covid-Zero measures. China's CO2 emissions fell 8% in 2Q vs. a 
year ago even as coal output rose 14% and thermal power generation gained 10%. 
The output of the nation's biggest coal miners, Shenhua Energy and China Coal Energy, rose 5% and 10.2% during 
the first nine months vs. a year ago.

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China's Coal Demand and Supply; Land Purchases YoY
 
Source: Bloomberg Intelligence 
Carbon Price Might Nearly Double Under Deglobalization 
The EU's carbon price might trade at $145 a ton under a deglobalization scenario, representing a 96% upside to 
Nov. 18's close. Regression analysis puts the coefficient of determination (R2) between carbon and oil prices, based 
on the past four years' data, as high as 0.77. Higher carbon pricing might effectively prompt a reduction in 
emissions and hasten a green-energy transition by households and businesses, with the tax revenue potentially 
ploughed back into cutting emission budgets.  
Yet higher carbon prices could also raise operating costs for businesses, which might put some pressure on 
governments planning to launch carbon trading or carbon taxes. Japan has abandoned its plan to include a 
carbon-tax reform in fiscal 2023 to avoid putting a cost burden on companies and consumers. 
EU Carbon and Oil Prices ($/Ton) 
 
Source: Bloomberg Intelligence 
 
EU Carbon Tax May Crimp US, China Exports 
The EU's carbon border adjustment mechanism will make the US, Chinese and many other non-EU countries' 
products sold by companies in five industries – iron and steel, aluminum, fertilizers, electricity and cement – more 
expensive in Europe. An additional four industries – chemicals, polymers, hydrogen and ammonia – may also be 
added by the end of the legislative process. In US-EU and China-EU trade, the most affected companies, for now, 
are those selling steel and aluminum, which the Peterson Institute for International Economics estimates may 
comprise $1.4 billion. Some of the raw materials used to make steel and process aluminum could also become 
pricier due to the tax. 
Alcoa earned 34% of revenue from Europe in 2021 and U.S. Steel 21%. However, China is the world’s largest 
exporter of both steel and aluminum.

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EU's CBAM Only Covers Fraction of Imports for Now 
 
Source: Peterson Institute for International Economics  
 
Russia Most Exposed to EU Carbon Border Price 
Baoshan Iron & Steel and Novolipetsk Steel are among the Chinese and Russian iron and steel producers whose 
competitiveness could diminish in the EU market when the cross-border carbon tax is implemented. Their carbon 
intensities are higher than the average of EU producers, and they're not subject to a domestic carbon-pricing 
system. China is the biggest global supplier of iron and steel products, accounting for one-tenth of EU imports. 
Beijing ships 12% of its iron and steel exports to the EU, while Russia is more dependent on the bloc. The EU 
bought 29% of Russia's exports of iron and steel products before the invasion of Ukraine in February. 
EU Iron & Steel: Supplying Markets 
 
Source: Bloomberg Intelligence, ITC Trade Map

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Financing the Transition 
 
Softer Global Economy May Put Temporary Brakes on ESG Finance  
Economic turbulence may keep next year's ESG debt issuance below the $1.8 trillion record of 2021 as energy-
transition projects compete with efforts to ensure energy security and tame inflation. Higher interest rates could 
affect all allocation, but we see several areas of resilience, like investments in energy efficiency and the "just 
transition." 
ESG Debt Issuance Is Not Immune to Wider Slowdown 
Global ESG debt supply may stay subdued in 2023 for macroeconomic reasons, unlikely to match the record $1.8 
trillion of 2021 amid higher interest rates, stagnating growth and significant earlier refinancings. One fillip could be 
the market debut or return of large SSAs (sovereigns, supranationals and agencies). Potential savings vs. 
conventional debt remain an attraction for issuers, but such greeniums compared with conventional bonds are not 
universal, our analysis suggests. 
High energy costs mean national security and financial liquidity may be prioritized over ESG credentials. Regulatory 
proposals such as an EU gas price cap may delay some transition projects. Positively, though, legislation like the US 
Inflation Reduction Act, the possible resumption of China-US climate talks and new commitments at COP27 may 
durably boost transition investment. 
Labeled Issuance 
 
Source: Bloomberg Intelligence 
 
Green Bonds to Retain Appeal Despite Softer Volume 
The largest security type within sustainable debt continues to be green bonds, which have accumulated over $440 
billion in issuance so far in 2022. Governments including supranationals are the largest issuing sector, representing 
36% of issuance year-to-date, with the European Union, the European Investment Bank and France leading with 
over $10 billion per year over the past two years. 
We believe green bonds will continue to be the leading ESG security type even with softening economic 
conditions, as governments and corporates have an abundance of energy-efficiency and decarbonization projects

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to fund. These could include growing fields such as green buildings, electric vehicles and renewable power, but 
also industrial sub-sectors previously seen as less suitable for the instrument, such as fertilizers and polymers. 
 
Green Bonds By Sector 
 
Source: Bloomberg Intelligence 
Sustainability-Linked Bonds Adapt Better Than Covid’s Social Bonds 
Softer economies could also dampen the private sector's appetite for other types of ESG debt. Social bonds ($101 
billion issued so far in 2022) – dominated by sovereigns, supranationals and agencies, whose issuance behavior 
could easily move totals – are seeing a pullback after large amounts were issued to tackle Covid. With the 
pandemic ebbing, social and sustainability bonds, including municipals, look well-placed to finance "just transition" 
schemes blending environmental and local community benefits, perhaps in partnership with corporate issuers.  
Sustainability-linked debt fell to $416 billion year-to-date but remains popular with a range of industries thanks to its 
flexibility. More companies that have already used linked bank loans, often revolving facilities, may graduate to 
sustainability-linked bonds, which are more transparent. 
Social Bond Issuance Relies on a Few Mega-Issuers 
 
Source: Bloomberg Intelligence

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High-Carbon Businesses Line Up Transition Projects 
The energy and mining sectors are facing increased scrutiny of their carbon dioxide emissions, but also exceptional 
internally generated cash flows thanks to high commodity prices. With the economy turning and many banks 
aiming to reduce financed CO2 emissions, bond issuance for such activities may turn costlier. At the same time, we 
expect more interest in transition-related investments, like oil majors' expansion into wind and solar power, biogas 
and hydrogen (for example, BP's deal for Archaea Energy); miners' push into battery metals (BHP's bid for OZ 
Minerals); or container shippers' spending on methanol-powered vessels.  
Such moves could also preempt more “windfall profit” taxes as advanced economies try to shore up national 
budgets, including via carbon border adjustment mechanisms and higher carbon emissions prices. 
Oil & Gas Bond Issuance Down on Sector Rude Health 
 
Source: Bloomberg Intelligence 
 
Governments Play Growing Role in Policing `Green’ 
Going into 2023, we see governments and regulators in an unenviable position vis-à-vis the green transition. On 
the one hand, they will likely work to attract more investment by highlighting their own green roadmaps, including 
nationally determined contributions (NDCs) to the Paris Agreement. On the other hand, they are poised to take a 
harder line against perceived greenwashing by corporations and investors in order to maintain the public's 
confidence. 
Transgressions on the regulators' radars range from allocations of green bond proceeds to unsupported 
sustainability claims by investment funds. Regional differences may emerge, but we expect that a well-reasoned 
crackdown on miscreants may allow bona fide transition projects to access adequate funding, reflecting their 
genuine potential.

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Government Filing 
 
Source: UK's Financial Conduct Authority 'Sustainability Disclosure Requirements (SDR) and investment labels' consultation paper, 
October 2022

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34
Hong Kong and China Governance 
 
Stewardship Could Rise Despite Dilutive M&A and Audit Concerns 
Against the backdrop of the China-US audit saga, opposition to dilutive financing activities, executive 
compensation and non-accretive M&A/privatization proposals are the key governance topics to watch in Hong 
Kong and mainland China next year. Yet despite the selldown by significant shareholders, we expect rising support 
for stewardship and proxy voting participation. 
 
Potentially More M&A, Privatization Proposals 
As ESG issues gain prominence in shareholder meetings, M&A-related objectives remain the most common 
campaigns, according to Lazard. Minority shareholders have successfully blocked bids that were too low, such as 
the merger between Li Ka-shing's Power Assets Holdings and CK Infrastructure in 2015. Only 50.8% of votes 
approved the deal, falling short of the 75% threshold. Among minority investors, 26% rejected the deal, which 
required that no more than 10% voted against the proposal. 
China Resources Holdings scrapped a plan to combine two units, China Resources Gas and China Resources 
Power, in 2013 after 64% of minority shareholders voted against it. In 2008, China Eastern Airlines rejected an offer 
from parent Air China to buy a stake. Hong Kong courts in 2009 blocked Richard Li's proposed buyout of PCCW. 
Global Activist Campaign Objectives 
 
Source: Bloomberg Intelligence 
 
Capital Raising Amid Slump Could Fuel Shareholder Ire 
Shareholder support for capital structure proposals is declining, given that a majority of Hong Kong boards are 
issuing shares at a time when stock prices are falling. This not only undervalues companies but also dilutes the 
stock held by existing shareholders. Raising shares is more beneficial to stakeholders when stock prices are high to 
minimize dilution. Yet only a handful of companies – such as PAX Global Technology, China Oilfield Services, 
Shenzhen International Holdings, Giordano International, WH Group and Sinopharm Group – proposed issuance 
shares amid rising stock prices this year. 
Hong Kong companies that proposed a share issuance this year have fallen 14% on average. The number of proxy 
proposals for capital structure that had a low voting approval (50-80%) rose to 122 in 2022 from 84 in 2021 and 81 in

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2020. 
HK Firms: Share Issuance Proposed at Higher Prices 
 
Source: Bloomberg Intelligence 
 
More Scrutiny Likely on Performance-Linked Compensation 
Rising shareholder support for director compensation in Hong Kong over the past three years and aligning 
executive pay with relative shareholder returns will be crucial to ensuring approval remains high. Investors might be 
more inclined to vote against larger pay packages that aren't justified by company performance, given the current 
inflationary environment and lack of supportive policies to lift the economy. The number of proxy proposals for 
director compensation that had low voting approval (50-80%) fell to five this year vs. 13 in 2021 and 18 in 2020. 
Emoluments for CK Hutchison's co-managing director Canning Fok rose 15.5% to HK$192 million in 2021, even as 
the company's share price fell 7%. That for Tencent president Martin Lau dropped 24.5% to 323 million yuan last 
year amid the stock's 19% price dive. 
HK Proxy Proposals With 50-80% Voting Approval 
 
Source: Bloomberg Intelligence 
 
Bottom-Up: Top Dogs Have Reduced; Trend Is Slowing 
The interest of the 15 largest shareholders in the outstanding shares of Hang Seng Index members has fallen since 
2019, but the trend appears to be slowing through the end of 2022. The reduced shareholdings mainly came from 
the largest five shareholders, reflecting that top-tier asset managers such as BlackRock and Temasek could be 
reducing their exposure to Hong Kong-listed companies. Tencent also distributed its JD.com stake to shareholders

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36
as a dividend while its biggest shareholder Naspers sold more shares of Tencent despite pledging not to. 
Largest Five vs. Largest 15 Shareholders 
 
Source: Bloomberg Intelligence 
 
Extreme Concentration Declines; Curbing Manipulation 
A focus on diversifying and increasing the number of shareholders could be rising, based on the sudden decline of 
Hong Kong companies with high shareholding concentration. Some companies can appear to maintain the 
minimum required public float, even if a small number of shareholders holds their shares. Both HKEX and the 
Securities and Futures Commission alert the market when companies have a high shareholding concentration with 
more than 90% of their shares held by 10-20 shareholders. Only four such companies were alerted this year vs. 14 in 
2021 and 13 in 2020. 
HKEX requires listed firms to maintain a public float of at least 25% to ensure an open and fair market. 
Extreme Shareholding Concentration Alert 
 
Source: Bloomberg Intelligence

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37 
Labor 
 
Could 2022 Labor Headwinds Turn to Tailwinds in 2023? 
This year has seen significant labor disruption with staffing shortages, strike threats and rising wages. High levels of 
turnover weighed on productivity. In 2023, companies with strong retention may start to reap benefits as recent 
hires ramp up. In the event of an economic downturn, companies that minimize layoffs might see better 
productivity and lower recruiting and training costs. 
 
Markets Learned Value of Human Capital 
This has been a year of labor disruption. The US quit rate touched a more than 10-year high in late 2021 as layoffs 
hit the lowest levels in over a decade. Resignations are running about 50% above average, while layoffs are near 
30% below, suggesting a historically wide gap in favor of labor. The tight worker supply created significant 
challenges with reduced operations, high wage inflation and strike threats across a swath of industries. There was 
renewed interest in unionization at companies such as Apple, Starbucks and Amazon.com. Wages have risen, but 
labor disputes centered on quality-of-life issues such as scheduling in many industries. 
High turnover can come at a big cost as companies need to attract, train and retain talent. New hires need time to 
ramp up. A recent report indicated Amazon's elevated turnover cost the company $8 billion. 
US Quits vs. Layoffs 
 
Source: Bloomberg Intelligence 
 
Poised for Productivity Gains in 2023? 
As companies hired and trained new staff in 2022, many suffered a significant drop in labor productivity, forcing 
companies to curtail operations and limit services. In early 2022, the trend in US labor productivity slipped to a 
multi-decade low. This manifested as canceled flights, delayed shipments, limited hotel housekeeping and slow 
customer service. These headwinds could start to reverse in 2023. For companies able to retain recent hires, 
operating efficiencies might start to accrue as these new workers move up the learning curve. 
The CEO of Delta Airlines indicates the company is working through a training bottleneck, noting that to replace

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2,000 senior pilots, you almost have to train 12,000. The company is operating at roughly 85% pre-pandemic 
capacity. 
US Labor Productivity, Output Per Hour, Q/Q Change 
 
Source: BLS, Bloomberg Intelligence 
 
Labor Lessons Learned? 
Labor markets have remained tight, even as indicators suggest potential economic softening. US unemployment is 
hovering near 50-year lows. Should the global economy tip into recession, companies that spent the post-Covid-19 
recovery struggling to attract and train staff might prove more reluctant than normal to let workers go during a 
downturn. Companies have increased investments in technology and automation to decrease the labor burden. 
Robots are making tortilla chips at Chipotle, cleaning floors in hotels and filling prescriptions at Walgreens. 
Driverless taxis are on the roads in some cities. 
While deploying technology has the potential to reduce costs and improve the quality of life for the remaining staff, 
this needs to be managed carefully. Automation is the major sticking point in a labor dispute at a West Coast port. 
Lessons to Be Learned 
 
Source: Bloomberg Intelligence

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39
Changing Climate Raises New Risks to Labor 
In a viral video, a UPS worker collapsed on a porch from extreme heat. Weeks later, during a heat wave, company 
employees protested working conditions at a non-air-conditioned New York facility. The US government 
investigated Amazon after a storm damaged a facility, killing six workers. A changing climate is creating new risks 
for workers, which may affect operations across a wide range of companies and geographies. A UN report, citing 
IPCC analysis, concluded that lost productivity related to extreme heat could exceed $2 trillion by 2030. To address 
this, companies may have to alter and shrink operating hours, invest in air conditioning and other forms of 
mitigation, and comply with mounting regulatory requirements. 
Global Temperature Change (C) 
 
Source: Bloomberg Intelligence 
Labor Roadblocks to Realizing Technology Potential 
As traditional industry embraces technological solutions, companies increasingly need to compete to attract and 
retain workers with the requisite skills. Technology can help the mining industry improve its ESG footprint with 
lower operating emissions and improved safety. But miners must compete with well-paying technology companies 
and industries such as electric vehicles for tech staff. Once hired, retaining staff with in-demand skills can be a 
challenge. By some estimates, Exxon's recent attrition has run nearly double peers, attributed at least partly to a 
culture that has alienated younger, diverse and skilled talent who were lured away by Microsoft, Amazon and 
leading consultants like Bain.  
Focusing on retraining existing talent is one solution. Teck Resources is targeting $200 million in training/skills 
development. 
More Lessons to Be Learned? 
 
Source: Bloomberg Intelligence

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Green Trade 
 
Green Protectionism Steers Trade, Supply-Chain Reshaping in 2023 
Efforts to strengthen supply-chain resiliency and to accelerate a shift away from fossil fuels are fueling tensions that 
will increasingly weigh on US and EU trade decisions in 2023, we believe. The US-China technology rivalry could 
continue curbing the aspirations of China's chip industry while the US debates the role foreign suppliers should 
play in the efforts to lift solar's share of the energy mix to 30% from 3% in 2030. The EU’s first carbon border tax to 
put a price on emissions embedded in imports could begin to roll out and redesign the industrial competitiveness 
landscape well beyond Europe. 
 
Carbon Border Taxes Can Speed Shift From Fossil Fuel 
EU plans to adopt a tax on carbon emissions embedded in imports could concretely accelerate the decarbonization 
of several industrial segments. In particular, this would tackle the carbon footprint of energy, construction and agri-
food companies that are key users of the materials targeted by the EU Carbon Border Adjustment Mechanism. The 
EU tax would initially cover imports worth less than 5% of the bloc's total imports, but still amount to almost €25 
billion a year under our core EU carbon-price scenario of €75 a metric ton, we calculate. 
US plans to adopt a similar levy in response to the EU CBAM may have been reduced with the US' Inflation 
Reduction Act and would require a bipartisan compromise to pass, but other EU partners may adopt similar 
programs in response to effects on their exports' competitiveness. 
Average Carbon Intensities: Europe vs. Partners 
 
Source: Bloomberg Intelligence 
 
US Solar Industry Struggles to Balance Industrial, Green Goals 
Efforts to meet US clean-energy targets through solar can reap the benefits of both Made-in-America regulatory 
initiatives promoting domestic production and milder tariff actions on solar products. Yet the outlook for the 
availability and price of Asian supplies of solar equipment remains uncertain as 2022 nears an end, with a US 
Commerce Department probe result that could lead to the adoption of tariffs starting in 2024 on key US Southeast 
Asian suppliers accounting for 80% of total imports. 
The Biden administration set the annual solar target at 30 GW by 2025 and 60 GW by 2030, which could be 
difficult to achieve without the inputs of overseas suppliers. That goal is crucial for the nation's energy-mix target of 
40% electricity derived from solar by 2035, and instrumental to the overall net-zero emission goal by 2050.

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PV New Build: World Top 5 Countries 
 
Source: Bloomberg Intelligence 
 
US Regulatory Moves Sketch 2023 Gloom for China Chip Industry 
Tariffs and regulatory barriers might lock China into its current low share (5%) of global chip sales, with non-tariff 
measures currently weighing the most. US export restrictions, license requirements, restricted entity lists, increasing 
foreign investment scrutiny and actions limiting the employability of staff of US nationality affect US sales to China 
and may hinder Beijing’s aspirations to climb the added-value ladder of the global semiconductor industry, just as 
the "Made in China 2025" plan pours effort into narrowing the technological gap with the US. 
Chinese companies still concentrate on the assembly and testing segments of the industry's global supply chain, 
missing out on the 90% of total chain value that's in the design and manufacturing segments dominated by the US. 
Global Chip Sales' Market Shares 
 
Source: Bloomberg Intelligence, Hinrich Foundation

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EV Subsidies Are Double-Edged Sword for Climate-Change Fight 
New conditions attached to the US Inflation Reduction Act's electric-vehicle (EV) tax incentives could boost the sales 
of clean industries domestically but slow the development of those relying on global supply chains. As more than 
half of the $8 billion of batteries imported by the US came from China in 2021, the IRA's provisions could dent the 
profitability of non-US EV and EV-battery makers as well as affect pre-discounted prices in the US. 
In 1H22, the top three EV-battery makers worldwide were Asian, based on SNE Research data: CATL (34% of global 
sales), LG Energy Solution and BYD. These are among the companies that may see US revenue decline on the 
competitive disadvantage posed by the new rules. 
Battery-Powered EV Sales 
 
Source: Bloomberg Intelligence 
 
Ukraine War Supply Disruptions Defy EU Green Farming Push 
EU sustainability efforts in agriculture may continue facing pushback in 2023 as the war in Ukraine keeps pressure 
on global farming, war-induced food supply and prices, and affordability concerns shadow green-agriculture goals. 
With $2.4 billion of Russian fertilizer exports to the EU, and Russia and Ukraine's historical 30% share of global 
wheat exports still at stake, EU proposals to curb pesticides (by 50%) and fertilizers (20%) by 2030 are now unlikely 
to make a breakthrough before the end of the EU's current mandate in 2024. 
A 2022 Green-Deal draft law requiring EU pesticide use to be halved by 2030 was sent back to the drawing board 
by EU member states in June as more robust impact assessments of the associated costs are sought.

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Top EU Fertilizer Producers' CO2 Emission Goals 
 
Source: Bloomberg Intelligence 
 
Supply Chains, Strategy Guide US Tariff Changes More Than Prices 
US tariff decisions in 2023 on Chinese green goods' exports are likely to support industrial strategies aiming at 
boosting domestic production and diminishing the exposure of North American supply chains to China. As inflation 
pressures may have passed their peak, clearing at least in part potential price concerns, some tariffs may remain in 
place to shield domestic industries as they grow with the help of domestic incentives, while others could be 
reduced through waivers and exemptions to satisfy specific internal demand needs. 
US Section 301 tariffs, in place since July 2018, still affect US imports worth almost $350 billion from China with a 15-
25% surcharge. A decision to prolong some of those may take place in early 2023, in absence of clear evidence 
showing a link between tariff and price levels. 
US CPI, USD/CNY Exchange Rate, Tariff Dates 
 
Source: Bloomberg Intelligence

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Analyst Contacts 
 
 
Adeline Diab 
Director of ESG 
Research EMEA & 
APAC  
Adiab15@bloomberg.n
et 
 
Eric Kane 
Director of ESG Research 
Americas 
Ekane19@bloomberg.net  
 
Clelia Imperiali 
ESG Analyst 
Cimperiali1@bloomber
g.net  
 
Rob Du Boff 
Senior ESG Analyst 
Rduboff6@bloomberg.net  
 
Remus Negoita 
ESG Credit Analyst 
Rnegoita2@bloomberg
.net  
 
Shaheen Contractor 
Senior ESG Analyst 
Scontractor2@bloomberg.net  
 
Grace Osborne 
Senior ESG 
Integration Associate 
Gosborne7@bloomber
g.net 
 
Gail Glazerman 
Senior ESG Integration 
Analyst 
Gglazerman1@bloomberg.net

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written consent of Bloomberg Finance L.P. Copyright and Disclaimer notice on page 36 applies throughout. 
45
Analyst Contacts Continued 
 
 
Rahul Mahtani 
ESG Equity Quant 
Strategy 
Rmahtani6@bloomber
g.net 
 
Christopher Ratti 
Senior ESG Credit Analyst 
Cratti2@bloomberg.net  
 
Michelle Leung 
ESG Analyst 
Wleung113@bloomber
g.net  
 
Ortis Fan 
ESG Integration Analyst 
Cfan110@bloomberg.net  
 
Lu Yeung 
ESG Analyst 
Lyeung39@bloomberg.
net  
 
Conrad Tan 
ESG Analyst 
Ctan600@bloomberg.net  
 
Melanie Rua 
ESG Associate 
Mrua1@bloomberg.net 
 
Cindy Lam 
ESG Associate 
Slam185@bloomberg.net

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written consent of Bloomberg Finance L.P. Copyright and Disclaimer notice on page 36 applies throughout. 
46
 
Analyst Contacts Continued 
 
 
Margot Wentzel 
ESG Associate 
Mwentzel2@bloomberg.net

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47 
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