ESG Focus: The Little Big Things – 14-07-2025

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The sustainability industry and ESG protocols took some major steps forward in Europe while the US unravels decarbonisation efforts at home.

-Supermarkets confronted with salmon farming challenges
-Sustainability funds rethink Defense
-Trump's Big Beautiful Bill aint so beautiful for the environment 
-Cybersecurity risks hit Qantas Airways
-France Cracks Down on throwaway threads

By Danielle Ecuyer

The fishy matter of sustainable salmon

Jarden touches on the slippery issue of salmon sourced from Macquarie Harbour by Australia’s two largest supermarket operators, Coles Group ((COL)) and Woolworths Group ((WOW)), which draws together two major issues according to the broker: the environmental impact of salmon farming in Macquarie Harbour, including the decline in the endangered Maugean skate, and overarching concerns regarding salmon farming practices in Tasmania.

With pre-existing issues around oxygen levels in Macquarie Harbour, which has been described as “bathtub-like” due to its narrow entrance, the Maugean skate population has fallen by -64% between 2014-2021, having previously been abundant.

Several factors are impacting oxygenation, including elevated levels of freshwater from hydroelectric power generation, treated wastewater, rising ocean temperatures, run-off from rivers and organic inputs from salmon farming.

Beyond Macquarie Harbour, in February a mass salmon extinction event with more than 13,500 tonnes of salmon dying between January and March this year occurred in Huon’s Zuidpool lease. In addition, an EPA report indicated 1,133kgs of an antibiotic was given via fish feed between February 13 and February 26.

Huon, which is owned by Brazilian company JBS, has since lost its RSPCA certification after live salmon were filmed being put into tubs of dead salmon, and oily globules composed of salmon fat were washing up on beaches.

Macquarie Harbour has three companies farming salmon; Huon, Tassal and Petuna with production having dropped by -50% since peak levels in 2016. When combined with other measures to improve oxygenation, scientific evidence reports show levels of Maugean skate have risen back to 2014’s.

It is not hard to see how the optics around salmon farming under an ESG and sustainability lens is blurry at best for Australia’s major supermarkets. The nub of the issue is the fact Coles and Woolworths rely on three certifications to qualify sourcing salmon from Macquarie Harbour under a generic “Responsibly Sourced” label.

Australian Stewardship Council (ASC) has not certified the harbour since 2018 due to environmental non-compliance, and Best Aquaculture Practices (BAP) and GLOBAG.A.P. currently used have no dissolved oxygen compliance limits.

Under the generic label there is no qualification as to which certification applies.

Jarden emphasises under OECD guidelines biodiversity impacts must be included, and certification alone does not meet the sufficient due diligence.

The Conservation Alliance for Seafood Solutions recommends companies discontinue sourcing products which have bad outcomes for endangered species.

With growing pressure from environmental groups, Coles has accepted the impacts of farmed salmon on the skate and reduced supply from the harbour. Woolworths has said it will commit to increased transparency. Shareholder resolutions are proposed for 2025. Shareholder resolutions regarding sourcing of salmon achieved solid support at last year’s AGMs receiving 39.1% support from Coles shareholders and 30.4% at Woolworths gathering.

Jarden believes both supermarkets should initiate measures to improve both reporting and due diligence for farmed salmon to manage reputational risks and “build social license” by being at the forefront of sustainability.

Europe debates defence

European sustainability funds and protocols are meeting a major challenge head-on, as explained by Morgan Stanley.

European defence sits at the intersection of two of the broker’s four key investment themes, notably a Multipolar World and Tech Diffusion and, increasingly, Sustainability.

NATO’s AI military spend is estimated to have the potential to double to around US$112bn by 2030, with a bull case of it reaching US$360bn. As the focus on national security rises (with an accompanying outperformance of defence-related companies), there is a push for exclusion of weapons from Sustainability Funds to be eased.

There is currently no consensus on what can or shouldn’t be included, but increasingly asset managers are reconsidering historic exclusions and launching thematic funds concentrating on security and resilience.

The potential for accelerated technological integration of the likes of AI and cybersecurity might pave the way for a more “forward-looking” and risk-aware approach to sustainable investing around a national security theme, the analyst proposes.

Europe’s defence budget has remained relatively stable in real terms for the last 30 years, notably contrasting with the growing military spending from the US, China and Russia over the same period.

The pace of AI integration into Europe’s growing defence investment is expected to grow across aerospace and defence companies. Morgan Stanley’s assessment across categories including number of AI applications, dual-use applications, AI-pricing power, Responsible AI policy and partnerships for both external and internal products, isolated Airbus, Rolls-Royce, Leonardo, Rheinmetall and Thales.

All these companies have technology ready across three or more categories. Airbus, Rolls-Royce, Rheinmetall and Leonardo are Overweight rated by the broker’s European Aerospace & Defence desk.

Qantas’ data leak

Macquarie’s latest ESG snacks highlighted Qantas Airways’ ((QAN)) cyberattack which saw over six million customer records being exposed illegally.

On July 2, the company announced a third-party breach which originated from an offshore call centre’s third-party client service platform and compromised personal details including names, phone numbers, email addresses, dates of birth and frequent flyer numbers.

Not all data points were accessed for each impacted customer. The breach represented around 35% of the Qantas frequent flyer base.

Under the government’s updated Privacy legislation in October 2022, no fines have been issued and Qantas’ cyber insurance is flagged as likely to assist recovery.

Macquarie stresses cyberattacks via supply chains are a growing risk for corporates and underscore the importance of cybersecurity and resilience of supply chains, as well as a company’s core operations.

In other corporate news, ASIC has started a compliance assessment and inquiry into ASX‘s ((ASX)) market and clearing licensees with an expert panel to be announced that will investigate the company’s governance, capability and risk management “frameworks and practices”.

The assessment comes on the back of the December 2024 CHESS settlement failure and upgrade to the system. Macquarie also notes the ASX’s strategy is ongoing towards improving culture, capabilities, risk management, and resilience across business operations and technology.

Costs related to ASIC’s investigation were not part of the company’s FY26 and FY27 guidance as outlined at the June 11 Investor Forum.

One Big (not so) Beautiful Bill

The US’s “One Big Beautiful Bill” was approved by Congress and will result in the removal of green energy incentives as well as funding for immigration crackdowns and making Trump’s 2017 tax cuts permanent, with new tax breaks promised in last year’s campaign.

The main changes to clean energy:

-EV tax credits and low-carbon building credits will be eliminated after September 30, seven years earlier than originally intended.

-Solar and wind projects can use Inflation Reduction Act (IRA) tax credits only if construction begins before June 2026 and when operational by the end of 2027.

-Other low-carbon energy sectors like batteries, nuclear, geothermal and hydropower will continue to claim IRA credits with credits phasing out from 2032.

-Clean hydrogen tax credits will end for projects beginning construction after 2027.

-Low-carbon transport fuel credits are extended by two years until the end of 2029, which is a positive outcome for biofuels.

-Credits for carbon sequestration will be retained and the credit for captured carbon for enhanced oil recovery will be raised to the same levels as for carbon set for geographical storage up to US$85/t from current levels up to US$60/t.

Other changes include the rescinding of environmental funding programs and the limitation of foreign entities to access IRA credits.

More snippets

The state of Victoria, in addressing declining gas supplies, announced gas hot water systems will be gradually phased out of all homes from March 2027 and electric systems will be mandatory for new constructions.

Higher energy efficiency standards will come into effect for rental properties and the rollback of proposals to force households to replace gas appliances has been removed.

In France, the Senate approved legislation to address the environmental and economic impacts of ultra-express fashion, targeting Temu and Shein, with European brands like Zara and H&M currently excluded from the law.

Low-quality, disposable clothes boost overconsumption and waste, with 600kt of textiles thrown away annually in France.

The Australian Sustainable Finance Institute released the Australian Sustainable Finance Taxonomy which is aligned to the Paris framework and classification system for green and transition finance.

The protocol is aimed at guiding investments and financial activities towards sustainability goals in Australia, including climate change mitigation, protecting biodiversity and promoting social well-being.

The adoption of taxonomy is currently voluntary, but Macquarie believes numerous financiers and investors will come to rely on taxonomy’s classifications to inform investment decisions.

Six priority sectors are covered by the taxonomy: Agriculture and Land; Minerals, Mining and Metals; Manufacturing and Industry; Electricity generation and supply; Construction and Buildings; and Transport.

There is also a Do No Significant Harm framework as part of the taxonomy to ensure climate-aligned activities do not undermine other environmental objectives, including biodiversity or pollution prevention and control.

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