Discover more from ESG on a Sunday
Week 20: Oh, what a party we have here!
In this issue: ▸ Exxon’s noble enterprise! ▸ Who’s feeling the heat? ▸ Carbon credit chaos for Gucci ▸ Did you see who just walked into the party? ▸ And much more...
You think you know? Are you sure? Really? Or maybe it is better not to know? Or is it the other way around? Does it matter? Despite the rather odd start to this newsletter, everything you will read here is positive and good for all of us.
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We must see the opportunities, and don’t get bogged down with dark realities and petty losses. I mean some 100 people dead in the worst flooding in Italy in 100 years, and who knows how many in Ethiopia, is really nothing to get upset about. People die crossing the street. Houses will be rebuilt, and roads fixed and yes, some dear photos won’t be saved from the mud, but the EU will give aid and funds are available for all of that. So, seriously no need to be pessimistic.
Some business opportunities will emerge and some entrepreneurs in northern Italy will develop new housing solutions with floating houses and floating cows and floating cars and all of it is, you will see, for the better. Just close your eyes and feel it in. Can you see the lights and fireworks and nice cosy dinners under the open skies, some good wine and cheese, smiling faces and children playing?
Rising temperatures could lead to more than 9 million climate-related deaths each year by the end of the century, the World Health Organization (WHO) said in a report on Friday.
Despite contributing the least historically to global emissions, African countries, poorer nations and small island developing states face the greatest health consequences of climate change.
“All aspects of health are affected by climate change – from clean air, water and soil to food systems and livelihoods,” the WHO said. “Further delay in tackling climate change will increase health risks, undermine decades of improvements in global health, and contravene our collective commitments.” See! The opportunities are endless.
Exxon’s noble enterprise!
I think we should hail Exxon. And I also admit that the CEO of Exxon and the entire senior management should take control over the state of world affairs. As soon as possible. They know things, and they know much more about us than we will ever know ourselves.
I have great trust in those men. After all, they have managed to do things, some other people get many prison years for what these guys do and yet they are all free and they are running one of the most profitable criminal operations in the world.
You sort of must see this in a positive light. Exxon Mobil Corp. said the prospect of the world reaching net zero carbon dioxide emissions by 2050 is “highly unlikely” due to the drop in living standards that would come with such a scenario.
The Texas oil giant made the comments in a regulatory filing that argued against proxy adviser Glass Lewis’ view that the cost of phasing out oil and gas operations would be a material financial risk. The International Energy Agency’s Net Zero Emissions scenario, which models a phaseout of most fossil fuels by 2050, has little bearing in reality, Exxon said.
You get the angle here? It is us, our living standards they protect! Oh, Exxon. Such a noble enterprise. All of you buy stocks in Exxon! (You most likely have it already in your pension savings but buy more!) The other part, the one that we seriously need to thank Exxon for is that they, unlike the IEA, know what reality is!
Exxon urged shareholders to reject a resolution, backed by Glass Lewis, that the company should produce a report at its annual meeting on May 31 on the cost of shutting oil and gas operations that are no longer needed. What? Not needed? But Exxon is trying to protect our lifestyle!
Who’s feeling the heat?
Global temperatures are likely to exceed 1.5C above pre-industrial levels for the first time in human history within the next five years, the World Meteorological Organization has said in its latest annual assessment. In a stark conclusion, scientists said for the first time there was a 66 per cent chance that the annual mean global surface temperature rise would temporarily surpass 1.5C above pre-industrial levels in “at least” one year by 2027.
The chances of this outcome were also “increasing with time," the report said. The assessment of a two-thirds chance of a temporarily breach of the 1.5C threshold compares with estimates of around 48 per cent a year ago, and “close to zero” in 2015. The report, compiled by researchers from 11 organisations around the world, including those in Europe, North America, Japan and China, covers the years 2023 to 2027. Come on! It is not that dark and besides, Exxon knows it does not have any bearing on reality.
The world’s top fossil fuel companies owe at least $209bn in annual climate reparations to compensate communities most damaged by their polluting business and decades of lies, a new study calculates.
BP, Shell, ExxonMobil, Total, Saudi Arabia’s state oil company and Chevron are among the largest 21 polluters responsible for $5.4tn (£4.3tn) in drought, wildfires, sea level rise, and melting glaciers among other climate catastrophes expected between 2025 and 2050, according to ground-breaking analysis published in the journal One Earth.
It is the first time researchers have quantified the economic burden caused by individual companies that have extracted — and continue to extract — wealth from planet-heating fossil fuels. The study considers this to be a substantial yet conservative price tag, as the methodology excludes the economic value of lost lives and livelihoods, species extinction and other biodiversity loss, as well as other well-being components not captured in GDP. But hey! These companies are just protecting our lifestyle, so it does not degrade! See what they are doing to and for us!
Carbon credit chaos for Gucci
For all Gucci brand lovers out there… Zimbabwe has nationalised your CO2 offsetting and it looks like some other countries may do the same.
Zimbabwe’s government this week upended the global carbon credits industry. It announced, with no warning, that current contracts for the production of the securities in the country, bought by polluters around the world to offset their emissions, were invalidated. The state will take 50% of the revenue in any deals going forward, including the Kariba project to protect trees that’s one of the biggest such initiatives in the world.
The global market for carbon offsets is worth about $2 billion today and is projected to grow to as much as $1 trillion in 15 years even as it faces fundamental questions about credibility and effectiveness. Add government appropriation to the list of risks for this climate solution.
Zimbabwe’s move gives the government control of carbon credit production and cancels all past agreements with international organizations. That means more revenue generated from credits tied to protecting forests and other efforts to cut emissions will flow into national coffers rather than going to project developers.
There’s now risk that other countries might follow suit, creating new uncertainties for businesses that develop and sell offsets, corporations that purchase offsets as a way to counterbalance their greenhouse gas pollution and the cohort of traders who invest in this emerging asset class.
Corporate buyers who rely on carbon credits will also face new doubts. The government’s decision “will significantly impact companies that have been big buyers of offsets in Zimbabwe,” a group that includes Gucci, Volkswagen AG and Bayer AG, wrote Kyle Harrison, head of sustainability research at BloombergNEF. “Such decisions will affect companies’ sustainability plans.”
Treating carbon credits as just another export commodity underscores an imbalance at the heart of this global trade. Efforts to develop credits are usually funded by firms from wealthy countries and sold to corporate buyers in Europe and the US, yet most of the projects are located in emerging economies. This setup has been derided as a form of carbon colonialism that strips developing countries of an increasingly valuable resource.
Comments by officials in Zimbabwe have focused on one project in particular: Kariba, a supersized forestry effort operated in part by South Pole, the world’s leading seller of offsets. Mangaliso Ndlovu, minister of environment, climate, tourism and hospitality, said on Wednesday that the operators of the Kariba project will have to give the government half its revenue if the initiative is to survive; retrospective payments will not be sought. Gucci love for real!
Did you see who just walked into the party?
We dance on, it is a party and only the brave ones dance into the morning. The real positive spin starts now! The United Arab Emirates has invited Bashar al-Assad to attend the COP 28 climate summit in Dubai. Read this again. Bashar al-Assad, a despot who has tortured, imprisoned, bombed, gassed and besieged the people he is supposed to serve. Yes. This is how things are done. What a COP! Can you feel the energy and the heat?
Hundreds of thousands of people were killed in the civil war, during which the regime bombed and tortured civilians. What do you think they talk about when they meet? Climate emergency? Oh, yes. On the other hand, to finish on the positive side, if Exxon knows that has a bearing on reality, why shouldn’t UAE and Syrian governments chair the international human rights commission? I don’t see any issue with this. I mean they know how things work and they know what it takes! After all, all of this is good business for us. Music moves mountains and it goes on.
Climate conflicts? What climate conflicts?
As investors at shareholder meetings in recent weeks scrutinised bank directors’ abilities to manage risk and deliver returns, one striking fact may have gone unnoticed.
Non-executive directors at some of the world’s biggest financial institutions also have top roles at oil and gas or power companies, according to data compiled by the investigative website DeSmog and analysed by Moral Money.
Take Bank of America. Denise L Ramos, a director on its sustainability committee, has a surprising side gig: chair of the public policy and sustainability committee at Texan oil refiner Phillips 66. The refiner was among the 20 most obstructive companies on climate change last year, according to InfluenceMap’s lobbying record analysis. The bank declined to comment.
A few other examples stand out. Adebayo Ogunlesi — the chair of Goldman Sachs’s governance committee, which helps manage the bank’s exposure to climate change — is also head of the committee that oversees pay at Kosmos Energy, a Texan deepwater oil exploration company. His colleague Jessica Uhl, a director on Goldman Sachs’s audit, risk and governance committees, worked at Shell for nearly two decades — including as chief financial officer — before joining the bank last year. Wells Fargo director Theodore F Craver Jr, former boss of the utility Edison International, is also chair of the governance committee at US power company Duke Energy, which says it generates more than a quarter of its energy from coal. Morgan Stanley has boardroom links to the oil and gas industry too; director Rayford Wilkins Jr is a sitting board member of Texas-based oil refining company Valero Energy.
On average, around one in every seven directors at Bank of America, Goldman Sachs, Wells Fargo, Morgan Stanley and JPMorgan has ties to a company identified by Climate Action 100+ as a top global polluter, for example in aviation, steel, coal mining or oil and gas. This includes working as a director, chief executive or investment officer.
The practice is also common in Europe. The head of Barclays’s remuneration committee, Brian Gilvary, was formerly the chief financial officer at BP and now serves as non-executive chair of Ineos Energy, which said earlier this year that it was acquiring thousands of Texan oil wells. Amanda Blanc, chief executive of the insurer Aviva, is a non-executive director at BP. Blanc has no oversight of investment decisions by the group’s asset manager, Aviva Investors. Ah! Imagine when they all meet how much climate emergency gets discussed! Lovely!
CCS - running like clockwork…
The last dance before the lights turn on. Chevron Corp.’s flagship carbon capture and storage project in Australia faces years of work to hit full capacity, underscoring the challenge of a technology seen as necessary to help the world hit climate goals.
The Gorgon CCS project, one of the largest of its kind in the world, needs investment to boost performance and will be stuck at around one-third of its intended capacity until that’s completed, according to David Fallon, Chevron Australia’s general manager energy transition. Gorgon is designed to capture 4 million tons of CO2 a year from a Chevron-led liquefied natural gas plant on Barrow Island and store it in a subsea reservoir.
Since its commissioning in 2019, the project has been plagued with difficulties and is currently operating at a storage rate of about 1.6 million tons of CO2 a year. Oil and gas producers, along with other polluting industries, are stepping up global plans to deploy carbon capture projects, both to curb their own climate impact and to develop businesses that will handle emissions generated by third parties. The total number of proposed or operating projects jumped 44% in 2022 to about 196, according to the Global CCS Institute, an industry group.
Unlike many carbon capture projects which use depleted oil or gas wells to store CO2, Gorgon utilizes a saline aquifer that never contained fossil fuels and has encountered problems with water pressure. Solutions being reviewed by project teams include proposals to remove water and transfer it into another reservoir nearby, allowing CO2 to be injected at a higher rate.
An investment decision on that project is expected this year and completing the work would likely take years, rather than months, Fallon said. “That will allow us to move the CO2 injection rates back up,” he said. Under an agreement with the Western Australian government, Chevron must buy around 2.3 million tons-worth of carbon offsets every year to make up the shortfall in its capture capacity. From Zimbabwe maybe! See. It works! CCS is commercially viable and works like a Swiss watch, no need to look at the details. Smart guys from oil and gas companies, they know reality.
Dawn is upon us! The European Central Bank (ECB) announced the publication of its review of EU banks’ climate and environmental risk disclosure practices, indicating that while reporting has improved over the past year, very few banks are prepared to meet regulatory disclosure requirements set to take effect this year.
The assessment, covering 103 significant banks under the direct supervision of the ECB, and 28 other institutions supervised by national authorities, found that banks have significantly improved climate and environmental risk disclosure compared to the ECB’s review last year, with 86% of banks now disclosing material exposures to these risks, compared with only 36% last year.
Similarly, nearly all of the banks report on how their boards oversee climate and environmental risks, compared to around 70% in the prior assessment. Reporting on Scope 3 financed emissions, which typically account for the vast majority of banks’ climate footprint, also improved, with 50% now reporting, compared to only 15% last year, although the study found that most banks’ Scope 3 disclosures were not yet adequate, with only 16% providing complete, specific and substantiated information.
Despite the improvement, however, the ECB found that the vast majority of banks are not yet meeting their full reporting requirements, with only 6% of banks assessed as providing “broadly adequate” disclosure across all of the categories of the review.
The study comes as banks face near-term pressure to comply with sustainability-related reporting requirements under the European Banking Authority’s Implementing Technical Standards (ITS) on Pillar 3 ESG risks, which take effect this year, and include requirements to provide quantitative and qualitative disclosures on topics including climate-related transition and physical risks, asset exposures to climate change events, proportion of financing activities aligned with the EU Taxonomy, and Scope 3 aspects, among others. Some banks will be required to make their first disclosures under the new rules as soon as June 2023.
I wish us all a great ‘bäääääääääää sheep’ week!
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