Week 8: Do not go gentle into that good night

In this issue: ▸ ESG ratings both wrong and scary ▸ Executives get “green” bonuses despite slow progress ▸ The US will make “no apologies” for green jobs ▸ And much more...

Dear all, 

Do Not Go Gentle into that Good Night.

I have to start this newsletter by mentioning that poem by Dylan Thomas. You can read it at the end of the newsletter.

It got stuck in my head like a butcher’s knife. I can feel the words pressing my chest and squeezing my breath. I can sense the intensity in which it was written.

Defiance, hope, love, sadness, rage. A plea that points at each one of us who reads it.

Do not go gentle into that good night. Rage against the dying of light.

We need to rage more, far more than we have been raging so far.

One of my good friends told me the other day: “If those 90% of the population on this planet really understood how screwed they are by the 10%, they would take to the streets immediately.”

Thanks, Ravi. This observation is so right.

Why ESG ratings are both wrong and scary

Is the current use of ESG ratings in the world of finance yet another tool to oppress developing countries and companies operating in those markets?

As it is today, it certainly looks like it. An ESG rating agency based in NYC, London or Paris issues an ESG rating for a company operating in Indonesia. It is done in an automated way and the sector weightings are applied as well as a benchmarking evaluation compared to peers. Local context in not taken into account, nor have any residual local impacts been taken into account.

The company gets a CCC rating due to lack of disclosure and lack of stringent Anglo-Saxon corporate governance practice. With that ESG rating this Indonesian company will most likely never become a worthy member of the ESG investable universe and as such will remain in the shadows of possible. The company may have significant local presence and have a number of social aspects to their business that enable a number of people to secure their livelihood, yet, simply because ESG rating agencies are using one measurement stock, i.e. a Western one, they don’t fit. We rule the world and as such we decide the rules. You obey or you are out.

There is something scary, very scary about this. ESG is becoming a tool that upholds the system of the 10%. It is not and never was the intention of ESG. The current ESG ratings provided to the financial markets are simply not only wrong, they are also not really helping us to develop the markets and companies where ESG measures would most likely make the biggest difference.

Executives get “green” bonuses despite slow progress

What you are just about to read – from this and this article – is an example of how the system is upheld as well as who is upholding it. You have to digest this one. No, I mean it you have to read this (I felt lost when I read it):

Bosses at Europe’s largest companies received “surprisingly high” bonus levels for meeting goals to cut carbon emissions in 2022, easily achieving their targets despite inadequate progress on global warming, the latest executive pay expert report finds.

More than three-quarters of Europe’s 50 largest companies now include some form of carbon target in their executive pay packages, a new report from PwC and the London Business School said.

But the robustness of these targets and the ease at which business leaders were being awarded their “green” bonuses was called into question by the study. For the carbon target-linked pay-outs by companies in the Stoxx Europe 50 index disclosed in 2022, half were paid out at 100 percent of the total available bonus pot, while the average was 86 per cent.

“Current levels of playout don’t seem consistent with the slow progress we’re making on climate change,” said Tom Gosling, executive fellow at LBS’s Leadership Institute and an adviser to boards on pay for two decades. Gosling said there was a risk that rewards to executives for the “unstoppable” need to address climate change “just results in more pay — not more climate action”.

Companies that have introduced climate-related targets in pay include Shell, where work on the energy transition by the oil and gas group accounts for 10 percent of the executive long-term incentive plan. In 2021, Shell awarded 180 percent of a maximum of 200 percent of the LTIP that was linked to the energy transition.

In its annual report, Shell said the payouts for then-chief executive Ben van Beurden and former chief financial officer Jessica Uhl came after the group met decarbonisation targets and developed new renewable energy projects, as well as investing in ventures to produce “low-carbon” fuels.

Shell has committed to reducing the carbon intensity of the energy products it sells by 20 percent by 2030, and by 45 percent by 2035, but not to a reduction in absolute emissions. This would require bigger cuts to the amount of oil and gas it produces.

The short version is:

WE ARE NOWHERE WITH REGARDS TO TACKLING CLIMATE EMERGENCY. CO2 EMISSIONS ARE GOING UP.  

It is an absolute game. It was never relative.

And at the same time, at the very same time we learned this:

Shell, ExxonMobil and the Dutch government earned €429bn from exploiting the Groningen gasfield, but left thousands of residents with cracked homes and health issues, a parliamentary investigation has found.

The geological destabilisation caused by drilling at Groningen, Europe’s largest natural gas reserve, resulted in 1,594 earthquakes and damaged more than 85,000 buildings, a Dutch parliamentary report concluded on Friday.

The profits attributed to the two energy majors were €66bn while the biggest beneficiary of the extraction was the Dutch treasury, which earned €363bn in revenues over the past 60 years, it said.

The state and companies earned a lot of money but they ignored signals that there was a causal relationship between gas extraction and earthquakes and when it was proved that this connection was there, they underestimated the severity of how bad these earthquakes were.

The US will make “no apologies” for green jobs

You know, the climate emergency has never been about cutting CO2 emissions for the sake of our own life or for the coming generations. How stupid and naïve that is. No, it is simply business and – even more – it is a competition to the bitter end.

You have to pay attention to the narrative. The US will make “no apologies” for prioritising American jobs in its push to lead the global clean energy contest, the White House official responsible for the $369bn green funding drive has said.

In an interview with the Financial Times, John Podesta, Joe Biden’s senior clean energy adviser, pushed back at criticism that the US Inflation Reduction Act would divert investment and undermine the EU economy. He argued that allies who have hit out at the IRA should “welcome US leadership”.

“We make no apologies for the fact that American taxpayer dollars ought to go to American investments and American jobs,” Podesta said, calling on Europe to take responsibility for developing its own clean energy sector. “We hope that the European industrial base will succeed, but it’s up to Europe to do some of the work,” he added. “We’re not going to do that all for them.”

More than $90bn in green investment has poured into the US since last year’s passage of the IRA, which includes $369bn worth of tax credits, grants and loans to boost renewable energy and slash emissions. But EU politicians fear the subsidies’ scale could undermine the bloc’s own efforts to secure green investment, with Emmanuel Macron warning the IRA could “fragment the west”.

The IRA, which seeks to reduce emissions to half their 2005 levels by 2030, provides tax credits for groups that source parts and materials from countries with which the US has a free trade agreement. That excludes the EU and Japan, which lack such deals with the US.

Dismissing claims of rivalry with Europe as “hollow” because of Biden’s efforts to rebuild alliances and support Ukraine, Podesta argued more clean energy innovation and investment in the US would drive down costs and open opportunities elsewhere.

US energy firms use Ukraine to lock in gas deals

And the story sort of takes us a step further down the hole: US oil and gas companies are pushing to solve the short-term problem of a tight European gas supply, driven by Russia’s invasion of Ukraine, with long-term liquefied natural gas (LNG) contracts, a new report shows.

The US fossil fuel industry has locked in 45 long-term contracts and contract expansions since the start of the war, according to research by Friends of the Earth, Public Citizen and BailoutWatch. That’s a major increase from the 14 such contracts signed in 2021. While price volatility for gas in Europe is already easing, most of the new contracts won’t deliver gas until 2026 or later, after which they will lock in purchases for 20 years or more.

“LNG terminals are massively expensive, multi-decade investments,” said Lukas Ross, a co-author of the report and program manager for Friends of the Earth. “In order for a bank or other investor to feel comfortable writing a check for something like this, they need market certainty. And the way that certainty is delivered is through long-term contracts. But a short-term supply crunch should not be solved with long-term infrastructure.”

And then there’s the climate question. Taken together, the 2022 LNG contracts total 58.1m metric tons of LNG every year – that’s more than half the gas burned for cooking and heating in US homes in 2021. These contracts represent 351m metric tons of carbon dioxide emissions a year, equivalent to the yearly emissions of 94 coal plants or one-third of all US households. “How many of these projects are built – and how many years of extraction and emissions are locked in – is perhaps the most urgent climate policy question in the US today,” Ross said.

The ugly side of carbon offsetting

We end this rage newsletter with, well, the ugly side of the industry of carbon offsetting.

A number of Indigenous communities in the Amazon say that “carbon pirates” have become a threat to their way of life as western companies seek to secure deals in their territories for offsetting projects.

Across the world’s largest rainforest, Indigenous leaders say they are being approached by carbon offsetting firms promising significant financial benefits from the sale of carbon credits if they establish new projects on their lands, as the $2bn (£1.6bn) market booms with net zero commitments from companies in Europe and North America.

A huge global expansion of protected areas during this decade was agreed by governments at last month’s Cop15 biodiversity summit with a target to protect 30% of land and sea by 2030. The agreement puts respect for Indigenous rights and territories at its heart amid fears of land grabs.

Proponents of carbon markets, especially those that aim to protect rainforests, say that carbon credits are a good way to fund the new areas and pay Indigenous communities for the stewardship of their lands, as they have been shown to be the best protectors of forest and vital ecosystems. The resulting credits could then be used for climate commitments by western companies.

Many believe that although carbon credits are not perfect, they can provide the vital finance these projects need.

Johan Rockström, chief scientist at Conservation International, which manages a number of carbon offsetting projects, recently told the Guardian: “On the one hand, carbon offsetting is necessary, and has positive potentials of providing incentives and thereby generating much needed investments, for example in nature climate solutions [such as forests].” On the other, he says, are the risks that people will not then make the necessary reductions in their own emissions.

While some leaders recognised the potential benefits from well designed carbon markets, they warn that Indigenous communities are being taken advantage of in the unregulated sector, with opaque deals for carbon rights that can last up to a century, lengthy contracts written in English, and communities being pushed out of their lands for projects.

Examples include Peru’s largest ever carbon deal involving an unnamed extractive firm, where the Kichwa community claim they have been forced from their land in Cordillera Azul national park and received nothing from the $87m agreement. The park authorities say everything has been done in “strict compliance with current legal regulations and with special respect for the rights of Indigenous peoples”.

Several Indigenous communities spoke of training themselves in carbon market regulation and organising global exchanges to help others avoid falling victim to “carbon pirates”.

Read more here.

Do not go gentle into that good night

As promised, we end this newsletter with Dylan Thomas’ poem, because we need to rage more, much more.

Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.

Though wise men at their end know dark is right,
Because their words had forked no lightning they
Do not go gentle into that good night.

Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light.

Wild men who caught and sang the sun in flight,
And learn, too late, they grieved it on its way,
Do not go gentle into that good night.

Grave men, near death, who see with blinding sight
Blind eyes could blaze like meteors and be gay,
Rage, rage against the dying of the light.

And you, my father, there on the sad height,
Curse, bless, me now with your fierce tears, I pray.
Do not go gentle into that good night.
Rage, rage against the dying of the light.

Please, don’t go gentle into that good night. We need your rage.

/ Sasja