June 17, 2022 - Sustainability Decoded Newsletter
Energy Crisis Deepens
Soaring energy prices have set off new investments in fossil fuel projects that could lock the world into “irreversible warming," says a new report by the Climate Action Tracker (CAT). “There seems to be really a gold rush for new fossil fuel infrastructure,” noted Professor Niklas Hohne, a CAT member.
New liquefied natural gas (LNG) facilities have been proposed in Germany, Italy, Greece, the Netherlands, and Canada, while countries like the US, Qatar, and Egypt have all signed new deals to export LNG to the EU. Fuel from Canada’s oil sands–some of the world’s dirtiest–is again in hot demand. UN Secretary General Antonio Guterres summarized the crisis in forceful words: “The war has reinforced an abject lesson: our energy mix is broken.”
Food or Fuel?
Soaring fuel prices have reopened the debate around using crops for biofuel. The embargo on Russian oil exports led to the current price spike and its invasion of Ukraine is stretching food supplies to the limit. The global effects of this conflict demonstrate how connected the world has become.
When the choice is food vs. fuel, the answer is clear: Food. “Now is not the time to be encouraging the conversion of food crops to energy,” asserted a statement from the International Food Policy Institute. The sentiment was echoed by large food companies and policymakers calling for an ease in policies incentivizing or mandating biofuel production as the UN warns that the war will spark a famine that could affect hundreds of millions of people.
GOP vs ESG
A POLITICO investigation found that financial regulators in West Virginia plan to blacklist six major financial institutions from access to state contracts over their support for climate protection policies. POLITICO’s public records request revealed that this blockage could go into effect in the next 45 days, after West Virginia treasurer notified BlackRock, JP Morgan Chase, Morgan Stanley, Goldman Sachs, Wells Fargo and U.S. Bancorp that they’d been placed on the state’s Restricted Financial Institutions list.
The consequence is that the firms are ineligible to enter or remain in contracts with the state- unless they respond to the Treasurer with “information showing they’re not boycotting the fossil fuel industry.” West Virginia ranks in the top 5 for coal and natural gas production which fuels its opposition to climate policies. The Texas GOP launched a similar campaign earlier this year.
This divide is being played out in public comments submitted to the Securities and Exchange Commission (SEC) on the proposed rule mandating climate reporting. In May, over a dozen House Republicans from the Committee on Oversight and Reform submitted a letter concerned about the impacts of the proposal on not only public companies, but also on private companies that do business with public companies. Another letter from House Republicans on behalf of the farmers and ranchers of America doubled down on this point, asserting the rule would burden small farmers: “To do business with public companies, small farms would be required to disclose a significant amount of climate-related information.”
My colleague and former SEC staffer, Kristina Wyatt, refutes these assertions in her Newsletter - Full Disclosure: “This argument doesn’t recognize that public companies don’t have to obtain emissions data directly from all of their suppliers in order to report their Scope 3 emissions… The Greenhouse Gas Protocol acknowledges this issue and states in its Scope 3 Technical Guidance.”
Following the fine of BNY Mellon for greenwashing and the police raid (and CEO resignation) at DWS, the crackdown on greenwashing continued this week when the news broke that the SEC is now investigating Goldman Sachs. The probe is looking into environmental, social, and governance claims made by Goldman Sachs funds.
Clearing up the Alphabet Soup
A new report from Persefoni and ERM examined the convergence and differences of emerging climate disclosure policies from the ISSB, SEC, and EFRAG. The Evolution of Sustainability Disclosure report found that all three policies roughly follow the framework outlined by the Task Force on Climate Related Financial Disclosures (TCFD), but there are substantial differences that must still be ironed out. Robert Eccles does a great job covering the report in his recent Forbes article.
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