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🗞️ Citing Util’s recent analysis of Adani, Bloomberg, Pensions & Investments, and Procurement Magazine dig into the latest development in the drama. JPMorgan’s decision to cut Adani from two ESG ETFs has reignited a debate about passive investing and sustainability, given the beleaguered stock still sits in the MSCI ESG index tracked by both funds. Can a rules-based strategy be an effective vehicle for a concept whose definition and constituents are ever in flux? Let us know what you think.
🇺🇸 ESG is a ball in US partisan ping pong. In the first veto of his presidency, Biden is expected to overturn a Congress resolution to overturn the Department of Labor rule that overturns a Trump rule that overturned the right of US fiduciaries to consider ESG factors. Though likely to escalate the countdown to 2024, anti-ESG action is failing to dent global institutional investor consensus for now.
🇺🇸US companies aren’t waiting for the SEC. The GOP vendetta has raised fears of pushback to SEC climate disclosure rules, but new research finds 70% of US companies are going ahead with compliance regardless of when it becomes law. The more pressing concern for 85% of respondents? Having the right technology to meet reporting requirements.
🇪🇺The EU reaches a provisional agreement on an European green bond (EuGB) standard. Under the long-awaited rule, any designated EuGB must finance projects aligned with the EU taxonomy. Tackling greenwash more broadly, it also introduces voluntary disclosure requirements for general climate and sustainability-linked bonds issued in the EU.
🇬🇧 The FCA rules climate collaboration is not anticompetitive. In the US, antitrust law has been weaponised against cross-industry environmental initiatives. Preempting similar attacks last week, the UK regulator reassured companies (“if the lawyers say you can’t, you can,”) as the Competition and Markets Authority issued draft guidelines for sustainability agreements.
🇫🇷 France pledges €50M to developing countries protecting their forests. It’s a small but important step towards a blended finance model for biodiversity. One of many small but important steps by France, in fact. Legally required to disclose their biodiversity strategy and impact (per the FT), French investors are behind the recent tripling of biodiversity fund flows.
🇮🇳 The G20 summit in India is a mixed bag. Though eclipsed by exchanges over Russia’s invasion of Ukraine, host India succeeded in its objective of raising a voice for the Global South on issues such as soaring debt and food security. Encouraging progress was made towards a G20 Sustainable Finance Technical Assistance Action Plan or framework for SDG financing.
🇺🇳 The world reaches a historic agreement to protect its oceans. Last week, we mentioned the challenges facing a treaty on maritime biodiversity. Following decades of negotiations, at last good news. On Saturday, the UN struck a deal to protect oceans outside of international bounds. The High Seas Treaty aims to place 30% of the seas into protected areas by 2030.
Do the latest numbers prove methane pledges are all hot air?
2022 was a great year for the energy industry. Buoyed by soaring prices, fossil-fuel companies raked in GDP-rivalling profits. On the surface, there had never been a better time to invest in business resilience; even, perhaps, to honour long-standing pledges to curb methane emissions by fixing (highly pollutive) leaking infrastructure.
That did not happen. Instead, according to the International Energy Agency (IEA) Global Methane Tracker 2023, the global energy industry released into the atmosphere 135 million tonnes of methane: a potent global greenhouse gas (GHG) that accounts for about half of the net rise in global temperatures since the pre-industrial era and 30% since the post-industrial era. In 2022, methane emissions by the energy sector were only slightly behind the record highs of 2019.
This was not how it was supposed to go. Back at COP 26, 112 countries signed the Global Methane Pledge to reduce global (methane) emissions by at least 30% by 2030 from 2020 levels. If met, the pledge could reduce warming by 0.2°C, making it, allegedly, “the single most effective strategy to keep the goal of limiting warming to 1.5°C.” The dream of 1.5°C depends, in fact, on methane emission reductions that “complement and supplement… global action to reduce CO2 emissions.” The call for “deep reductions,” is echoed by the Intergovernmental Panel on Climate Change (IPCC) in its Sixth Assessment Report III.
The Global Methane Pledge requires urgent action. It also faces steep challenges. The energy sector, recognised as having “the greatest potential for targeted mitigation by 2030,” accounts for both.
There is a reason the IEA couches its report in the context of profits. Not only is methane — unlike carbon — a Scope 1 emission for and so within the purview of energy companies, but fixing the issue hardly breaks the bank. Though the energy sector is responsible for 40% of total methane emissions (second only to agriculture), getting that number down is entirely feasible (unlike for agriculture).
Reductions depend on low-maintenance measures such as fixing leaks and replacing pumps. Relative to the environmental impact of those measures, it’s an investment that puts a new spin on ‘bang for your buck’. Had the global oil and gas industry spent just 3% of the income accrued last year on existing technologies, for instance, its methane emissions could have come down by 75% — and the IEA would be writing a very different report. Instead, they chose share buybacks.
History suggests that an environmentally damaging GHG becomes a global priority when two conditions are met: First, when the scientific evidence underscoring its impact becomes impossible to ignore; and second, when policy directs the private sector to pay attention. Methane is fast approaching the second stage.
Because Util company data is an aggregation of peer-reviewed scientific knowledge, the issue of methane pollution has — for years — had a heavy bearing on how we calculate the SDG scores of fossil-fuel companies. See: Exxon, below.
In terms of policy, however, CH4 has long been eclipsed by CO2. Consequently, as Planet Tracker recently discovered, financial institutions have weak or non-existent policies for reducing methane emissions. But the regulators won’t stay away for long. As technology unlocks more evidence of methane leaks and their environmental impact, how will fossil fuel companies respond? How will you?