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Hermes EOS Director Talks Climate at AGMs

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All eyes have been on the oil and gas industry this week as Annual General Meetings (AGMs) of industry giants got underway. There has been significant push in recent weeks for businesses to adopt climate resolutions in line with the Paris Agreement. Tim Goodman, Director at Hermes EOS, the stewardship team of Hermes Investment Management, discusses the positives progress made and the areas that still need to improve at companies Total and Chevron, below.

At the AGM of Total, Hermes EOS welcomes the publication of the company’s climate report, Integrating Climate into our Strategy, which has been produced in response to the reporting framework of the Aiming for A investor coalition.

We commend the leadership that Total has demonstrated on climate change, especially its strong support of the UN Global Compact’s Business Leadership Criteria on Carbon Pricing, the Oil & Gas Climate Initiative and the Carbon Pricing Leadership Coalition. We are encouraged that the company will spearhead ambitions in the electricity value chain by expanding its midstream and downstream gas activities, as well as investments in renewable energy and energy efficiency.

We are also encouraged by the company’s swift response to our engagement and the constructive dialogue we have had with Total over the past year, which has included meetings with the company’s chair and senior members of its executive. While this is only the beginning of the journey for the company in managing the risks it faces as a result of climate change, it is certainly an important step in the right direction.

To achieve this outcome, Hermes EOS, on behalf of its 42 clients, worked with a number of asset owners and managers, including CalPERS and Établissement de Retraite Additionnelle de la Fonction Publique (ERAFP), with more than $2 trillion of assets under management who are welcoming the publication of the Integrating Climate into our Strategy.

At Chevron’s AGM, Hermes EOS presented a shareholder proposal that it has co-filed with the UMC Benefits Board which manages $20 billion in assets on behalf of 92,000 United Methodist Church pension participants and more than 100 United Methodist institutional clients.

The resolution focuses on one aspect of the Aiming for A reporting framework, reporting on how the company’s business model will be affected by a world in which global warming is limited to two degrees Celsius. BP, Royal Dutch Shell and Statoil shareholders voted almost unanimously to adopt the Aiming for A framework in 2015 and have begun to report on this and the other aspects of the framework. In addition, oil and gas companies such as ConocoPhillips and Suncor have also begun to report on their resilience to a world in which global warming is limited to two degrees Celsius.

We aim to encourage Chevron to keep in step with developing best practice in the oil and gas industry on reporting on climate change risk. We also wish to have collaborative and constructive dialogue with its board and senior management on how the company plans to evolve as we move to a low carbon world. We seek to be a friend to the industry and look forward to publicly praising Chevron in future as we are doing with Total.

We expect stricter reporting on asset portfolio resilience to the climate scenarios outlined by the International Energy Agency to become a standard requirement for companies exposed to the effects of the transition to a low-carbon economy. Companies should look to embrace these changes sooner rather than later, not least because the Taskforce on Climate-Related Financial Disclosures, convened by Mark Carney as chair of the UK’s Financial Stability Board and chaired by former New York City Mayor Michael Bloomberg, is consulting on climate change disclosure by companies.”

In addition to reporting on scenarios relating to how their businesses may be affected by global warming that is limited to two degrees Celsius, the Aiming for A investor coalition also asks that extractive industry companies report annually on:

– Ongoing operational emissions management;

– Low carbon energy research and development and investment strategies;

– Relevant strategic key performance indicators and executive incentives; and

– Public policy positions relating to climate change.

The oil and gas industry will be one of the most affected by the transition, with direct impacts on, among others, demand for fossil fuel and commodity prices. The ratchet mechanism agreed as part of the COP 21 climate change agreement in Paris in December 2015 also means that companies will need to be prepared for stronger policy action on climate change over time.

 

Energy

Responsible Energy Investments Could Solve Retirement Funding Crisis

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Energy Investments
Shutterstock / By Sergey Nivens | https://www.shutterstock.com/g/nivens

Retiring baby-boomers are facing a retirement cliff, at the same time as mother nature unleashes her fury with devastating storms tied to the impact of global warming. There could be a unique solution to the challenges associated with climate change – investments in clean energy from retirement funds.

Financial savings play a very important role in everyone’s life and one must start planning for it as soon as possible. It’s shocking how quickly seniors can burn through their nest egg – leaving many wondering, “How long your retirement savings will last?

Let’s take a closer look at how seniors can take baby steps on the path to retiring with dignity, while helping to clean up our environment.

Tip #1: Focus & Determination

Like in other work, it is very important to focus and be determined. If retirement is around the corner, then make sure to start putting some money away for retirement. No one can ever achieve anything without dedication and focus – whether it’s saving the planet, or saving for retirement.

Tip #2: Minimize Spending

One of the most important things that you need to do is to minimize your expenditures. Reducing consumption is good for the planet too!

Tip #3: Visualize Your Goal

You can achieve more if you have a clearly defined goal in life. This about how your money can be used to better the planet – imagine cleaner air, water and a healthier environment to leave to your grandchildren.

Investing in Clean Energy

One of the hottest and most popular industries for investment today is the energy market – the trading of energy commodities. Clean energy commodities are traded alongside dirty energy supplies. You might be surprised to learn that clean energy is becoming much more competitive.

With green biz becoming more popular, it is quickly becoming a powerful tool for diversified retirement investing.

The Future of Green Biz

As far as the future is concerned, energy businesses are going to continue getting bigger and better. There are many leading energy companies in the market that already have very high stock prices, yet people are continuing to investing in them.

Green initiatives are impacting every industry. Go Green campaigns are a PR staple of every modern brand. For the energy-sector in the US, solar energy investments are considered to be the most accessible form of clean energy investment. Though investing in any energy business comes with some risks, the demand for energy isn’t going anywhere.

In conclusion, if you want to start saving for your retirement, then clean energy stocks and commodity trading are some of the best options for wallets and the planet. Investing in clean energy products, like solar power, is a more long-term investment. It’s quite stable and comes with a significant profit margin. And it’s amazing for the planet!

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Energy

What Should We Make of The Clean Growth Strategy?

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Clean Growth Strategy for green energy
Shutterstock Licensed Photo - By sdecoret | https://www.shutterstock.com/g/sdecoret

It was hardly surprising the Clean Growth Strategy (CGS) was much anticipated by industry and environmentalists. After all, its publication was pushed back a couple of times. But with the document now in the public domain, and the Government having run a consultation on its content, what ultimately should we make of what’s perhaps one of the most important publications to come out of the Department for Business, Energy and the Industrial Strategy (BEIS) in the past 12 months?

The starting point, inevitably, is to decide what the document is and isn’t. It is, certainly, a lengthy and considered direction-setter – not just for the Government, but for business and industry, and indeed for consumers. While much of the content was favourably received in terms of highlighting ways to ensure clean growth, critics – not unjustifiably – suggested it was long on pages but short on detailed and finite policy commitments, accompanied by clear timeframes for action.

A Strategy, Instead of a Plan

But should we really be surprised? The answer, in all honesty, is probably not really. BEIS ministers had made no secret of the fact they would be publishing a ‘strategy’ as opposed to a ‘plan,’ and that gave every indication the CGS would set a direction of travel and be largely aspirational. The Government had consulted on its content, and will likely respond to the consultation during the course of 2018. And that’s when we might see more defined policy commitments and timeframes from action.

The second criticism one might level at the CGS is that indicated the use of ‘flexibilities’ to achieve targets set in the carbon budgets – essentially using past results to offset more recent failings to keep pace with emissions targets. Claire Perry has since appeared in front of the BEIS Select Committee and insisted she would be personally disappointed if the UK used flexibilities to fill the shortfall in meeting the fourth and fifth carbon budgets, but this is difficult ground for the Government. The Committee on Climate Change was critical of the proposed use of efficiencies, which would somewhat undermine ministers’ good intentions and commitment to clean growth – particularly set against November’s Budget, in which the Chancellor maintained the current carbon price floor (potentially giving a reprieve to coal) and introduced tax changes favourable to North Sea oil producers.

A 12 Month Green Energy Initiative with Real Teeth

But, there is much to appreciate and commend about the CGS. It fits into a 12-month narrative for BEIS ministers, in which they have clearly shown a commitment to clean growth, improving energy efficiency and cutting carbon emissions. Those 12 months have seen the launch of the Industrial Strategy – firstly in Green Paper form, which led to the launch of the Faraday Challenge, and then a White Paper in which clean growth was considered a ‘grand challenge’ for government. Throughout these publications – and indeed again with the CGS – the Government has shown itself to be an advocate of smart systems and demand response, including the development of battery technology.

Electrical Storage Development at Center of Broader Green Energy Push

While the Faraday Challenge is primarily focused on the development of batteries to support the proliferation of electric vehicles (which will support cuts to carbon emissions), it will also drive down technology costs, supporting the deployment of small and utility-scale storage that will fully harness the capability of renewables. Solar and wind made record contributions to UK electricity generation in 2017, and the development of storage capacity will help both reduce consumer costs and support decarbonisation.

The other thing the CGS showed us it that the Government is happy to be a disrupter in the energy market. The headline from the publication was the plans for legislation to empower Ofgem to cap the costs of Standard Variable Tariffs. This had been an aspiration of ministers for months, and there’s little doubt that driving down costs for consumers will be a trend within BEIS policy throughout 2018.

But the Government also seems happy to support disruption in the renewables market, as evidenced by the commitment (in the CGS) to more than half a billion pounds of investment in Pot 2 of Contracts for Difference (CfDs) – where the focus will be on emerging rather than established technologies.

This inevitably prompted ire from some within the industry, particularly proponents of solar, which is making an increasing contribution to the UK’s energy mix. But, again, we shouldn’t really be surprised. Since the subsidy cuts of 2015, ministers have given no indication or cause to think there will be public money afforded to solar development. Including solar within the CfD auction would have been a seismic shift in policy. And while ministers’ insistence in subsidy-free solar as the way forward has been shown to be based on a single project, we should expect that as costs continue to be driven down and solar makes record contributions to electricity generation, investment will follow – and there will ultimately be more subsidy-free solar farms, albeit perhaps not in 2018.

Meanwhile, by promoting emerging technologies like remote island wind, the Government appears to be favouring diversification and that it has a range of resources available to meet consumer demand. Perhaps more prescient than the decision to exclude established renewables from the CfD auction is the subsequent confirmation in the budget that Pot 2 of CfDs will be the last commitment of public money to renewable energy before 2025.

In short, we should view the CGS as a step in the right direction, albeit one the Government should be elaborating on in its consultation response. Its publication, coupled with the advancement this year of the Industrial Strategy indicates ministers are committed to the clean growth agenda. The question is now how the aspirations set out in the CGS – including the development of demand response capacity for the grid, and improving the energy efficiency of commercial and residential premises – will be realised.

It’s a step in the right direction. But, inevitably, there’s much more work to do.

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