The Economist: Who buys the dirty energy assets public companies no longer want?

It could well be your university or your pension fund
Feb 12th 2022

The first law of thermodynamics states that energy cannot be created or destroyed, just transferred from one place to another. The same seems to apply to the energy industry itself. Pressed by investors, activists and governments, the West’s six biggest oil companies have shed $44bn of mostly fossil-fuel assets since the start of 2018. The industry is eyeing total disposals worth $128bn in the coming years, says Wood Mackenzie, a consultancy. Last month ExxonMobil said it would divest its Canadian shale business; Shell put its remaining Nigerian oilfields on the block. But much of the time these outmoded units are not being closed down. Instead they are moving from the floodlit world of listed markets to shadier surroundings.

Many are ending up in the hands of private-equity (pe) firms. In the past two years alone these bought $60bn-worth of oil, gas and coal assets, through 500 transactions—a third more than they invested in renewables (see chart). Some have been multibillion-dollar deals, with giants such as Blackstone, Carlyle and kkr carving out huge oilfields, coal-fired power plants or gas grids from energy groups, miners and utilities. Many other deals, sealed by smaller rivals, get little publicity. This sits uncomfortably with the credo of many pension funds, universities and other investors in private funds, 1,485 of which, representing $39trn in assets, have pledged to divest fossil fuels. But few seem ready to leave juicy returns on the table.

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The Effect of Drought on Energy Systems

Information gathered from the National Integrated Drought Information System (NIDIS)

Droughts greatly affect energy systems. as water and energy are very dependent on one another. All energy systems, including electricity, need water in their production processes, and energy is needed to deliver water.

A low water supply not only limits the amount of water that denizens can use, but can also lead to reduced and temporary shutdowns of energy facilities. Furthermore, high temperatures during droughts highly increase the risk of wildfires, impacting energy infrastructure and creating pollution, and affects the energy supply chain.

To understand more in-depth about how droughts and water availability specific types of energy click here.

BLOOMBERG: The Global Food Waste Crisis Is Even Bigger Than We Thought

More than 2 billion of tons of food goes uneaten around the world, almost double than previously thought, according to a new report.

By Agnieszka de Sousa, Published July 20, 2021

According to research done by the World Wildfire Fund, approximately 2.5 billion tons, of food was lost or wasted on farms or by retailers and consumers.

Food waste accounts for about 33% of all global greenhouse-gas emissions according to the last last comprehensive analysis done in 2011, and it most likely has only risen since then. Furthermore, over 50% of global food waste can contributed to the high- and middle-income countries of North America, Europe, and the industrialized countries of Asia.

For more, read the article here.

TIME: Why Doing Good Is No Longer Bad Business

By Charley Grant, Published June 4, 2021

A win for the ESG movement as two directors, who are displeased with the company’s polices on the climate, were elected by shareholders at Exxon Mobil. The environmental “wokeness” that large corporations display are more often than not viewed as publicity stunts rather then actual awareness to such issues. But among investors and consumers, the demand for impact through their investments is real and growing.

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Large fund managers frequently comply with t he recommendations made by shareholder advisory services when voting in a proxy contest. Furthermore, with a rise in demand for ESG and Socially Responsible Investing, it can be expected to see more activist-backed nominees to be elected as directors in companies like Exxon Mobil.

CNBC: Just 20 Companies Are Responsible For Over Half of ‘Throwaway’ Plastic Waste, Study Says

By Sam Meredith, Published May 18, 2021

People know that fossil fuels are hurtful to the environment, but do they know that single-use plastics, the most common type of plastic to be thrown away, are made almost exclusively from them? More often than not, these plastics end their short lifecycle polluting the oceans or in landfills.

The future of the climate crisis and the “throwaway” plastic emergency are closely intertwined. Found to produce the greatest amounts of plastic waste, more than 50 kg per person per year in 2019, Australia and the U.S. respectively are heading the charge into a polluted future.

With large corporations spreading awareness on how the individual needs to take steps to save our planet, the petrochemical industry has done all but taken responsibility for their majority of the plastic problem.

With plastic production predicted to increase by 30% it’s time for the petrochemical industry to start fixing the problem at the source: themselves. Shouldn’t they start listening to the awareness of the plastic pollution instead of blaming it on the end-users?

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TIME: Why Greening Your 401(k) Isn’t Easy as it Should Be

How can you make sure your retirement nest egg is green? Not easily.

By Aryn Baker, Published May 12, 2021

Far stricter laws govern American pension fund administrators than laws for retail investing. Last November, the Department of Labor issued a notice that further constricts private employer-sponsored retirement plans. Because there are very severe penalties for interfering with the Employee Retirement Income Security Act (ERISA), and until the Biden Administration gives formal encouragement to take ESG issues into account, American workers who utilize a 401(k) will be limited on how they can use sustainability factors while making decisions about investments for their retirement.

The issue? Well, one among several is that the demand for ESG investing is increasing as more and more investors want to take action and create change with their investments. To top it off, high ESG portfolios outperformed low ones by 16 basis points per year!

Do you think that anyone should be able to chose if their investments go into sustainable investments?

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WSJ: Are Electric Cars Really Better for the Environment?

EVs produce fewer emissions overall than their gas-powered counterparts, but there are caveats
By Russell Gold, Jessica Kuronen and Elbert Wang, Published March 22, 2021

Carmakers, including General Motors Co. and Volkswagen AG, are retooling their companies to make electric vehicles on the premise that their battery-powered motors are cleaner than gas-burning engines.

Are EVs really better for the environment, though? A close look at all the factors shows they are—but it’s a complex answer with some asterisks.

The environmental cost of a car includes both building it and fueling it. That means factoring in emissions associated with oil drilling and power plant smokestacks, as well as from mining metals such as nickel and cobalt that are needed for electric-car batteries.

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No matter what kind of engines they run on, cars add to greenhouse gas emissions. But the data show that switching from gas to electric vehicles will make a huge impact.

Consumers making individual choices between cars will make a difference. So will policy decisions made by governments and investments by companies as we drive into the future.

Time: Bill Gates’ Formula That Explains Where to Invest in Climate Innovation

Bill Gates: Here’s a Formula That Explains Where We Need to Invest in Climate Innovation

I came to focus on climate change indirectly—through the problem of energy poverty. In the early 2000s, I learned that about a billion people didn’t have reliable access to electricity and that half of them lived in sub-Saharan Africa. (The picture has improved since then, though today roughly 860 million people don’t have electricity.) In remote villages, Melinda and I met women and girls who spent hours every day collecting firewood so they could cook over an open flame in their homes. We met kids who did their homework by candlelight.

I thought about our foundation’s motto—“Everyone deserves the chance to live a healthy and productive life”—and how it’s hard to stay healthy if your local medical clinic can’t keep vaccines cold because the refrigerators don’t work. And it’s impossible to build an economy where everyone has job opportunities if you don’t have massive amounts of reliable, affordable electricity for offices, factories and call centers. I began to think about how the world could make energy affordable and reliable for the poor. But the more I learned, the more I came to understand the dilemma of energy and climate change: although the world needs to provide more energy so the poorest can thrive, we need to provide that energy without releasing any more greenhouse gases. In fact, we need to eliminate our emissions, all the way to zero.

The climate is like a bathtub that’s slowly filling up with water. Even if we slow the flow of water to a trickle, the tub will eventually fill up and water will come spilling out onto the floor. That’s the disaster we have to prevent. To stop filling the tub—to get to zero—we have to understand everything we do to cause emissions. Did you brush your teeth this morning? The toothbrush probably contains plastic, which is made from petroleum, a fossil fuel. If you ate breakfast, the grains in your toast and cereal were grown with fertilizer, which releases greenhouse gases when it’s made. They were harvested by a tractor that was made of steel—which is made with fossil fuels in a process that releases carbon—and ran on gasoline. If you had a burger for lunch, as I do occasionally, raising the beef caused greenhouse-gas emissions—cows burp and fart methane—and so did growing and harvesting the wheat that went into the bun. In short, fossil fuels are practically everywhere.

Some sources of emissions, like electricity and cars, get lots of attention, but they’re only the beginning. The biggest contributor to climate change is manufacturing—making things like steel, cement and plastic—at 31% of global emissions. Second in line is producing electricity, at 27% of emissions; after that comes growing things like crops, at 19%. Transportation comes in fourth, at 16%, followed by the emissions from heating and cooling buildings. These percentages are less important than the overall point: any comprehensive plan for climate change has to account for all the activities that cause emissions, and that’s much more than making electricity and driving cars. Unless you’re looking across all five areas—how we plug in, make things, grow things, move around, and keep cool and stay warm—you’re not going to solve the problem.

It’s also crucial to understand how much getting to zero will cost. Right now, the primary reason the world emits so much greenhouse gas is that fossil- fuel technologies are by and large the cheapest energy sources available. In part, that’s because their prices don’t reflect the environmental damage they inflict. In other words, moving our immense energy economy from “dirty,” carbon-emitting technologies to ones with zero emissions will cost something. These additional costs are what I call Green Premiums. For example, the average retail price for a gallon of jet fuel in the U.S. over the past few years is $2.22. Advanced biofuels for jets, to the extent they’re available, cost on average $5.35 per gallon. The Green Premium for zero-carbon fuel, then, is the difference between these two prices, which is $3.13. That’s a premium of more than 140%.

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NYT: How Investors Are Addressing Racial Injustice

Different strategies for socially responsible investing are working toward a similar goal: to pressure companies and municipalities to operate more equitably.

By Paul Sullivan, July 3, 2020

Socially responsible investing has been putting billions of dollars to work for social change for decades.

In some cases, the strategy means avoiding certain sectors. Religious organizations, for instance, steer clear of alcohol, firearms, tobacco and other “sin” stocks.

Some investors focus on companies that are already socially responsible to help them thrive, while starving competitors that are less responsible.

And others aim to change the practices at the companies themselves. By buying enough shares to get a seat at the table, they have a voice in issues like climate change, worker’s rights and gender discrimination.

For several years now, investors and advisers have applied the socially responsible lens to creating portfolios that consider racial inclusion and diversity. The social unrest incited by the killing of a Black man, George Floyd, by a Minneapolis police officer has added urgency to the movement.

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NYT: Taking the Nation’s Financial Pulse in Uncertain Times

A ONE-OF-A-KIND CONTINUING STUDY SHOWS THAT MILLIONS OF PEOPLE ARE LIVING ON THE EDGE

Millions of Americans were struggling financially, even before the Covid-19 crisis. The U.S. Financial Health Pulse shows that only 29 percent of Americans were financially healthy in 2019. Just over 70 percent of Americans were not financially healthy and may be unprepared for changes in their income, financial shocks or an economic downturn. These figures were roughly the same as 2018, but likely to change as the coronavirus outbreak takes its toll on the economy.

“Many people have been living on the edge and are just one shock away from financial instability,” says Jennifer Tescher, president and C.E.O. of the Financial Health Network. “Without a financial cushion, millions of people are exposed to financial risk during an economic downturn.”

Compared to 2018, more Americans in 2019 did not have a one-week buffer of savings and were less confident that their insurance would provide sufficient coverage to help them weather an emergency. “The Covid-19 crisis has exposed the true fragility of Americans’ financial lives,” explained Tescher.

Pulse data shows that some groups may be more vulnerable to an economic downturn than others.

More than half of women (51.2 percent) say they do not have enough liquid savings to cover three months of living expenses, an increase of 2.6 points from 2018. The average FinHealth Score for women decreased by 1.5 points between the two surveys, while the average score for men increased by 1.1 points. Women are also more likely than men to say that financial stress affects their physical and mental health, family life and performance at work.

Blacks and Hispanics have FinHealth Scores that are nearly 10 points lower than whites, a disparity that has remained steady since 2018, but may grow as the novel coronavirus takes its toll on the economy. Driving these differences in overall scores are disparities in savings and assets, and access to high-quality credit. Black and Hispanic respondents are, respectively, 38 percent and 25 percent less likely than white respondents to have a prime credit score. They are also 18 percent and 28 percent, respectively, less likely than white respondents to have at least three months of liquid savings.

Low- and middle-income respondents are also especially vulnerable to an economic downturn. Low-income respondents (those who make less than $30,000 a year) are less financially healthy than their higher-income peers. Only 10.3 percent of people in this segment are financially healthy, compared to approximately 52 percent of people with incomes above $100,000. The percentage of middle-income respondents (those who earn between $30,000 and $59,999) who say their expenses outpaced their incomes in the past year is up 4.1 percentage points from 2018.

“The gains of an economy that has grown tremendously over the past decade have not accrued to all people,” says Jimmy Chen, the chief executive and founder of Propel and a member of the U.S. Financial Health Pulse Advisory Council. Propel provides a banking app and other high-tech solutions to help low-income consumers budget, stretch their government benefits, look for employment opportunities and locate other resources. “It’s fair to say that with the constituency we serve, financial health is really fragile,” Chen added. “It’s hard to build a savings buffer when expenses are the same as your income or more.”

Read the report here