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Green Power Shielded Some Companies From Energy Crunch
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Welcome back. “Now that net zero is almost universal, the era of integrity begins.” That's the summary of a survey published last week by Net Zero Tracker, a research group, in the wake of the COP26 climate summit—which was, among other things, a veritable festival of climate-change promises.
As well as summing up the state of climate promises by countries and cities (short version: 85% of the world's population lives in a country with a net-zero target, and some targets are more ambitious and detailed than others) the researchers drilled down into corporate emission-reduction plans, shedding light on how climate considerations are being integrated into the way business operates.
Out of the Forbes 2000 list of the world's largest listed companies, 681 companies—representing half of the overall revenue—had a net zero target, and the majority of those had interim targets. Some 380 had published an emissions-reduction plan, as opposed to simply setting a target. And Net Zero Tracker found that 9% of the Forbes 2000's revenue was generated by companies that tie compensation to the company's performance against its climate targets, showing one way in which the issue is becoming material for executives.
This week: Hydrogen-powered trucking; electric-car rentals; shareholder activism at Microsoft.
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Some companies say long-term purchase agreements for renewable energy have paid off as power prices surged. PHOTO: LUCY NICHOLSON/REUTERS
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Green power was shield against energy crunch. More companies have been locking in long-term supplies of renewable energy in recent years as a way to cut greenhouse-gas emissions. For companies including drugmaker Novartis and telecommunications company Orange, the deals offered another benefit in 2021: protection from higher prices as a surge in demand scrambled energy markets.
In Europe before the energy crunch, a company could have secured renewable electricity through a power purchase agreement, or PPA at an average of about 40 euros per megawatt hour over 10 years, compared with more than 200 euros recently on the spot market, according to Pexapark, a provider of pricing data. But prices for new PPAs have been edging up.
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Pro Tips:
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💡 Rooftop solar on warehouses can offer protection from higher electricity costs because the cost doesn't change based on market forces, says Jared Friedman, vice president for global energy at industrial real-estate giant Prologis, which typically aims to generate 80% or more of its occupants' electricity.
💡 On-site renewables and fixed-price agreements can build resiliency in a company's energy portfolio, but virtual power-purchase deals can bring revenue when price shocks lift electricity prices, says James Goudreau, a sustainability executive at Novartis.
💡 Renewables supply deals can offer pricing benefits even in countries where renewable energy is less advanced, such as Poland, when power prices in the overall market are high, says Hervé Suquet, vice president of energy at Orange.
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High gas, coal prices keep renewables on track. In the past two years, freight rates have risen nearly sixfold, the cost of polysilicon used in solar panels has more than quadrupled, and prices of steel, copper and aluminum are up by half or more. But despite rising costs, the case for building more wind and solar farms still adds up🔒 because of higher power prices. This will be another record year for building wind and solar farms, according to the International Energy Agency.
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A wind farm in the part of northern England where BP plans to make hydrogen fuel using renewable energy. PHOTO: LINDSEY PARNABY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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BP effort to power power heavy transport in U.K. BP on Monday unveiled plans for a major green hydrogen production project in the U.K.’s Teesside industrial hub to provide fuel for trucks and other forms of heavy transport. A battleground has emerged between hydrogen fuel cell advocates and battery supporters. Hydrogen tanks can be filled quickly, but the fuel requires a significant amount of energy to be produced and a supply chain that doesn’t exist today. The HyGreen Teesside project follows BP’s plan for a blue hydrogen project in the same part of northern England.
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Car-rental business shifts toward EVs. The car-rental industry—a big bulk-purchaser of new car models—and its corporate clients are facing pressure🔒 to cut greenhouse-gas emissions.
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Hertz and Avis recently revealed plans to expand their plug-in offerings. Enterprise Holdings, which owns National and Alamo, also has said it is looking to add more electrics, particularly for clients that are renting or leasing small vehicle fleets. Chris Haffenreffer, an executive in charge of Enterprise’s electric-vehicle strategy, said the company is still studying how to make electric cars a better fit for leisure travelers, who are more likely to worry about finding enough charging stations.
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✍️ Feedback on this newsletter? We would love to hear from you, so please get in touch.
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Microsoft to disclose sexual harassment data. An investor proposal to Microsoft demanding greater disclosure on its handling of sexual harassment at the company was approved at the annual shareholders’ meeting. The proposal requested an annual report that summarized the number of sexual harassment cases investigated and their resolution, as well as results of any independent investigation into Microsoft’s executives, including co-founder Bill Gates.
A Wall Street Journal report, citing people familiar with the matter, earlier this year said Microsoft board members pursued an investigation into the billionaire’s prior romantic relationship with a female. Mr. Gates stepped down from the board last year.
The vote was a rare win for activist shareholders. Microsoft had recommended shareholders vote against the proposal, and has usually enjoyed strong support from its investors.
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“We really appreciate your push, your feedback to us and we always seek to listen, learn and act”
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— Microsoft chief executive Satya Nadella after the shareholder vote.
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White House considering Cordray as banking regulator. President Biden is considering Richard Cordray, the first director of the Consumer Financial Protection Bureau, to serve as the Federal Reserve’s top banking regulator, the Journal reported, citing people familiar with the matter. If nominated and confirmed by the Senate, Mr. Cordray would succeed Randal Quarles as the Fed’s vice chairman of banking supervision.
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If Mr. Cordray is nominated, it could hearten progressive Democrats who say the Fed should take a tougher approach to regulating big banks and addressing financial risks posed by climate change. At the CFPB, he brought significant changes to consumer finance, an area that had previously escaped regulatory scrutiny.
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Coal Remains a Controversial Asset for Glencore
Miner Glencore received a letter from activist investor Bluebell Capital Partners asking it to divest its coal assets. Unlike its major peers, Glencore still has exposure to the thermal-coal business with no intentions to reduce it in the short term. The Switzerland-based company is the second-largest copper producer in the world, and coal represents 11% of its 2021 first-half earnings before interests, taxes, depreciation and amortization. The coal division lags behind in its portfolio with a 25% margin, compared with 53% and 37% margins for the copper and zinc divisions respectively, the companies' core metals. Given the size and profitability of the coal division, coupled with its negative environmental
footprint, taking the activist letter into serious consideration could be welcomed by ESG investors. BlackRock, the world's largest asset manager, has publicly vowed to divest all of its thermal-coal exposure. In response to Bluebell’s demands, Glencore defended its strategy of providing materials needed to decarbonize energy while reducing its own emissions and delivering value for stakeholders.
This is a sample of exclusive analysis of sustainability news from the Journal’s environment, social and governance (ESG) research analysts, whose work is primarily published by Dow Jones Newswires to help institutional investors and wealth managers integrate ESG factors into portfolio models, risk management programs and financial advice. The commentary by our research analysts is independent of the news coverage by reporters at the Journal. For more information about Dow Jones Newswires, click here.
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Efforts by the Securities and Exchange Commission to ensure the drafting of its climate risk disclosures proposal is legally watertight are taking longer than expected, risking delays to publication. (Risk.net)
Several European investment groups that last year threatened to divest from Brazil over soaring deforestation haven't done so, even as data shows deforestation is accelerating. (Financial Times)
Supply-chain chaos is causing the biggest increase in ship emissions in more than a decade. (Quartz)
Major importers Amazon and Target are playing a big role in the port pollution crisis along the U.S. West Coast, according to a new report. (The Verge)
Food-tech innovation might help create a low-carbon food system, but it might not be a sustainable or ethical one. (Wired)
Mitsubishi Chemical will exit its carbon products and petrochemicals businesses over the next several years as a step to cut emissions, CEO Jean-Marc Gilson said. (Bloomberg)
Startups want to turn your conventional car into an electric one. (Reuters)
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We would like to hear your tips, suggestions and feedback. This newsletter was written by Ed Ballard. Contact the WSJ ESG research team at ESGresearch@wsj.com
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