Why EY’s ‘carbon-negative’ claim needs scrutiny

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Moral Money encourages the attention that the world’s largest companies are beginning to tackle sustainability issues. In particular, large corporations now have an overwhelming and postponed consensus that they will play an important role in the competition to combat the climate crisis. Therefore, it is important for us journalists to apply the same level of critical scrutiny to this area as other corporate press angles. That is, it emphasizes both what companies are doing right and what they can do better.

Today’s edition features an analysis of EY’s eye-catching announcement that it is already “carbon negative.” Some readers may find it immutable to criticize a plan created with constructive intent. Those who feel that they must work harder to exercise surveillance just because best practices in this area are still established, and just because the future of the planet is at stake. There may be. Whatever your view on this argument, we want to hear it.Please let us know what you think moralmoneyreply@ft.com..

Unpacking EY’s “Carbon Negative” Claim

As far as I know, the first announcement of this kind was from a major business group when professional services giant EY told me that it had achieved net negative carbon emissions.

Like many large global companies, EY puts carbon offsets at the heart of its sustainability strategy. The offset sector is under serious scrutiny concern Many nature-based offset schemes, such as initiatives to protect forests, are far less impactful than they claim. Some experts warned that offset certificates do not have a properly regulated and rigorously valued market. It should be noted that companies claim to have canceled their emissions through such projects.

But EY was bolder than others.In statement It sent me this week, saying it was far beyond any other company aiming to neutralize their emissions in the coming decades. EY states that it is already “carbon negative” and offsets and removes more carbon than is emitted through its business activities (mainly employee travel).

Despite the scrutiny of this space, EY’s first statement contained only two sentences of information about the offset itself. Through six projects carried out by offset provider South, offset or eliminate 528,000 tonnes of carbon dioxide equivalent annually (referring to the warming impact of all greenhouse gas emissions represented by the warming impact of 1 ton of carbon dioxide). Said. Pole. The statement referred to the Qian Bei plantation project in southwestern China, as well as unspecified projects in reforestation, regenerative agriculture, biochar and forest conservation.

The level of detail reflects “the length of the press release we think journalists can absorb,” Steve Burley, Global Vice-Chair of Sustainability at EY, told me. But when I asked Varley to tell me about five offset projects not mentioned in the statement, he couldn’t.

It may seem ridiculous to pierce the pitch set by Varley, who came across a belief in the need for serious climate change. However, the procurement manager of a major global business is expected to know in great detail about his largest supplier. There is no clear reason to apply low standards to sustainability leaders in times of climate crisis.

And Varley and EY are in a position to have real influence when it comes to the standards that apply to corporate climate change. Currently, there are no widely accepted evaluation frameworks for carbon offsets, claiming that they support negative emissions. EY plays an important role in the conversation through its fast-growing sustainability consulting business and examples that have been set up as one of the most prominent businesses in the world. In particular, it is based on the decision to establish itself as a pioneer.

For readers unfamiliar with the concerns raised about the carbon offset market, I would like to point out this recent thing. FT Big Lead, this Bloomberg Survey About “carbon neutral” natural gas. The latter explored ways to support Zimbabwe’s Kariba forest conservation project using South Pole, the same offset provider used by EY by TotalEnergies in France, and branded natural gas shipments as “carbon neutral.” I quoted this work to do.

As these and many other articles emphasize, it is very difficult to give an accurate estimate of carbon sequestration with a nature-based offset scheme. This is one of the major challenges facing those who are striving for consistent standards in this area, including Mark Carney, who is at the forefront of a new task force on expanding the voluntary carbon market. .. Experts warn that if low-quality carbon offsets are allowed to count towards a net-zero target, the corporate sector could claim carbon neutrality on paper while continuing to heat the planet. To do.

Varley told me that with deep expertise in auditing and accounting mechanisms, EY was impressed with South Pole’s internal experts, its own valuation process, and its reputation among previous clients. “We provide a guarantee of life as an organization, so we know what a good validation and verification process looks like,” he said. EY reserves the right to inspect ground offset schemes if he deems it appropriate, but “that’s not what I expect,” he added.

EY later followed up on the offset details. The project includes the Cariba scheme and other schemes in Germany and South America. EY points out that all projects are certified by the Gold Standard or Verra, two prominent non-profit groups that carry out evaluations of carbon offset schemes, after a “rigorous and transparent sourcing process”. He said he chose South Pole.You can read the follow-up statement completely here..

Varley was willing to disclose the price EY paid to South Pole for carbon offsets, but according to the Bloomberg report above, the total is an estimated carbon sequestration of 1 ton for offsets from the Caliber scheme. I paid South Pole less than $ 3 per. Fees paid by power companies in the European carbon permit market.

At that price, the United States can neutralize annual carbon emissions for less than $ 50 per inhabitant. And if EY paid similar prices for all offsets, the carbon-negative claim of a $ 40 billion revenue business would cost well below $ 2 million. If all of this sounds untrue, it may reflect the urgent need for higher standards in the carbon offset market. (Simon Mondy)

ESG barbarians at the gate

© Reuters

This month, Henry Kravis and George Roberts resigned from KKR, a private-equity firm founded in 1976. In 1989, the two acquired RJR Nabisco for $ 25 billion, giving it the landmark “Gate Barbarian.” Book It was characterized by their takeover attack.

Today, intruders are increasingly looking at environmental, social, and governance standards to form attacks. Engine No1 Guided the way With a shocking victory at ExxonMobil this year.But according to Lazard, other activists are sharpening their spears. Recent reports About the progress of activities from July to September.

Lazard argues that further ESG scrutiny is “one of the key themes of the quarter.”

The report focused on a campaign launched in September at German energy giant RWE. A lesser-known investment company, Encraft Capital, has urged RWE to accelerate the sale of its coal business, Lazard said. In a letter to RWE, according to Lazard, Encraft said its coal business became increasingly responsible as ESG became a higher priority for investors.

In particular, ESG activism often comes from far more barbaric investors. BlackRock, Vanguard and State Street’s three largest investment firms are feeling pressure from large pension funds to prioritize ESG. As a result, the trio has increased its support for environmental shareholder petitions at the company’s annual shareholders meeting. Large investors usually shrug off environmentalists and religious groups that force businesses to change their environment and society.

Another case that needs to be monitored is underway.Bluebell Capital Trying to build a simultaneous system Percentage of shareholders putting pressure on multinational Solvay of chemicals to thwart allegations of pollution to the Mediterranean (our colleagues covered the fight here).

Lazard said COP26 could draw more attention to ESG activities. Companies are developing a net zero carbon emission pledge. One question in the coming months: Will activists grab these commitments if they aren’t backed by corporate behavior? (Patrick Temple-West)

To catch up with Europe, Washington demands greater climate risk monitoring at banks

US Treasury Secretary Janet Yellen at the White House this month

© AFP via Getty Images

Washington’s systematic vulnerability regulator said in an unprecedented report released Thursday that US banks and other global financial firms should face increased scrutiny of the risks faced by climate change. Said.

To catch up with European climate risk oversight for banks, the Financial Stability Oversight Commission (FSOC) analyzes specific climate change scenarios where US regulators can pose a threat to banks, insurers and other companies. Recommended to do.

FSOC has stopped seeking new climate-related risk analysis in bank stress testing, but scenario analysis could be a building block for assessing the impact of climate-related risk on key sectors of the financial system and the financial system. There is. Overall, “the report said.

The FSOC report was submitted as the Joe Biden administration is under pressure to attend the High Stakes Climate Conference in Glasgow next month with a strong initiative to combat global warming. I did. So far, it has been stalled by the US Congress.

In a phone call with reporters, a senior Treasury official confirmed that the United States is competing to catch up with Europe’s fast-growing climate-related financial oversight.

“Are we late? Of course it is,” he said.

The FSOC noted that the Bank of England, the European Central Bank, and other health supervisors have already conducted risk analysis of early climate scenarios.

US regulators should also consider stronger public reporting requirements for climate risk. The Securities and Exchange Commission has drafted a new climate disclosure regulation, which will not be finalized until late next year at the latest.

Meanwhile, the FSOC also recommended that its members should consider using the climate risk scenario being developed by the Financial Stability Board. (((Kristen Talman and Patrick Temple-West).

Smart lead

  • Climate change “exacerbates a long-standing threat to global security,” the White House, US intelligence, and the Pentagon discovered in a new report. according to To the Washington Post. The assessment highlights broader changes within US security agencies as authorities have begun to incorporate climate risk into their strategic plans.

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