Saudi Aramco has a message for climate campaigners: Your protests are not getting rid of us anytime soon.
Speaking at the CERAWeek energy conference in Houston yesterday, Saudi Aramco chief executive Amin Nasser said the energy transition was “visibly failing on most fronts”, according to S&P.
“We should abandon the fantasy of phasing out oil and gas and instead invest in them adequately, reflecting realistic demand assumptions,” he said.
Those comments clash head-on with today’s first item. To nudge banks away from fossil-fuel financing, one of the most vocal pension funds on climate change has wrangled two Wall Street banks into disclosing a ratio comparing their respective levels of financing for green energy and fossil fuels. It is a far cry from getting banks to halt various forms of fossil-fuel financing — something climate campaigners have tried before. But in this political environment, the ratio disclosures can be seen as a win.
I also have a look at one of Europe’s hottest renewable energy start-ups with global aspirations for clean tech.
Thank you for reading.
ESG Shareholder proposals
Citigroup agrees to disclose green financing ratio
Despite the backlash to environmental and social shareholder proposals, the New York City comptroller Brad Lander — who oversees the pension plans of public employees — has already scored wins this proxy season at two big Wall Street banks.
Citigroup has agreed to disclose its relative levels of financial support for low-carbon energy versus fossil fuels — what’s known as a green financing ratio. If the ratio is less than one, then the bank is providing more funding for fossil-fuel companies than for renewable energy businesses. Citi’s decision follows JPMorgan’s recent announcement that they would also disclose this figure.
In 2022, the green financing ratio for North American banks averaged 0.6, according to Bloomberg New Energy Finance (BNEF). Lander has highlighted BNEF data showing the ratio needs to reach four by 2030 to reach the Paris agreement goal of limiting global warming to 1.5 degrees.
“They can improve their ratio in two ways: by less financing of fossil fuels or by jacking up low-carbon energy, which is a huge opportunity right now,” Michael Garland, the NYC assistant comptroller for corporate governance, told me on Tuesday.
“We are very excited about this,” he said. “We felt from the beginning that because we were not being overly prescriptive, that it was a feasible request and we would make progress, and I think getting two major institutions to agree, sort of validates that assumption and hopefully will lead to stronger votes” at the other banks.
Garland acknowledged that the ratios could be fudged by the banks to embellish their green credentials.
“There is a risk that banks are going to want to make themselves look as strong as possible,” he said. “Our expectation is that transparency will allow people to hold them accountable.”
JPMorgan said in a statement: “We found common ground with [the] NYC comptroller on disclosing a clean energy financing ratio.”
Citi did not immediately respond to a request for comment.
These new disclosures mimic “green asset ratios” that European banks have started disclosing as part of EU taxonomy regulations. Starting this year, banks are required to disclose the proportion of their assets that are financing environmental objectives.
Lander’s ratio requests are scheduled to go to shareholder votes at three other banks in the months ahead. As the season for annual shareholder meetings gathers pace, there have already been a record 27 environmental shareholder proposals filed at financial companies so far, according to ISS-Corporate, a data provider.
Recently, restrictive shareholder proposals that called on banks to halt coal financing had not seen much success, Kosmas Papadopoulos, an executive director at ISS-Corporate, told me. However, disclosure requests — like the comptroller’s — had fared better, he said.
“The common denominator tends to be the same: if the requests can be linked to economic value it tends to resonate well with shareholders,” Papadopoulos added.
The ratio disclosures are likely to be cheered by climate campaigners, but how much they will actually do to reduce greenhouse gas emissions is far from certain.
Renewable energy sector
In a down market for solar, 1Komma5 thinks it has what it takes to go public
Certain energy markets have been known to be widow makers, and for at least the past 12 months, the renewable sector has been terrifying investors.
Just last week, Enviva, once one of the world’s largest wood pellet producers, filed for bankruptcy in the US (wood pellets are marketed as a low-carbon alternative to fossil fuels). Since August, eight European solar companies have either filed for bankruptcy, paused production, warned of factory closures or restructured debts.
But Hamburg-based energy efficiency company 1Komma5 is hoping to survive where other renewables businesses have flopped. The company’s name, 1Komma5, is derived from the Paris climate agreement’s goal to limit global temperatures to 1.5 degrees.
I have had my eyes on the company ever since it scored one of the biggest early-stage investments of 2022, according to CBInsights, which tracks venture capital. 1Komma5 raised $218mn from Porsche’s venture arm among others. Last year, the company raised another $234mn to push its valuation to $1bn.
When we spoke recently, 1Komma5 chief executive and co-founder Philipp Schröder readily acknowledged that “the state of the market is in a downturn”. A triple-whammy of high interest rates, low energy prices and trade protectionism aimed at China were all challenges for solar companies, Schröder told me.
To combat these problems, 1Komma5 sells solar power systems, including battery storage and heat pumps. The company argues its hardware, software and installation set-up offers customers an opportunity to save money on electricity.
The business is also growing outside Europe. Earlier this month, 1Komma5 announced that it had acquired Australian solar provider Arkana Energy Group. Schröder said 1Komma5 was now the third-largest solar provider in Australia.
“You need to have multimarket access. That is why we are in Australia. Next to California, [Australia] is one of the largest solar and also battery markets.”
The US is also fertile ground for 1Komma5. The US solar sector added a record 32.4 gigawatts of new electricity generation last year, up 37 per cent from the previous record in 2021, according to Wood Mackenzie.
Schröder said he wanted 1Komma5 to be ready for a public listing next year. As renewable energy businesses globally face economic challenges, it is political problems such as trade protectionism that worry Schröder.
“We think the main constraint for us next is going to be political risk,” he said.
And US elections could further chill the renewables market. 1Komma5 has demonstrated growth so far, but geopolitical challenges are looming on the horizon.
Smart read
The World Meteorological Organization sounded a “red alert” on the climate change behind record surface and ocean temperatures, glacial retreat and rising seas during the warmest 10-year period on record, with twice as many people going hungry in the years since the pandemic, our colleague Attracta Mooney reports here.
Read the full article here