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| | | | | |  | | By Lorraine Woellert, Ben Lefebvre and Catherine Boudreau | | | | | 
The Corpus Christi skyline. | Eddie Seal/Bloomber | SNEAKY DEALINGS — French commodity company Engie SA last year walked away from a U.S. natural gas deal under pressure from the French government, which didn’t like the American oil industry’s environmental record. But in June, Engie inked a natural gas deal with Houston-based Cheniere Energy — one that was designed specifically to avoid detection. Engie structured the deal so it wouldn’t require approval from French government officials who sit on its own board. It even warned that it couldn’t vouch for the climate impact associated with the imported fuel, according to documents from the environmental group Friends of the Earth France. Engie will buy liquefied natural gas mainly from Cheniere Energy’s export terminal in Corpus Christi, Texas. A July letter Cheniere provided under seal to the Department of Energy said it would deliver 12 cargoes a year to Engie through December 2025. Another six cargoes per year will move between October 2023 and September 2032. The two-part deal keeps volumes low enough to sidestep scrutiny from Engie’s board. “No publicity should be made around the transaction to keep it under the radar,” Engie officials wrote in a document sent to the board’s executive committee. A person familiar with the negotiations said the companies had agreed to keep the deal under wraps. “Engie has complied with its standard internal rules while approving a contract of this size,” Engie spokesperson Damien de Gaulejac said in an email. Cheniere “has committed to a major transparency effort, as well as traceability of the carbon content of its gas chain and continuous improvement of the management of its methane and carbon dioxide emissions.” Friends of the Earth France isn’t happy. “This is a serious breach of its duty of vigilance and a disgrace for this energy company,” campaigner Lorette Philippot said. “Just a year ago, the French state opposed the signing of a similar shale-gas import contract because of its environmental consequences.” Cheniere, one of the largest natural gas buyers in the country, has said it is moving to bring transparency to its gas supplies. If it succeeds, it could help persuade Texas producers to cut their own greenhouse gas emissions to remain competitive, said Andrew Logan, director of oil and gas at investor advocacy group Ceres. “It’s the single biggest purchaser of natural gas most days of the year, so it has a real ability to impact the behavior of producers if it wants to," Logan said. "This will be a test of whether it actually wants to.” Catherine earlier this year told you about Engie trying to green its image. And for the record, Cheniere earned another F this year in climate disclosure. Read on for more about that.
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Will other companies catch that Pepsi spirit? | Joe Raedle/Getty Images | FAILING GRADES — Corporations are going all-in on environmental reporting, right? Not really. An annual report that grades companies based on their disclosure shows that most simply refuse to participate in a voluntary system. The list from nonprofit data repository CDP showcases companies leading on environmental transparency. CDP’s A list this year included 272 companies with a combined $12 trillion market cap. The group hit a record 13,000 companies reporting environmental data. But nearly 17,000 other companies have refused to play ball. Despite the hype over environmental, social and governance metrics, there’s work to be done. Some of the A-listers: Diageo PLC, Infosys Ltd., PepsiCo Inc., Tetra Pak, AstraZeneca PLC, Colgate-Palmolive Co. and Lenovo Group Ltd. Fourteen companies also earned top marks for water and deforestation reporting. Here’s the bad news. Most companies earn an F from CDP. The 16,870 that don’t report include Chevron Corp., Exxon Mobil Corp. and Berkshire Hathaway Inc. Remember, this is all voluntary. CDP, founded in 2000, has no legal authority to demand reporting. But its database is used widely by investors, policymakers and, increasingly, corporations themselves. The group is hard-wired into the ESG reporting ecosystem and its data repository is commonly incorporated into ratings from other groups. “Some companies may feel they don’t have the necessary resources at the moment, limited data or something,” said Simon Fischweicher , CDP North America head of corporations and supply chains, when asked about all those Fs. “Some companies prefer to utilize their own reports and control the narrative. That doesn’t provide the structured comparability that the CDP has.” Oil and gas is one of the least responsive sectors, Fischweicher said, especially in the U.S. The American Petroleum Institute takes no position on CDP’s reporting framework. “API is supportive of transparent and comprehensive sustainability reporting on climate-related risks,” API Climate & ESG Director Aaron Padilla said in an email, and reminded us that the industry has set up its own disclosure standard. “This reporting conducted voluntarily by individual companies in our industry aims to meet the expectations of stakeholders and ensure a consistent and transparent reporting structure.” Here’s a new trend: Supplier engagement has been driving a lot of CDP activity lately as retailers and manufacturers try to manage emissions in their supply chains.
| | | Lorraine is on R&R next week, so be sure to flag your tips to Catherine. What’s on tap for 2022? Send your predictions to lwoellert@politico.com and cboudreau@politico.com. Find us on Twitter @ceboudreau and @Woellert. FOMO? Sign up for The Long Game. Thanks to Shayna Greene and the gang from Playbook for the help today.
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Fish, dead. | Ringo H.W. Chiu/AP Photo | A CONSTELLATION OF NORTH STARS — Protecting and restoring nature is the next frontier in corporate ESG reporting. More than half of the world's economic output — about $44 trillion — depends on waterways, forests and other ecosystems threatened by climate change and human consumption. Yet, as you’ve just read, most businesses don’t assess their contributions to deforestation, biodiversity loss and water pollution. The Task Force on Nature-related Financial Disclosures wants to close that gap. The nonprofit, which has members from banking, steel, food, agriculture and other sectors, will release a reporting framework next year that companies can start testing. David Craig, task force co-chair and senior adviser to the London Stock Exchange Group, spoke to Catherine about what to expect. This interview has been edited for length and clarity. Why is there momentum now? The Task Force on Climate-related Financial Disclosures pushed forward what companies should do to manage risks around climate change and disclose them. That is now being applied to nature and biodiversity risk. We can’t achieve net-zero [greenhouse gas emissions] without being nature-positive, so we have to quickly understand how to preserve natural rainforests and savannahs to absorb carbon. But we also can’t look at climate change on its own. Those impacts are on top of what humans are already contributing, like overfishing. Things are moving fast. World leaders pledged to end deforestation by 2030 at the U.N. climate summit in November. The G-7 and G-20 endorsed our task force this year. Does nature have a North Star, some overarching goal similar to climate change? With climate, you have some simple numbers you can measure, such as limiting global temperature rise to 1.5 degrees Celsius. Natural systems are more complex, so we might end up with a constellation of stars we have to shoot for — such as protecting a certain amount of land, water or biodiversity — because the risks are very industry- and location-specific. A natural resource may be abundant in one part of the world but not another. Water might be very important for the food and beverage industry, but not steel production. There are some really good companies bringing a lot of knowledge. But reporting tends to be patchy and non-consistent. We are building on that. Will these nuances be reflected in the framework? Yes. Location will be an important part of the framework. It will help companies understand how much they depend on natural assets and the risks of losing them. Companies will share that with investors so they can understand how those risks are being mitigated. Why is the financial sector so important? If you think about hot topics right now, deforestation is one of the largest we have to tackle. There are plenty of laws policing illegal logging, but they aren’t always enforced. So while the financial system can’t solve that problem, greater transparency can encourage people to think before investing or buying products. The financial system can be an additional layer of scrutiny and operate as the policeman of the natural world. Financial flows fund the destruction of the natural systems we depend on, so there should be tougher controls to make sure those flows don’t happen. Pension funds will be key. They are long on systems that are damaging to the environment, so a transition — similar to the one away from oil and gas — will play a huge part.
| | | Volta Inc., the electric vehicle charging company based in San Francisco, will enter the European market. The initial focus will be on infrastructure build-outs in Germany, Austria, Switzerland and France, the company said Monday. Union Pacific Railroad Co. said it plans to be net zero by 2050, becoming the first U.S. railroad to make a pledge to curb greenhouse gas emissions. Its climate action plan includes improving operational efficiency and using more low-carbon biodiesel fuel. Royal Dutch Shell PLC — soon to be simply Shell PLC — abandoned plans to develop an offshore oil field because the numbers didn’t add up. The Cambo project off the coast of Scotland was a joint venture between Shell and Siccar Point Energy, a company backed by private equity firm Blackstone. “The economic case for investment in this project is not strong enough at this time,” Shell told The Guardian. Siccar Point CEO Jonathan Roger told CNN the company would find a way around the setback.
| | | STILL WHITE, STILL MALE — Women and Black people have been losing ground at investment companies. (What did we just say above about work needed on ESG?) A report from the House Financial Services Committee found stagnant levels of racial and ethnic diversity over the past five years. There was a slight increase in employees who identify as Asian or Pacific Islander and a slight decrease of employees who identify as white. Legislation could be coming, folks. BIG PLAYERS JOIN THE FIGHT — A Ceres study of 2021 proxy votes found that support for climate-related shareholder proposals jumped 10 points to 41 percent, propelled by the votes of large asset managers. That’s a first — big asset managers typically lag in their support for climate initiatives. Votes by BlackRock, Vanguard and others showed statistically significant increases, suggesting that they’ve changed their approach on corporate climate risks, Ceres said.
THE NEXT FRONTIER? — Principles for Responsible Investment is wading into a new space — tax fairness. “Companies and investors need to recognise that externalising costs onto others while aggressively reducing their own corporate tax payments is detrimental to broader society,” PRI wrote in a report released Monday. INSURER BAILOUT — Insurance companies in Louisiana will be assessed at least $100 million to pay the claims of two failed property insurers that went belly up after Hurricane Ida. But the cost of the insolvent insurers ultimately will fall on taxpayers. The Advocate has more.
| | | SUPPLY CHAIN POLITICS — Vulnerable moderate Democrats are antsy that their party will be blamed for high inflation and supply-chain problems, and they’re itching to do more to address the twin issues. Rep. Josh Gottheimer (D-N.J.) on Monday unveiled a bill that calls on President Joe Biden to name a supply chain czar and said the National Guard and non-combat military ships should be deployed to move critical goods. With campaign season about to heat up, look for similar moves from other moderate Democrats.
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Hot, even for Death Valley. | John Locher/AP Photo | California this year had its hottest summer in history. Now, state policymakers want to build a ranking system for heat waves, something modeled after the Saffir-Simpson wind scale for hurricanes. A bill will be introduced in January, AccuWeather reports. Anti-work manifestos are cropping up on receipt printers around the world. “ARE YOU BEING UNDERPAID?” one of the messages asked, according to screenshots posted on Reddit and Twitter . “POVERTY WAGES only exist because people are ‘willing’ to work for them.” Vice has the nitty-gritty.
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