Exxon misled?

"This paper assesses whether ExxonMobil Corporation has in the past misled the general public about climate change. We present an empirical document-by-document textual content analysis and comparison of 187 climate change communications from ExxonMobil, including peer-reviewed and non-peer-reviewed publications, internal company documents, and paid, editorial-style advertisements ('advertorials') in The New York Times." See Assessing ExxonMobil's climate change communications (1977–2014) by Geoffrey Supran and Naomi Oreskes. Pdf here. Video abstract below. 

"We conclude that ExxonMobil contributed to advancing climate science—by way of its scientists' academic publications—but promoted doubt about it in advertorials. Given this discrepancy, we conclude that ExxonMobil misled the public. Our content analysis also examines ExxonMobil's discussion of the risks of stranded fossil fuel assets. We find the topic discussed and sometimes quantified in 24 documents of various types, but absent from advertorials. "

Exxon have on going litigation in this area. Check out Exxon's 20-F for more and a recent NYT piece on the NY State litigation, In June 2017,  “evidence suggests not only that Exxon’s public statements about its risk management practices were false and misleading, but also that Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public.”

Cross fertilise. Read about the autistic mind here and ideas on the arts here. On investing try a thought on stock valuations.  Or Ray Dalio on populism and risk.

Bank Sued on Climate Disclosure

Shareholders sue CBA (Commonwealth Bank of Australia) on climate risk disclosure. The claimants argue the lack of disclosure contravenes parts of the Australian Corporations Act law.

I think this is an intriguing new development in the activism front. Mainly activism has focused on AGM activism, where shareholder take climate related disclosure and risks to a proxy vote (see recent actions by Share Action, Aiming for A; and the recent debate over Exxon's proxy). This relies on a companies' articles of association etc. and a shareholder vote. It is often non-binding.

This approach relies on Company / Corporation Law - which varies country to country but tends to have similar principles (see below). It is likely much more costly, but an assessment by an independent judge and enforcement by law courts carries potentially more weight. It will be binding.

This also opens up a possibility that certain claimants will use ERISA law in the US to pursue a similar line of argument with Fund Managers / Trustees. (see my arguments on this in a forthcoming post). 

The Australian case focuses on sections 297 and 299A of the Corporations Act. Section 297 says annual financial statements must present a “true and fair view” of the financial position and performance of the company. Section 299A says the financial report must contain enough information to allow people to make an informed assessment of the company’s financial position, business strategies and future prospects.

You can read the short form claim here.

"The Applicants seek a declaration that CBA, by failing to report on CBA’s Climate Change Risks, the Carmichael Risks, CBA’s Management of its Climate Change Risks and CBA’s management of the Carmichael Risks in the 2016 Annual Report contravened ss292(1)(b), 295, 297, 298(1) and (1AA), and 299A(1) of the Corporations Act; and

an injunction under s 1324(1) of the Corporations Act:

i. restraining CBA from continuing to fail to report on the risks set out in sub-paragraph a,
and on CBA’s management of those risks, in CBA’s Annual Reports; alternatively

ii. requiring CBA to report on the risks set out in sub-paragraph a, and on CBA’s management of those risks,in CBA’s Annual Reports;"

"Guy Abrahams, one of the claimants and a chief executive of not-for-profit Climarte Inc, said in a statement: “We bought Commonwealth Bank shares more than 20 years ago as an investment in our children’s future.

“We are deeply concerned about the serious risks climate change poses to the environment and society. The bank should tell investors about the risks climate change will have on its business.”

Also from the Guardian article: "The sorts of risks the Commonwealth Bank might face as a result of climate change are diverse, said David Barnden, a lawyer at Environmental Justice Australia.

“CBA has exposure to the Australian economy in general. We could be talking about anything from extractive projects to the housing market, which might face risks from sea level rise,” Barnden said.

Reputational risks for the bank as the economy moves away from fossil fuels could also be significant, Barnden said, with the shareholders raising concerns about the bank’s position on funding Adani’s proposed Carmichael coalmine and associated infrastructure.

“There is an aspect of the claim that looks at the reputational and financial risks the Carmichael mine might pose to the bank,” Barnden said. “We say that CBA ought to have known of those risks and should tell investors what its plans are with respect to the mine and if it is considering financially supporting the mine.”

Another part of the claim focuses on the Commonwealth Bank not disclosing any climate-related risks as major or material risks. “When the bank talks about major or material risks to the bank, we say it should be talking about climate change,” said Banden."

Cross fertilise. Read about the autistic mind here and ideas on the arts here. On investing try a thought on stock valuations. 


 

Free Carbon Model

Google Research team makes available models to help assess impacts needed to decarbonise. The technical details of the model are in this paper.  The web UI is available for you to try.

You will need to bring yourself up to speed on energy modelling. See my overview here on Vaclav Smil's work, his work offers a good introduction (although advocates argue he is too pessimistic, his history of energy is a great place to start). But, it shouldn't take long for an interested reader to be able to make reasonable models and assumptions themselves.

From Google team: "we created a tool that allows us to quickly see how different assumptions—wind, solar, coal, nuclear, for example—affect the future cost to generate electricity and the amount of carbon dioxide emitted.

We created a simplified model of the electrical grid, where demand is always fulfilled at least cost. By “least cost,” we mean the cost of constructing and maintaining power plants, and generating electricity (with fuel, if required). For a given set of assumptions, the model determines the amount of generation capacity to build and when to turn on which type of generator. Our model is similar to others proposed in other research, but we’ve simplified the model to make it run fast...

... One interesting conclusion of the paper: if we can find a zero-carbon, 24x7 electricity source that costs about $2200/kW to build, it can displace carbon emission from the electricity grid in less than 27 years. We hope that the tool and the paper help people understand their assumptions about the future of electricity, and stimulate research into climate and energy."

"Anyone —from students to energy policy wonks—can try different assumptions and see how those assumptions will affect the cost and CO2. The web UI is available for you to try: you can explore the how utilities decide to dispatch their generation capacity, then can test different assumptions. Finally, you can compare different assumptions and share them with others."

Cross fertilise. Read about the autistic mind here and ideas on the arts here. On investing try a thought on stock valuations. 

Drones Inspecting Environment

The use of drones in China to follow up on environmental inspections seems like it should be science fiction, but is an evolving reality (SCMP post article). Amazon are developing drones, Walmart too for inventory management (though they seem a long term loser to Amazon); Easyjet have thought about them for inspections and maintenance of planes.

"Dongguan, one of the world’s biggest manufacturing hubs, is home to more than 300,000 factories making everything from shoes to smartphones, and all crammed into a region about the size of Hong Kong. About 200 environmental inspectors oversee the plants’ emissions.

The use of pollution-detecting drones has helped the city identify and punish tens of thousands of polluting factories, and cut the number of smoggy days to just 12 last year from 104 in 2015, when the devices were introduced as part of an environmental clean-up campaign, according to the local environmental protection bureau.

In the past, residents would regularly don face masks on the streets to protect themselves from the smog. But the practice has since waned as the city’s air quality is now ranked among the best in China. The average PM2.5 level – the small polluting particles deemed most harmful to health – is 35 micrograms per cubic metre, close to that of downtown Paris."

"With the help of drones, any resident can now pick up their phone and stop pollution within hours." From the SCMP post article. There are wider implications, but it is a sign of how technology might be used in ways unexpected to combat our problems.

It is impacting agriculture too:

"Another major application for drones is in agriculture. Liu Jun, a farmer from the village of Dongan, Yanshou county, in northern China’s Heilongjiang province, said that this summer it was almost impossible to cross a field without hearing the buzzing of drones.

“That wasn’t the case last year. Then, boom, there were drones everywhere. And they’re doing all the dirty and harmful work such as spraying crops with pesticides and disease prevention drugs,” Liu said.


“Overnight, their performance [in the agriculture sector] has changed farmers’ suspicions of new technology. Now almost every farming family in our village has either bought or hired a drone.”

Heilongjiang, which spans more than 13 million hectares of flat, fertile farmland, churns out more agricultural products than any other province in China. According to government statistics, its annual food output is enough to feed everyone in China for nearly two months.

As in many other parts of China, however, Heilongjiang’s agriculture sector is facing a growing labour shortage as young people head to the city in search of better pay and less physically demanding work.

“Drones are saving us,” said Liu, who helped set up Dongan’s “drone squadron”. More than 20 young people in the village are training to become professional drone pilots this year. Last year, the number was just one, he said...."

From what I can tell - supposedly many other industries are being persuaded by the cost and safety benefits of drone-based data as well. In transportation, American railroad BNSF is partnering with the Federal Aviation Administration to test drones for remote track and bridge inspection and air quality monitoring. Network Rail in the United Kingdom is using drones as part of its ORBIS project to digitize the country’s rail network in 3D, to enable better planning of track maintenance and renewal.

Miner, Rio Tinto is using drones to survey equipment and mining pits in Australia. Industrial machinery company Caterpillar is exploring the use of drones for fleet vehicle management in the field, while drones are important in Komatsu’s “Smart Construction” service, which can fully automate bulldozers and excavators.

Cross fertilise. Read about the autistic mind here and ideas on the arts here. On investing try a thought on stock valuations. 
 

Vaclav Smil, energy expert. Awesome.

Vaclav Smic is a world leading authority on energy systems and usage. I had the fortune to hear him speak at a CLSA event this week.

See his work and academic credentials here.  His books give more data and insights. These two pieces on energy here (2017 Annual Energy paper with JPM) and here, (A skeptics look at alternative energy) also expand on these notes below in more detail. Bill Gates is a fan. 

My brief impressions are:

We are heading for >2 degree world. Too much is already baked into the pipeline. I] It is unlikely we will bend human behaviour enough by 2050. Energy transitions as can be seen throughout history take a long time (decades).

We need to be prepared to deal with negative catastrophes in places like Bangladesh and Florida. Conversely, it is possible that much of Russia will benefit. One could argue Russia might want to ensure at least a +3 degree warm happens if it was only self interested.

We should think about consuming less. The impact of eating 50 percent less beef in the Developed world would be significant. Turning vegetarian for one day a week could also be very significant in terms of carbon impact.

Smil views improving battery technology as incremental. He cites 100 years of progress since Edison made an improvement. He does not view mass efficient energy storage of the type needed to power a city for one day as likely to come on to the market in the next 20 years. He cites near term the biggest to be completed in 2021 in California as being insufficient to power most cities for more than a few hours.

Smic is optimistic on the impact that moving to natural gas could have. Both in terms of pollution, but also in terms of efficiency. Gas is still FF though.

There are no viable alternatives for producing fertiliser, steel, plastics, and much of the basic materials of the modern world; and flying planes other than fossil fuel use. This leaves likely FF to make up at least 50 percent of worlds energy requirements on an ongoing basis.

Fusion. Commercially - The most optimistic assessment would be "Not in our life time" or perhaps "Never". He cites two world fusion experts.

Cities don't really sleep. However solar and wind in most places are not reliable. This is why even though Germany which now has renewable capacity to match its fossil fuel capacity has not impacted meaningfully its FF use, not its carbon emissions from Energy use.

In many places in the world the grid is not connected. One can't send energy from San Francisco to Texas. Or from Texas to Canada. In some places it can work, Denmark can obtain hydroelectric power from Norway when the wind is not blowing. Few people want high energy transmission lines traversing their backyard or landscape, so the situation is unlikely to rapidly improve.

In discussion, as an aside - We will cure more cancers before we solve the mass electricity storage problems  (I happen to agree with this view on the cancer side, I'll have to rely on Smil on the storage problem)

The return on vaccines is at least 44x.  Eradicating polio has been an amazing world benefit. As an advisor to Bill Gates, this is not a surprise to have this view. The Gates foundation has worked on this for a while now.  Many world human development metrics have vastly improved over the last 25 years (As my infant mortality post shows as well, hopefully more data on this).  You can see the Gates work here and a Smil article on it here.