TBLI Weekly - August 29th, 2023


TBLI Weekly - August 29th, 2023

Your weekly guide to Sustainable Investment

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The true cost of climate pollution? 44% of corporate profits.

By: Kate Yoder - Grist

Yet governments are still pouring $7 trillion into subsidies for fossil fuels.

What if companies had to pay for the problems their carbon emissions cause? Their profits would plunge, according to new estimates, possibly wiping out trillions in financial gains.

These results, spelled out in a recent study in the journal Science, are based on analysis of almost 15,000 publicly-traded companies around the world. To calculate how much each ton of carbon emissions ends up costing society, economists used the Environmental Protection Agency’s estimate of $190 per ton.

For all of those companies combined, the damage would run into the trillions of dollars, Christian Leuz, a coauthor of the study and a business professor at the University of Chicago, told the Associated Press. The researchers only included direct emissions from companies, not “downstream” emissions related to the products they sell. (So emissions from the operations needed to build cars would count; the pollution that comes out of its tailpipe wouldn’t.)

They found that the cost of damage surpassed profits for highly polluting industries, including energy, utilities, transportation, and materials manufacturers — a group that accounted for 89 percent of the total. Researchers didn’t name any specific companies.

The study arrives during a summer when the costs of climate change are coming clearly into view, as historic flooding, deadly wildfires, and frequent heat waves have rattled the United States. The administrator of the Federal Emergency Management Agency warned last week that the pace of disasters has been so frequent that it’s running out of cash. And the economic consequences of climate change go beyond emergency response: Extreme heat is believed to cost the U.S. economy billions in lost productivity every year.

But even as the toll of carbon emissions becomes apparent, governments around the world are pouring more money into support for fossil fuel companies than ever before. Last year, subsidies for oil, coal, and natural gas reached a record high of $7 trillion, according to a report out Thursday from the International Monetary Fund, which works out to $13 million every minute. That’s nearly double what the world spends on education and equal to roughly 7 percent of global economic output. Subsidies often come in the form of tax breaks intended to keep people’s gas prices and energy bills low, but they come with huge costs, slowing the shift to a cleaner economy.

The economists behind the new study of corporate emissions make the case that forcing companies to disclose their greenhouse gas pollution is a start toward decreasing emissions. Some governments are starting to move toward this approach: The European Union adopted rules earlier this year that will require companies to disclose their emissions, following a similar move by the U.K. government in 2022. It’s an approach also being considered by the U.S. Securities and Exchange Commission and California lawmakers.

There’s some evidence that such disclosures could prompt companies to reduce emissions. One study found that contamination levels dropped after fracking companies were forced to disclose their pollution, and that these kinds of regulations enabled more public pressure on corporations.

“Put plainly,” the study concludes, “it is difficult to imagine a successful approach to the climate challenge that does not have widespread mandatory disclosure as its foundation.”

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Will China’s Electric Vehicle Dominance End?

By: Ariel Cohen - Contributor - Forbes

U.S. is in the lead combating China’s unfair business practices in EV production. India and Australia are following, EU is lagging behind.

Amidst Hangzhou’s modern skyline are scores of weed-infested lots filled with the remains of thousands of abandoned electric vehicles (EVs). China’s EV revolution soared to prominence, generating envy and fear from Western competitors. Like the Greek mythological hero Icarus, however, it may have flown too close to the sun. As China now confronts intense deflationary economic woes fatal to consumer spending, the subsidy-driven EV boom may be coming to an end. An assortment of EV competitors determined to humble China makes things worse for the nascent Chinese EV industry.

Once brushed aside as mere imitators, Chinese car manufacturers transformed themselves from producers of lackluster replicas to formidable challengers against top-tier Western competitors. The numbers paint a vivid picture: China sold a staggering 27 million cars last year, the U.S. trailed at 13.75 million, and the European Union at 9.25 million. Thus, China sold 15% more cars than the US and the EU combined.

What's truly electrifying is China's dominance in the EV market. Amongst the 5.4 million EVs sold globally in the past year, China sold two-thirds of this total. Anchoring this surge is China's stranglehold on approximately 75% of the world's battery cell production capacity, a critical advantage that allows its automakers to drive costs down significantly. At a glance, by almost any metric, China appears ready to dominate the EV market.

This path to prominence is not without potholes. A 27.5% tariff, started by the Trump administration and continued under Biden, has killed the competitiveness of Chinese auto manufacturers in the American market. A bipartisan suspicion towards China has created an array of regulations designed to punish dependency on China and protect American manufacturing.

While it's easy to regulate imports, the interconnectivity of global supply chains and China’s dominance of Rare Earth Elements (REEs) and EV batteries make decoupling easier said than done, even for the willing.

The scandal around a nascent partnership between Ford and China’s largest battery company, CATL, perfectly highlights this legal and economic minefield. The partnership was designed to produce CATL-designed novel lithium iron phosphate batteries cheaply at a designated $3.5 billion facility in Michigan. Even this initiative, which should be a commendable example of re-shoring American manufacturing, ran into concerns stemming from the ratio of the American to Chinese workforce in the plant, the relevance of federal tax incentives, CATL’s connection with forced labor and lithium from Xinjiang, and the overall dependency on China. Even when companies want to disengage, it is not easy.

This is further complicated by the resilience of Chinese automakers and their involvement with global companies and brands. Geely's acquisition of Volvo and its luxury EV arm Polestar – which is opening plants in South Carolina – shows just how ubiquitous Chinese automakers are, and how difficult avoiding them is. Chinese automakers will not bow out gracefully.

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Will A Coup In One Of The World’s Biggest Uranium Producers Squeeze Nuclear Energy?

By: Alexander C. Kaufman - HuffPost

Uranium from Niger helps power Europe, but all eyes are on the West African country after the military overthrew its elected president.

It takes a long time to dig a mine, especially in the middle of the Sahara Desert. Just ask Bob Tait.

The Toronto-based Global Atomic Corp. where he serves as vice president of investor relations started exploring for uranium in the middle of Niger, a landlocked West African nation roughly twice the size of Texas, some 18 years ago. It took until late last year to finally start digging the mine.

The timing couldn’t have been better. Countries all over the world were announcing plans for new nuclear reactors, right as nations that already had them started seeking alternatives to Russia for buying uranium fuel after the invasion of Ukraine. By July of this year, the company finished building the access ramp to the edge of the underground ore ― putting the project, called the Dasa mine, ahead of schedule. And a second shipment of mining equipment had just completed its overland journey north from a port in neighboring Benin.

Then, suddenly, Niger’s military toppled its elected government.

On July 26, not long after the tools for excavating rock arrived in customs, Gen. Abdourahamane Tchiani, the erstwhile head of Niger’s presidential guard, led a revolt, detaining President Mohamed Bazoum and threatening to kill the leader if foreign powers intervene to stop the coup. Casting the ouster as an anti-colonial rebellion, the junta and its supporters accused France of meddling in its former colony and cut off military cooperation deals with Paris.

Once the fourth-largest producer of uranium in the world, Niger has since slid to No. 7, exporting about 5% of the global supply. But Niger’s uranium fuels at least 10% of France’s nuclear reactors, which generate most of its electricity, and supplies as much as one-fifth of Europe’s atomic fleet. Prices in the spot market jolted slightly upward after the coup.

But at Global Atomic’s construction site for the Dasa mine roughly 600 miles northeast of the capital of Niamey, “people are going about business as usual,” Tait said.

“I don’t see our operations getting interrupted,” he said. “There was some noise that the military leadership was going to block shipments of uranium to France. Whether that happens or not, I don’t know. But it wouldn’t affect us.”

Analysts say it wouldn’t affect France much either. Or, for that matter, global uranium supplies.

In the days after the coup, the price of uranium in global spot markets inched up only by 10 cents, to $56.25 ― more than double what it was three years ago, but still less than half its historic peak of $140 in 2007, when the world last looked poised for a major build-out of new reactors. By late August, the price spiked another $2 to $58.25.

The incident highlights one of nuclear energy’s key advantages. Natural gas and oil need to be constantly replenished with fresh supply, giving producers ― particularly countries that control the taps of hydrocarbons buried beneath their land ― tremendous leverage over those nations whose economies would screech to a halt without fuel.

While solar and wind run off of free sunlight and airflow, a dark, still sky means no electricity, making it virtually impossible for any major economy to run exclusively on those renewables without some kind of backup sources. And the supply chains for the processed metals needed to make solar panels, wind turbines and batteries to store that electricity to use later run overwhelmingly through China, which has recently threatened to cut off certain exports to geopolitical rivals.

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Ten climate “solutions” that don’t help

Many shiny new “green” ideas do more to preserve fossil fuels than to replace it

The world continues to face a major obstacle to addressing the climate crisis: deliberate distraction with a proliferation of new whiz-bang technologies and ideas. Some are well-intentioned, some are strategic, some delusional, but most are outright greenwash to justify the continued use of fossil fuels and to distract from the inevitable move to less expensive renewable energy.

Historically, this innovation and testing would have been carried out at research universities funded by government grants with a commitment to finding the best and most useful solutions. Today, much of this work is sponsored by individual businesses or sectors — notably, by coal, oil and gas companies.

An entire suite of bad ideas is being pushed by a fossil fuel industry determined to slow global efforts to decarbonize. This week the Climate & Capital team looks at some of these “shiny objects” distracting the world from forming effective climate solutions.

1. The mother of all distractions: Carbon Capture and Storage

Carbon Capture and Storage (CCS) has long been touted by the fossil fuel sector as THE answer to their enormous greenhouse gas emissions problem. CCS (not to be confused with direct air capture of carbon) involves collecting CO2 from power plants and then injecting it underground, or using it for some other industrial purpose.

Sources like Saudi Arabian negotiators and former Goldman Sachs CEO Hank Paulson argue for developing carbon capture technology while pushing back against efforts by the G20 industrialized nations to phase out fossil fuels.

Forget the hype. This is the reality of the contribution of CCS to reduce emissions today: virtually nil.

Consider this simple chart created by energy researcher Ketan Joshi comparing emissions generated by gas and oil giants (black bars) to those avoided by relying on CCS technology (green) and another questionable solution, “carbon offsets” (purple).

Not convinced? Consider there are 196 CCS projects globally “in the pipeline,” with 30 in operation, 11 under construction, 153 in development and two suspended. The carbon capture capacity of all of these projects is estimated to be only around 242 million tons per year. The International Energy Agency (IEA) says capacity needs to reach 1.6 billion tons per year for the technology to be effective.

Attempts to build power plants using CCS are also numbingly expensive and, so far, have all but failed. Oil giant Chevron recently acknowledged its flagship CCS project built in 2017 off the northwest coast of Australia is operating at just one-third of its capacity because of problems at the facility.

Tim Buckley, director of Climate Energy Finance and contributor to Climate & Capital, says Chevron’s admissions are an indictment of the technology: “Dismal operating performance since [the plant] opened six years ago shows the technology has little future.” Buckley notes that most carbon sequestration worldwide is “aimed at extracting more oil and gas from reservoirs.”

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Republican anti-ESG push complicates faith-based impact investing



As heat waves blazed across the U.S. in July, what was later declared the hottest month on record, House Republicans held a series of hearings grilling investment practices based on environmental, social and governance criteria, or ESG.

The monthlong inquiries, aimed at what conservative lawmakers and their allies call "woke capitalism," produced an unexpected target of interest: Seventh Generation Interfaith Coalition for Responsible Investment, a contingent of 40 faith-based institutions, mostly Catholic congregations of women and men religious.

Letters from the House Judiciary Committee sought all communications and documents the world's largest proxy adviser firms — Institutional Shareholder Services and Glass Lewis — and others had with Seventh Generation Interfaith Coalition and fellow shareholder engagement organizations, alleging they may have colluded and violated U.S. antitrust law in advocating American companies to decarbonize their assets and achieve net-zero greenhouse gas emissions in their operations.

It was the second time in six months Seventh Generation Interfaith was named by conservative politicians investigating ESG-guided investing. A March letter from Republican attorneys general for 21 states lumped the faith investing coalition among "some of the most radical ESG activists" who use shareholder resolutions to press companies to align with the goals of the Paris Agreement on climate change and reach net-zero emissions globally by 2050 to wean economies worldwide off the use of fossil fuels.

"Indeed, pressuring companies to reach zero commitment is one of the most radical active investment strategies imaginable," the attorneys general wrote, calling shareholder proposals targeting banks an attempt "to cut off funding to business in our states that may be out of step with environmental activists' net zero goals."

The House hearings and attorneys general letter, as well as hundreds of bills proposed in red-state legislatures, are part of increasingly coordinated campaigns to push back against the growing tide of ESG investing and principles around socially responsible investing — approaches long championed by religious institutions.

Reports have traced funding for the anti-ESG blitz to the fossil fuel industry as well as right-wing and libertarian groups, including those tied to Catholic conservative activist Leonard Leo.

"It's a sign of the impact we've been having," said Cathy Rowan, director of socially responsible investments with Trinity Health, a Michigan-based Catholic health system operating in 22 states. "And it's obviously upset some people."

Still, the backlash has alarmed faith-based investors and their allies in socially responsible investing, who attribute it partly, but not entirely, to diminished support this year on a number of shareholder proposals, particularly around climate change. There's a fear that anti-ESG fervor in legislatures could blunt momentum for the rapid shifts in global finance needed to address climate change at a time when the window for avoiding the worst impacts is narrowing.

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