WOKE WEDNESDAY: ESG adjacent headlines, carbon disclosure, and an SBTi special look with words from fancy expert Daniel Cash

Live from an SBTI-flavored puddle, it’s the ESG Industry’s ONLY weekly woke data podcast, featuring AnalystHole Matt Moscardi! In today’s un-greedy ESG offshore-windbag called September 20, 2023: random ESG headlines, an SBTI deepdive, and a fancy expert named Cash who ironically is a Credit expert

Our show today is being sponsored by ESGauge, your ESG data solutions provider

DAMION1

1. California Governor Commits to Sign Climate Disclosure Bills into Law

1. “Of course I’m going to sign those bills”

2. California Governor Gavin Newsom announced on Sunday that he plans to sign two new landmark climate-related disclosure bills into law, which will require most large companies in the U.S. to disclose their full value chain emissions, as well as requiring companies to report on their climate-related financial risks and adaptation measures.

3. Newsom noted that SB 253, requiring $1 billion+ revenue companies to disclose greenhouse gas emissions will apply to more than 5,300 businesses, including multinationals, and “some of the most well-known businesses in the world.” He added that several large companies have recently indicated their support for the bills, including Apple and Salesforce.

1. As passed in the Assembly, SB 253 would require companies with revenues greater than $1 billion that do business in California to report annually on their emissions from all scopes, including direct emissions (Scope 1), emissions from purchase and use of electricity (Scope 2), and indirect emissions, including those associated with supply chains, business travel, employee commuting, procurement, waste, and water usage (Scope 3).

2. Disclosure obligations would begin in 2026 for Scope 1 and 2 emissions, and in 2027 for Scope 3 emissions, with measurement and reporting to be performed according to the Greenhouse Gas Protocol standards. The law would also require companies to obtain third party assurance for their emissions reporting, starting with a limited assurance level beginning in 2026 for Scope 1 and 2 emissions, and at a more stringent reasonable assurance level in 2030, and at a limited assurance level for Scope 3 in 2030.

4. SB 261 applies to U.S. companies that do business in California and with revenues greater that $500 million to prepare a report disclosing their climate-related financial risk, in accordance with the TCFD framework, as well as measures to reduce and adapt to that risk. Prior to approval in the Assembly, the bill was amended to move the date of first disclosures to 2026 from 2024, and to require reporting every two years instead of annually.

5. The new laws would introduce the first major mandatory climate-related reporting obligations for many U.S. companies, although there are others likely to apply to U.S. companies as well. 

6. Meanwhile: 'Big Oil has been lying to us': California sues oil giants over climate change damages

1. The US state of California sued five of the world's largest oil companies on Friday, alleging the firms caused billions of dollars in damages and misled the public by minimizing the risks from fossil fuels, according to a court filing.

2. ExxonMobil, Shell, BP, ConocoPhillips and Chevron, which is headquartered in California. The American Petroleum Institute, an industry group, is also a defendant in the case.

3. "Oil and gas company executives have known for decades that reliance on fossil fuels would cause these catastrophic results, but they suppressed that information from the public and policymakers by actively pushing out disinformation on the topic," the 135-page complaint read.

2. Del. Chancery Upholds Disparate Voting Rights for Same Class of Stock

1. Nuff said

3. BP CEO Search Is Big Oil’s Best Chance to Fix Its Gender Problem

1. Big Oil even accepted climate change before having female CEO

2. Discrimination and harrassment remain problems in the industry

3. Titans of the oil and gas world like Exxon Mobil Corp., Chevron Corp., Shell Plc, and BP Plc have successfully adapted to countless societal changes over the last century — war, nationalizations, even the climate movement. But a major hurdle remains: Big oil has yet to appoint its first-ever female chief executive — something BP could soon change.

4. This week, the 114-year old British oil company parted ways with its charismatic CEO Bernard Looney after multiple investigations found he failed to disclose several workplace relationships. What the board knew and when remains unclear. BP’s interim leader, Murray Auchincloss, is also in a relationship with a BP employee, though the company says it was fully disclosed when he became CFO.

5. Appointing a female CEO would send a clear message that the clubby era of petro-masculinity could finally be coming to an end. But doing so will require bucking more than a century of precedent: Only two women — Vicki Hollub at Occidental Petroleum Corp. and Meg O’Neill at Woodside Energy Group Ltd. — currently lead large international oil companies.

6. In the US, women represent just 13% of the oil and gas C-suite, the lowest of any professional industry, according to McKinsey & Co. Worldwide, women occupy just 22% of jobs in oil and gas, making it the third-most gender imbalanced industry, according to a 2021 study by Boston Consulting Group and the World Petroleum Council. Despite the industry’s embrace of diversity and inclusion policies, that percentage was unchanged from four years earlier.

7. In the BCG study, the top two career obstacles women cited were not being told of job opportunities and unfair performance evaluations. A review of the resources industry by the Australian government supported that study: It depicted an industry dominated by a macho culture rife with sexual harassment, one where employees promotions are based on personal recommendations rather than merit.

4. New Qantas CEO Vanessa Hudson apologises to sacked workers

1. The new boss of Qantas has acknowledged the harm caused to more than a thousand workers who were illegally sacked during the pandemic.

2. Nearly 1,700 ground staff were deemed to have been illegally dismissed during a High Court ruling last week.

3. In a phone call to TWU Secretary Michael Kaine, Vanessa Hudson offered a personal apology to those workers as she begins the work to rebuild the airline's reputation.

4. “She made a phone call, reached out and said that she acknowledged that the workers had had a really hard time,” Mr Kaine told Sky News Australia.

5. Meanwhile: Former Qantas CEO Alan Joyce paid $21.4 million in last financial year, $14.4 million subject to clawback by airline's board

1. Alan Joyce received $21.4 million from Qantas last financial year as its CEO

2. A short-term $2.2 million bonus has been withheld from the former CEO pending the outcome of an ACCC legal investigation

3. Qantas' board says more than half of Mr Joyce's total payout — including his bonus — is at risk of being clawed back

4. The airline has posted its highly anticipated annual report on Wednesday afternoon, confirming Mr Joyce's final payout.

5. But $14.4 million of Mr Joyce's total pay could be clawed back by Qantas' board "if considered necessary", including $8.3 million worth of previously-awarded long-term bonuses, and a $2.2 million short-term bonus.

5. Six young people sue 32 European states over climate change

1. Six Portuguese youths are taking 32 nations to the European Court of Human Rights this month for not doing enough to stop global warming, the latest bid to secure climate justice through the courts.

2. The move was sparked by the massive wildfires that struck Portugal in 2017, killing over 100 people and charring swathes of the country.

3. Aged 11 to 24, the young people say they are suffering from anxiety over their health and "having to live with a climate that is getting hotter and hotter" with more natural disasters.

4. Some claim allergies and breathing problems both during the fires and after, conditions at risk of persisting if the planet keeps warming.

5. Underscoring the potential impact of the case in terms of forcing countries to act, the Strasbourg-based court's Grand Chamber will examine the arguments on September 27, something that is reserved for exceptional cases.

6. The youths argue that excessive carbon emissions are infringing in particular the right to life and the right to the respect of private and family life.

6. Justice Department Probe Scrutinizes Elon Musk Perks at Tesla Going Back Years

1. Federal prosecutors also have sought information about transactions between Tesla and other entities related to the billionaire

2. Federal prosecutors are scrutinizing personal benefits Tesla may have provided Elon Musk since 2017—longer than previously known—as part of a criminal investigation examining issues including a proposed glass house for the CEO. 

3. The U.S. Attorney’s Office for the Southern District of New York also has sought information about transactions between Tesla and other entities connected to the billionaire, people familiar with the investigation said. Prosecutors have referenced the involvement of a grand jury. 

4. The new information indicates that federal prosecutors have a broader interest in the actions of Musk and Tesla than was previously known and that they are pursuing potential criminal charges. 

7. UAW justifies wage demands by pointing to CEO pay raises.

1. The United Auto Workers union has made CEO pay a central part of their argument for a big worker wage increase

2. It’s been a central argument for the United Auto Workers union: If Detroit's three automakers raised CEO pay by 40% over the past four years, workers should get similar raises.

3. UAW President Shawn Fain has repeatedly cited the figure, contrasting it with the 6% pay raises autoworkers have received since their last contract in 2019. He opened negotiations with a demand for a similar 40% wage increase over four years, along with the return of pensions and cost of living increases. The UAW has since lowered its demand to a 36% wage increase but the two sides remain far apart in contract talks, triggering a strike.

4. “The reason we ask for 40% pay increases is because in the last four years alone, the CEO pay went up 40%. They’re already millionaires," Fain told CBS’ “Face the Nation” on Sunday. “Our demands are just. We’re asking for our fair share in this economy and the fruits of our labor."

5. “I don’t know where the 40% came from,” said General Motors CEO Mary Barra at a new conference when asked if the UAW’s numbers were accurate.

6. Barra, the only one of the three who held the role since 2019, is the highest paid, with a compensation package of worth $28.98 million in 2022. The single biggest component was $14.62 million in stock grants, which vest over three years and whose ultimate value depends on stock performance and other metrics.

7. Her pay has increased 34% since 2019, according data from public filings analyzed for AP by Equilar.

MATT1

The arguably largest standard setting body for setting carbon emissions targets made this announcement over the weekend: SBTi Separates Climate Target Standard Setting and Validation Units to Boost Credibility

• SBTI stands for Science Based Targets Initiative, it’s a vaguely organized group lead by four different non-profits: CDP, World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact (UNGC)

• SBTi said that the move to separate the standard-setting and target validation entities will help to boost credibility and integrity, and is in line with best practice for assurance bodies.

• SBTi announced a series of key governance changes, including incorporating the organization in the UK, establishing itself as independent from its founding organizations.

• Announced the additions to the board of trustees: 

• Francesco Starace, formerly CEO of Italian energy giant ENEL

• former President in Colombia Iván Duque

• Novozymes CEO Ester Baiget

I made a promise on social media after reactions to Friday’s show where I nominated someone as asshole of the week for complaining like a giant entitled baby about SBTI to do a deep dive into SBTI.  So here goes… 

1. The Board

1. Start with our favorite thing - and there are two board members in our database actually

2. SBTI’s current mission here is to “define and promote best practice in emissions reductions and net-zero targets in line with climate science.”

3. They give technical assistance and work with companies to set and validate targets

4. Here’s the board overseeing it - remember, this is science based carbon reductions which they define as “in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement”:

1. Francesco Strarace, Chair, Partner at EQT

1. We have director data on Francesco - boards of Enel (28% influence) and Endesa (19% influence)

2. Bats 0.556 on carbon intensity

3. Enel has one of the worst governance scores in MSCI ESG scores, BUT is doing more to decarbonize and move to renewables than every other utility for the most part (considering it still does gas and coal)

4. Set SBTI approved targets

2. Iván Duque, former President of Colombia

1. Increased CO2 per capita while he was president 6%

2. Increased absolute emissions 11%

3. Mostly production based increases - meaning, the country made more shit that spewed more carbon than bought it

4. Top two exports in Colombia: Crude petroleum and coal!

3. Ester Baiget, Novozymes

1. Board of Azko Nobel, she’s a rookie

2. CEO of Novozymes, a fake position - CEO of Novo Holdings Kasim Kutay on board, has all influence

3. Set SBTI approved targets

4. Funders

1. Lila Karbassi, United Nations Global Compact

2. Nicolette Bartlett, CDP

1. SBTI CTO, Head of Comms, Compliance Director, Ops Director hosted by CDP

3. María Mendiluce, We Mean Business Coalition

4. Manuel Pulgar Vidal, WWF

1. Chief Impact Officer hosted by WWF

5. Ani Dasgupta, WRI

1. SBTI CEO hosted by WRI

2. SBTI money:

1. 45% “core” funding (Bezos, IKEA foundation)

2. 20% “project” funding (Laudes Foundation, Bloomberg, Rockefeller)

3. 35% fees for validation

4. Meaning more than a third of income is “issuer pays” model - the same conflict of interest that exists in credit ratings agencies.  Also like credit ratings conflict: SBTI is essentially a monopoly player - there are no other real alternatives - and they just go backed by the US government

1. US Government - the world’s largest purchaser - takes a bold step to align supply chain with SBTi

5. So think of them as ⅓ as bad as a credit ratings agency, which Daniel Cash is going to tell us about at the end of this show

6. The other two thirds are as bad as a non-profit

3. SBTI science

1. This is core to complaints against SBTI - not only are they now lead by non-scientists, non-profits, the former head of a fossil fuel state, and one of the “better” coal-burning utilities, but there are questions in the academic world about whether SBTI’s targets model is best

1. It boils down to how you measure the carbon pie - if you measure wrong, you overshoot, but how you measure is an ongoing debate

2. Effectively, one paper by an academic now added to SBTI’s technical council said there was a better way out of the half dozen models than SBTI chose

2. The model SBTI chose happens to be the model it’s loosely organized non-profit overseers created - which feels pretty conflict-y

3. But PRIOR to choosing one model, they had like seven, and no companies want to sign up to set valid targets from an org that can’t recommend a model to use, so they just pick their own and run with it

4. But the grumbling takes the form of using the most stringent science whatever it is vs. using a different model that is both familiar, economic, and achieves what could be similar ends while getting people to sign up for it

4. SBTI conflict

1. Which gets us to the news story!

2. The second core complaint here is the conflict of interest in an issuer pays model effectively - how can SBTI both set and validate the targets for pay.  

3. The incentive LOOKS LIKE it would be to cheat or set it gently and get the money… making them exactly like every other asshole in capitalism?  Like when Sustainalytics for years sold consulting to improve ESG ratings to companies they rated?  Or when ISS sold the same for governance, and effectively, votes?  Only they were FOR PROFIT, so we expect that of them, and this is a NON PROFIT, so we think differently for some reason?

4. Here’s where we’ll bring in Daniel Cash to walk us through what the other assholes look like from a conflict perspective