Flipping the Script on The Supreme Court - August 26, 2022

Flipping the Script on The Supreme Court

Federal climate regulation may regain its teeth due to the Inflation Reduction Act (IRA). In July, the Supreme Court hobbled the authority of the US Environmental Protection Agency (EPA) to regulate greenhouse gasses (GHG) in the landmark West Virginia v. EPA case. The basis of the Court’s decision was that Congress did not give the EPA explicit authority in the Clean Air Act to regulate greenhouse gas emissions as pollutants.?

It turns out the Inflation Reduction Act may reverse this . The bill signed into law last week explicitly defines CO2 produced by fossil fuels as a pollutant, returning authority to the EPA to regulate GHG emissions.?

In the hours before the bill passed on a party-line vote, Republican staff tried to persuade the Senate parliamentarian that the provision should not be allowed in a budget bill. Ultimately it was allowed to stay in the bill and now the new law provides EPA explicit authority to regulate greenhouse gas emissions from power plants.

Democratic Senator Tom Carper, noted “The language, we think, makes pretty clear that greenhouse gasses are pollutants under the Clean Air Act.” Conservative Senator Ted Cruz raised the alarm with those on the right, saying “The Democrats are trying to overturn the Supreme Court’s West Virginia vs. E.P.A. victory.”

ROI of the IRA

Elsewhere in IRA news, the US Office of Management and Budget released a study this week showing that the law could cut the costs from premature illnesses, deaths and property damage by $1.9 trillion by 2050. The agency’s models predict that the emissions reductions resulting from the IRA will reduce climate-related wildfires, crop destruction, and drought - estimated to cost $120 billion annually.

New reports show the IRA will create huge demand for clean energy workers and spur new cleantech opportunities . Princeton University’s REPEAT project warned that it will be a challenge for companies to find trained workers in the tight job market.

ESG vs. ‘Anti-Woke’?

The battle between ESG proponents and the ‘anti-woke’ campaign from conservative US politicians continued this week as Florida’s Republican Governor - Ron DeSantis - banned “social, political or ideological interests” from being considered in the state’s pension fund investment decisions. The resolution directs Florida’s fund managers to prioritize the highest return on investment over ESG ideologies .?

Asset managers fired back claiming that preventing consideration of ESG factors will put pensions at risk . Sasja Beslik, the chief investment officer at NextGen ESG, described the DeSantis decision as “tragic.” It shows that the governor of Florida and others who share his view “don’t understand that long-term management of pension investments naturally includes material ESG issues that can impact returns,” Beslik said.

The law firm Ropes & Gray has been tracking ‘anti-woke’ policies state by state . Partner Joshua Lichtenstein commented to Bloomberg this week , “Florida and Texas have a lot of money, but it’s not clear we’ll see enough money line up for the red states to change things.” He also noted that ignoring ESG completely could be a risky decision, especially since the European Union has already adopted ESG investing principles in their Sustainable Finance Disclosure Regulation (SFDR).?

Back to the ESG Fundamentals

Former CEO of the Principles for Responsible Investment (PRI) Fiona Reynolds weighed in on the debate this week, saying that many voices chiming in “fundamentally misunderstand” what ESG is all about . Reynolds voiced concerns that ESG is being overly complicated, overregulated and over-standardized, leading to its own demise as people think of ESG as a “tick the regulatory box” and move on exercise. She said, “ESG principles can all be boiled down to a few simple truths : we all have responsibilities as citizens, and we should all act ethically, and we should invest in ways that don’t contribute to human suffering or to the detriment of the planet we all inhabit.”

Following a similar tone, BlackRock warned that the Securities and Exchange Commission (SEC) proposed rules on ESG disclosure by fund managers could result in confusion by leading investors to believe their holdings are more ESG-minded than they actually are. Because the SEC’s proposal would require reporting on how ESG factors fit into investment strategies, BlackRock argued it will result in overstating the significance of ESG in the fund’s decision-making process .?

Solar So Good

The price of solar has tumbled in recent years, so much so that it is now the cheapest source of electricity of all time . The IRA looks set to bring that price down further, with a 10-year 30% tax credit for installing solar panels. Between the new tax credit and property value increases, solar panel installation is now virtually free . Even if you don’t install solar panels on your house, new research shows that the IRA will save the average US household $170 to $220 annually in lowered energy bills .

The EU is also looking to solar as part of their solution to dependency on Russian fossil fuel. Solar power installations in Germany were up 22% last year , and the European Space Agency is looking into the prospect of space-based solar.

No Drought About It

Droughts across the Northern Hemisphere are still wreaking havoc on some of the world’s largest economies , exacerbating stressed supply lines, food and energy shortages.?

Europe’s drought, the worst in more than 500 years , is shrinking water bodies revealing “Spanish Stonehenge ,” WW2 Nazi ships and “hunger stones .”? One hunger stone, which was first carved in the 15th Century, had a fateful warning, "if you see me, cry ." And in Texas, severe drought revealed previously submerged dinosaur tracks left in the mud 113 million years ago.

China is suffering its most severe drought ever recorded . The government declared a level IV emergency , shutting down factories and the lights at tourist venues as the drought cuts energy supplies. Authorities are also mobilizing teams to protect vulnerable crops and deal with the growing problem of forest fires, which have driven thousands to evacuate .

Monsoon rains resulted in a series of flash floods across the Southern US, submerging cars in Texas and sweeping hikers off their feet in Utah . However, meteorologists say the heavy rains are unlikely to be a reprieve from the droughts as the time between rainy periods is too long, and dry soils are less able to absorb moisture.??

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Notable news of the week:

• Finance groups could be thrown out of GFANZ if they are not meeting targets . Financial institutions that signed up to the industry alliance to tackle climate change could be kicked out for failing to hit targets by a new independent panel due to new plans to be announced at New York Climate Week.
• BlackRock, Temasek, Quantum Energy Partners Invest $60 Million into Carbon Direct - the leading carbon management firm working to help its global clients to meet their climate goals through its end-to-end carbon management platform.
• Chair of the International Sustainability Standards Board (ISSB), Emmanuel Faber, claims that the capital markets can be wielded to drive the green transition and internationally consistent disclosure standards from the ISSB will be essential.?
• Harvard Business Review has shared a six step guide for companies seeking to integrate ESG performance into their core business models . It seems more guidance is needed, as the paper quoted “of the 2,000 global companies tracked by the World Benchmarking Alliance, most have no explicit sustainability goals, and among those that do, very few are on track to meet them.”
• Coca-Cola’s largest bottling firm seeks to develop tech that converts carbon into key materials like sugar and, you guessed it, more plastics . Coca-Cola Europacific Partners is in collaboration with University of California, Berkeley to explore capturing carbon and using it as a feedstock.
• As the pressure rises on companies to measure their impact on the environment and society , companies are moving beyond annual ESG performance reviews to real-time impact performance.?
• In this article , my colleagues Mike Wallace and Anissa Vasquez explore how government procurement creates a snowball effect for corporate climate action and deliver what you need to know about how federal procurement rules will affect companies’ climate strategies.?
• The level of methane emissions, a very potent GHG, is growing at a record rate . The increase in wetland cover, coupled with warmer weather in the tropics, is driving up methane emissions and scientists don’t know how to curb them.?

Notable podcasts:

• In this week’s Sustainability Decoded with Tim and Caitlin , we were joined by Rohitesh Dhawan . Rohitesh is President and CEO of the International Council on Mining and Metals (ICMM) - 26 of the world's largest mining and metals companies. We discussed how mining and the circular economy intersect, misconceptions about the mining industry, and the increased demand for metals created by the energy transition.?

• In this week’s ClimateTech with Kentaro , he was joined by the co-founder and CEO of Patch.io - Brennan Spellacy . Patch helps businesses reach net zero by connecting them with carbon removal developers. They discuss Brennan’s journey as an entrepreneur, his version of a book recommendation, and the idea of ‘undoing’ pollution by funding carbon removal and carbon capture projects.?

Notable events:

• This year’s Decarbonization Expo event in Chiba, Japan, will be held from August 31st to September 2nd. The Decarbonization Expo is an exhibition gathering decarbonization solutions such as Corporate PPA, Renewable Energy, Technology for Energy Management, Net Zero Energy Building, Next-Gen Ventilation, etc. You can request a ticket here .
• I will be speaking at this year's Workiva Amplify event along with Persefoni CEO Kentaro Kawamori on September 12-15, 2022. The event will be held both in Las Vegas in person and virtually, bringing thousands of passionate finance, accounting, compliance, and ESG professionals together to share best practices, gain insights, and get inspired. Register for the event virtually for free here , or in person here .
• I hope to see you at this year’s Climate Week NYC on September 19-25. In its fourteenth year, Climate Week is the biggest global climate event of its kind, bringing together the most influential leaders in climate action from business, government, and the climate community, in conjunction with the United Nations General Assembly. To attend one of the virtual or in-person events over the week, sign up here .