Mild Temperatures Significantly Alter Forecasted Prices, Renewables Incentives on the Rise, and Weekly Reporting Updates

Weekly Energy Market Update:

The Mar ‘23 natural gas contract is currently trading at $2.42/MMbtu. After five, consecutively bearish storage reports from EIA, the draw on US stocks surpasses the five-year average depletion of 171 Bcf for the first time since late December.

Temperatures across the United States in January were the mildest since 2006, which reduced consumption of natural gas for space heating and significantly changed our forecast for natural gas markets in the coming months. From December to January, percentage returns for many gas producers fell by double digits, tracking a steep decline in Henry Hub gas prices. Weather forecasts for the next two weeks show warmer-than-average temperatures across the East, while the West will see a cold pattern hold through the next few weeks.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generators as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as parts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production has grown and surpassed any speculation that production would not be able to keep up with demand due to LNG and Mexican exports.?

Sustainability

Renewables Incentives on the Rise in Global Race for Clean Energy Leadership

The Inflation Reduction Act passed in 2022, marks the single largest commitment of public dollars to address climate change to date. The IRA provides?$369 billion in meaningful incentives for clean energy technologies such as wind, solar, storage, hydrogen, nuclear, carbon capture, and biofuels that will drive energy sector transformation and emissions reduction efforts. Money flowing into the green-energy industry will enhance the U.S. competitive advantage in all forms of energy production, and by 2029, U.S. solar and wind could be the cheapest in the world. Firms should look to set themselves up for success now by capitalizing on the global race for comprehensive renewables incentives and diversifying their portfolios with clean and efficient energy technologies.

Read more about the implications of the IRA in our latest blog >>

The European Commission on Feb. 1?announced ?a new plan designed to boost investment in clean-tech industries and make the EU more competitive on the world stage as the energy transition advances. European lawmakers had raised concerns about the potentially market-distorting effect of the Inflation Reduction Act and the new plan aims to keep the EU on par with the U.S. The Green Deal Industrial Plan aims to speed investment and financing in clean-tech industries, notably via relaxing state-aid rules, the commission says.

Updates to Sustainability Reporting?Regulations?and Moves for?Consolidation?of Standards:

SEC

• SEC claims they will finalize the climate disclosure rule by the?end of April.

ISSB

• The IFRS Foundation’s International Sustainability Standards Board (ISSB) will be releasing the finalized versions for the first global standards for sustainability and climate-related reporting (IFRS S1 and IFRS S2) in?June?of this year —?according to the IFRS head , Erikki Liikanen?

CSRD

• Europe’s three primary financial regulatory agencies, the European Supervisory Authorities (ESAs) each announced the?release of their opinions ?on the first set of draft European Sustainability Reporting Standards.
• The?European Commission?re-confirmed that it will publish its regulatory proposal on ESG ratings on?June 13, 2023.
• European Financial Reporting Advisory Group (EFRAG) published its update for January 2023 , reporting on the work that has begun to develop the ESRS for listed small and medium enterprises (SME) and small and noncomplex financial institutions and captive insurances and re-insurances. CSRD and ESRS are aiming to bring smaller companies – both listed and private – into the fold, which is important to keep an eye on.

General?Corporate Reporting

PRI (Principles for Responsible Investment)

• The?2023 version ?of the Reporting Framework and updates on accountability has now been published.

SBTi ?(Science Based Targets Initiative)

• The SBTI has launched?new guidance ?for investors to support in identifying the overlaps of the SBTi Financial Institutions (FIs) framework, and Task Force on Climate-related Financial Disclosures (TCFD) recommendations. This will "support enhanced coordination between financial institutions science-based target setting and climate-related financial disclosures".
• A new change to?SBTis Commitment Compliance Policy ?states that if targets are not submitted within the 24 month commitment time frame, the commitment will be marked as ‘Removed’ on the SBTi Target Dashboard. This change will mean it is much easier to see which companies and financial institutions are sticking to their commitments and going on to set

SASB

• Future of the SASB Standards : What you need to know for 2023 disclosure. The ISSB recently made several decisions that further clarify the role and evolution of the SASB Standards. The ISSB confirmed that industry-specific disclosures are required and, in the absence of specific IFRS Sustainability Disclosure Standards, companies must consider the SASB Standards to identify sustainability-related risks, opportunities and appropriate metrics.

Notable News

Articles

• Rescuing ESG from the Culture Wars , Harvard Business Review. Ahead of upcoming House hearings on ESG, this article aims to dispel common misconceptions around the meaning of ESG. "The key will be returning ESG to its original and narrow intention—as a means for helping companies identify and communicate to investors the material long-term risks they face from ESG issues.”
• BP’s CEO Plays Down Renewables Push as Returns Lag , WSJ. Fossil fuel corporations are backpedaling on their climate commitments.?
• SEC to Examine Investment Advisors, Funds on ESG Investing Practices , ESG Today. According to the division, the examinations will focus on ESG-related advisory services and fund offerings, assessing whether the funds are operating as described in their disclosures. The exams will also assess whether ESG products are appropriately labeled
• Upcoming regulations in ESG ratings: 3 implications for business , GreenBiz
• The Challenge Of Chief Sustainability Officers: Creating A New Mindset Throughout An Entire Global Organization , Forbes. "The number of Chief Sustainability Officers (CSOs) at corporations globally is skyrocketing. According to a May 2022 study in Reuters, the number of CSOs holding an executive level position increased to?28% in 2021, more than tripling from 9% in 2016."
• ESG Is Going to Have a Rocky 2023. Sustainability Will Be Just Fine . MIT Sloan Management Review dives into the differences between the terms "ESG" vs. "Sustainability".
• How Real Estate Firms Can Streamline ESG Reporting and Improve Their Bottom Lines , ESG Today
• CO2?removal solutions: A buyer’s perspective , McKinsey. To reach net-zero, companies will need to go beyond deep decarbonization of their operations and value chains, and also neutralize any residual emissions (the 'net' in net-zero). They can do so through removing carbon from the atmosphere, for example by buying carbon credits from carbon dioxide removal (CDR) projects, but how can firms ensure these claims are credible...
• Only 0.4% of companies have disclosed credible climate transition plans , according to a new report released today by environmental disclosure platform CDP, assessing the state of climate-related reporting from more than 18,600 companies, CDP
• Wall Street regulator may ease climate costs rule , WSJ reports

Insightful Reports

The State of Green Business 2023 , by GreenBiz

The Economic Impact of ESG Ratings , Massachusetts Institute of Technology (MIT)

CDPs latest?Non Disclosure Campaign: 2022 Results Report

Norton Rose Fulbright’s?2023 Annual Litigation Trends Survey ?indicates that environmental, social and governance (ESG) concerns are growing.?

Energy and Technology Perspective 2023 report ?by the International Energy Agency (IEA) explores the tremendous growth needed in clean technologies to align with our climate goals.?

S&P Look Forward Report

Upcoming Events

GreenBiz 2023,?Feb. 14-16, Scottsdale, Arizona, USA

WatchWire is a proud sponsor of GreenBiz 23, the premier gathering of sustainable business leaders. Join more than 1,600 professionals in Scottsdale, Arizona for three days of thought-provoking sessions, an action-oriented expo, and engaging networking opportunities.

?Register ?and save 10% with discount code SPNSRGB23

At WatchWire:

Join WatchWire for our webinar, "2023 Sustainability Reporting Frameworks Update: SASB, GRESB, and CDP". In this session, we will be sharing the most important updates to sustainability reporting frameworks this year. We will discuss:

• New updates to widely used sustainability frameworks: SASB, GRESB, and CDP
• How to set your team up for success this sustainability reporting season
• How WatchWire can support your entire sustainability journey

Register Now>>

A main concern for companies going into 2023 is preparing for the global patchwork of?sustainability?and?ESG?regulation and enforcement on the horizon. Check out our new educational report,?Guide to Sustainability Regulation: Navigating the ESG and Climate Regulatory Landscape.

In this report we explore:

• An overview of the global landscape of mandatory sustainability and ESG disclosure
• The increasing risk of climate or sustainability-related litigation
• Policy initiatives influencing energy and sustainability investment in the U.S.
• Federal and state-level emissions and building standards
• Preparing for regulation
• How WatchWire can help guide your organization’s sustainability journey through data acquisition, completeness, and accuracy

Read >>

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