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Pickering Energy Partners: ESG News Roundup

By Garrett Delk, Pickering Energy Partners
Pickering

The U.S. Environmental Protection Agency (EPA) has proposed a series of amendments to its Greenhouse Gas Reporting Program, specifically targeting petroleum and natural gas systems. These amendments are designed to capture gaps in the total emissions (particularly methane) reported by facilities in three ways:

  1. Provide methodology for additional sources of emissions for which there are currently no methods of estimation (e.g. nitrogen removal units, produced water tanks and crankcase venting)
  2. Require reporting from additional industry segments for certain emissions sources (e.g. blowdown vent stacks, natural gas pneumatic device venting, dehydrator vents and acid gas removal units)
  3. Inclusion of a new emissions source coined “other large release events,” which the EPA hopes will account for abnormal emission events not fully represented by current methods.

PEP believes these amendments are likely to push additional facilities above the 25,000 metric ton CO2e/year threshold for taxation, increasing the already broad financial burden recently put in place by the Inflation Reduction Act’s (IRA’s) methane emissions reduction program. The majority of these changes are expected to become effective by January 1, 2025, with changes beginning in reports in 2026. The EPA will accept public comments on the proposal for 60 days post its publication in the Federal Register.

New ISSB Rules Explained

In late June, the International Sustainability Standards Board (ISSB) officially launched its first two standards, International Financial Reporting Standards (IFRS), S1 and S2. Where IFRS S1 covers sustainability-related risks and opportunities, the IFRS S2 covers the disclosure climate-related risks and opportunities.

Given the already abstruse state of ESG/sustainability reporting, what does this ISSB update really mean for public and private energy companies? A recent note by our Partner, Dan Romito, notes “given the prolific number of self-congratulatory superlatives flung loosely around social media, it may be prudent for ISSB proponents to pump the brakes on this “momentous” occasion and objectively ask what was really achieved. Unfortunately, the answer is nothing material.”

Indeed, the ISSB news follows a string of attempts to consolidate the ESG reporting landscape. As the new IFRS S1 and S2 standards attempt to align with more ubiquitous frameworks already in use like SASB (for which the ISSB also has purview over), we anticipate the new standards to have little initial impact or move the needle in any meaningful way. Additionally, energy companies already reporting on sustainability will likely already cover the more general standard requirements in S1 – e.g., risks and opportunities linked to water, emissions, waste, etc., and more sophisticated reporters will also likely cover S2 – climate risks and opportunities. Importantly, the area of climate covered in S2 is nearly identical to the Task Force on Climate Related Financial Disclosure (TCFD) criteria upon which the SEC’s upcoming climate proposal is predicated on.

BlackRock Expands Voting Choice Program

BlackRock announced its intention to extend its Voting Choice program to the iShares Core S&P 500 ETF, its largest Exchange Traded Fund (ETF) with over $305 billion in assets under management. This planned expansion, would allow over three million shareholder accounts to participate in voting decisions, marking a significant increase in shareholder democracy. Since its launch, BlackRock’s Voting Choice has attracted over 70 newly committed clients, representing $223 billion in assets under management. If approved, the expansion is expected to be effective for the 2024 proxy voting season.

Generally, expansionary voting programs like these increase the already busy pool of stakeholders with which CEOs and investor relations have to manage, draining resources to educate a broad swath of retail investors who have a proven proclivity toward impulse voting.

Amazon Requires Scope 3

Amazon is revising its Supply Chain Standards by 2024, mandating suppliers to disclose carbon emissions data and establish reduction goals. This initiative aligns with Amazon’s commitment to achieve net-zero carbon emissions by 2040, primarily targeting Scope 3 emissions, which account for over 75% of the company’s total carbon footprint.


Energy Workforce partner Pickering Energy Partners provides insights on ESG due diligence, disclosures and reporting. Garrett Delk is Associate, ESG Strategy & Integration.
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