Following Climate Week 2023, we applied our ESG analytics on news coverage to explore in further detail some key topics and themes that came out of the conference. We also applied our analytics on company coverage to see how companies are adapting or not adapting when it comes to environmental issues. Specifically we looked into the state of fossil fuels in the wake of Gavin Newsom's legal campaign and unpacked greenwashing in the meatpacking industry as JBS seeks a listing on the NYSE.
Now that Climate Week 2023 has wrapped, there are some key takeaways worth exploring as we head into 2024.
One of the big headlines was California Governor Gavin Newsom’s announcement of the “Hold Big Oil Accountable” legal campaign. This is a comprehensive legal effort to hold fossil fuel companies accountable not only for Climate Change, but also for their willful ignorance of the harm fossil fuels do to the environment. There is no sugarcoating that going forward, fossil fuel companies will likely face major headwinds from lawsuits and other future regulations such as the EU Sustainability Reporting Standards.
For further insight on these matters, we used the Amenity ESG News Monitoring in our proprietary platform to unpack how some of the major fossil fuel companies are adapting, or not adapting, to these increasingly adverse conditions.
When it comes to action on renewables, U.S. oil majors are clear laggards when compared to their European counterparts. The following are some mentions picked up by our ESG News Monitoring solution that highlighted activities from European fossil fuel companies in recent months.
Norway’s Equinor (EQNR:NO) has been one of the most prominent names in offshore oil and wind, with a push in recent years to further their offshore wind aims. In early October, the first turbine at (part of a joint-venture project between Equinor, SSE Renewables, and Vårgrønn) began generating and transmitting electricity to the national grid of the United Kingdom. Prime Minister Rishi Sunak has hailed this achievement:
"I’m proud that this country is already a world leader in reaching Net Zero by 2050, and by doubling down on the new green industries of the future, we’ll get there in a way that’s both pragmatic and ambitious." ―U.K. Prime Minister Rishi Sunak
This statement is largely true. Dogger Bank, when fully completed, will be the world's largest wind farm, and Equinor will have played a prominent role in reaching that milestone.
However, just as Sunak talks about doubling down, Equinor and the U.K. are also being criticized for hedging their bets. Just a few weeks prior, Equinor was approved by the U.K. government to lead the Rosebank oil project off the Shetland coast. This move is more in line with Equinor’s American counterparts.
At least, Equinor will be powering Rosebank with renewable energy, and the firm is electrifying oil operations in an effort to mitigate carbon emissions from oil extraction in the short term. This is another area where European oil majors differ from their American counterparts. The latter, American based energy companies, are focused on the idea of carbon capture at extraction sites rather than moving towards renewables.
Last month, French energy giant TotalEnergies (TTE:FR) announced a joint venture with Adani Green Energy for $300M to develop both wind and solar projects. This move away from fossil fuels is consistent with the green aspirations of other European energy companies. In the United States, offshore wind is finally starting to be more developed. Some American utility companies, such as Dominion Energy, are stepping in to develop projects in the Atlantic in conjunction with European companies.
In the wake of Gavin Newsom's legal campaign against fossil fuels, American oil majors could have a tough road ahead of them. As European energy companies continue to develop projects—not just in Europe, but across the globe, including the U.S. and India—they will be positioning themselves for the energy needs of today and tomorrow.
The consumer goods sector has faced significant backlash in recent years from an ESG standpoint. We’re seeing this to be especially the case in the meat processing industry. One name that immediately comes to mind is JBS (JBSS3:BR). The Brazilian meat processing company is seeking a listing on the New York Stock Exchange, and it began a PR push around Climate Week 2023. JBS plans to launch its IPO in the U.S. by the end of 2023.
Back in June, the National Advertising Review Board (NARB), the appellate advertising body of BBB National Programs, recommended that JBS stop using the claims of achieving net zero emissions by 2040. This response was largely tied to the sourcing of cattle by JBS from ranches engaged in the illegal deforestation of the Amazon rainforest, one of Earth’s largest carbon sinks. Nearly 90% of deforestation in the Amazon rainforest is linked to clearing land for cattle grazing. The company had also previously faced backlash from European supermarkets, which boycotted JBS and other meat producers over deforestation concerns last year.
Rainforest Action Network and other environmental organizations petitioned the SEC in August to not allow JBS to list because of environmental concerns, underscoring the negative sentiment around this company. Shortly after Climate Week, The New York Times interviewed JBS CEO Gilberto Tomazoni about the company's environmental record and potential listing on the NYSE. When asked about what JBS is doing to solve deforestation, Tomazoni told the NYT, “We are so confident that we are doing the right things.” This speaks to the extent of JBS’ greenwashing campaign and how much the company accepts its own propaganda. Our ESG News Monitoring dataset reflects that many other organizations and media outlets are stating contrary points of view.
As we take a look at the packaged meat and food products sector from a greenwashing standpoint, our data shows that the meat producers are having lower sentiment differentials. This indicates higher greenwashing risk compared to other food products companies. We calculate our greenwashing score by looking at company content such as press releases, earnings calls, and statements in the news from company officials. (As an example, see the above-mentioned NYT interview with the CEO of JBS.) We then compare that content to external news that was not generated by the company. The difference in sentiment is the divergence of narratives, the gulf between a company’s own version of its ESG story and what the outside world is saying about what that story should be.
As we can see in the statements charts, the sentiment from JBS statements differs from sentiment from external media. The primary discrepancies are higher instances of negative environmental statements from external media, especially for the Pollution Management and Biodiversity events. Another major discrepancy is that there is no mention by JBS of its negative Human Capital track record, which has been covered by external news.
Greenwashing has become more of a concern for regulators, investors, and consumers—as well as the companies themselves—for two major reasons: (1) companies have become so adept at controlling the ESG narrative, and (2) words do not equal action, especially when it comes to the health of our planet.
As greenwashing becomes more prevalent, there is a greater burden placed on all stakeholders to discern fact from fiction. One of the easiest ways to examine a company from a greenwashing perspective is to separate what the company is saying from what other media outlets are saying about a company.
Another way is to look at its track record. Has it made claims in the past about reaching certain milestones? Has it made good on those promises? Is that leadership team still around from when the company hit those milestones, or fell short? These are all useful questions to ask as you begin to assess the seriousness of a company to make good on new promises around ESG initiatives.
Going beyond greenwashing, it is also important to remember that ESG initiatives are about creating long-term value and success for companies. The actions a company takes around ESG can be examined in two lenses, one short-term and the other long-term. There is no denying that fossil fuels are here for the foreseeable future. It is a losing proposition to demand that energy majors stop drilling overnight. But energy companies like Equinor and TotalEnergies are preparing themselves for an eventuality in the future where fossil fuels are not the primary sources of energy; they are considering all possibilities. So as we move forward from Climate Week, be on the lookout for greenwashing. In the coming months, check if the companies that you see advertising “Net Zero by 2050” are actually taking action to back up those claims.
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The ESG landscape has changed dramatically over the past year in terms of new laws and guidelines that have gone into effect, presenting opportunity and risk for a whole spectrum of stakeholders—advisory, banking, buy side, and data providers. KPMG joined this webinar to discuss how traditional ESG falls short in a volatile market and how it’s possible to close the coverage gap with Amenity’s real-time ESG datasets. Watch the recording.
Amenity Analytics (part of Symphony) is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.
This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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