On the 15th April 2021, the CEM CCUS Initiative held a webinar looking at Environmental, Social and Governance (ESG) Assessments in relation to CCUS. ESG has gone from an aspirational activity to a mainstream, essential aspect of commercial behaviour in recent years. Climate change is now synonymous with the 'E' in the acronym, making a corporation's exposure to climate-related risks central to ESG. But what does this mean for carbon capture and storage? Panellists Juho Lipponen (CEM CCUS Initiative), Ian Havercroft (GCCSI), Fiona Wild (BHP), Mark Sisouw de Zilwa (ING), and Eduardo Famini Silva (HSBC) discuss this area of importance.
Ian Havercroft set the scene for the webinar by describing a recent piece of work done by GCCSI in 2020(1) on the relationship between ESGs and CCUS, considering the significance and extent of influence of ESG ratings in supporting investment in CCS project deployment. This report recognises that climate has become first and foremost in the consideration of 'E' ratings, the materiality of an organisations greenhouse gas (GHG) emissions are increasingly considered, and there are rising expectations around more detailed disclosure of performance and in a manner that is accessible. CCS should play a positive role in an ESG assessment (by demonstrating awareness of market and policy risks, it directly reduces emissions, and provides an opportunity as a low-carbon investment), however the technology has received little direct attention within ratings schemes to date. There is potential for CCS to contribute to an organisation's ESG rating, where reported as part of efforts to address GHG emissions. There is considerable potential offered by CCS to address the critical element of many ESG rating assessments and more widespread deployment of CCS may encourage greater review and ratings performance. However, even when CCS is included with provable benefits, an improvement in ratings performance alone is unlikely to drive investment – it would be one part of an organisations investment strategy. A significant consideration is the impact of climate litigation. This is a largely unexplored area, but likely to be significant going forward.
The panel discussion recognised the importance of enhancing the understanding of the role that CCUS can play. ESG provides a real opportunity and is important for the strategic plans of organisations. The Task Force on Climate-Related Financial Disclosures (TCFD) was established in 2014 and aims to help companies understand and be able to disclose the financial impacts of climate change, relating closely to the area of ESG. The recommendations from this task force ask a number of questions of a company to try and illicit a response and think through the impacts of climate change; standardising the questions that companies should ask themselves to be able to disclose climate-related and financial impacts. IEAGHG commissioned a report in 2016 on unburnable carbon which relates directly to financial risk disclosure; please see the link at the bottom of this article to access this report.
There is clearly a significant role for CCS and for investors going forward in utilising ESG and it's important to marry the two. ESG needs to be measured and advisory bodies are needed. These bodies could advise and give clarity on what benefits there would be to including CCS in a company's strategic plan and it would be important for future taxonomies to include CCS to help open a wider investment base.With the 1.5°C trajectory, CCS plays a fundamental role in three of the four scenarios – it's not realistic to not use CCS to achieve our climate mitigation goals. CCS should be widely recognised as a technology that can and should be deployed, and policy support will be important moving forward.
For more information on the CEM CCUS Initiative, please visit http://www.cleanenergyministerial.org/initiative-clean-energy-ministerial/carbon-captureutilization-and-storage-ccus-initiative.
The GCCSI report, 'Environmental, Social and Governance (ESG) Assessments and CCS', can be found at https://www.globalccsinstitute.com/resources/publications-reports-research/esg-assessments-and-ccs/.
More information on the Task Force on Climate-Related Financial Disclosures (TCFD) can be found at https://www.fsb-tcfd.org/.
IEAGHG's 2016 report, 'Can CO2 Capture and Storage Unlock Unburnable Carbon' can be found at https://ieaghg.org/docs/General_Docs/Reports/2016-05.pdf. Additional blogs on this area of work can be viewed at https://ieaghg.org/ccs-resources/blog/can-co2-capture-and-storage-unlock-unburnable-carbon and https://ieaghg.org/ccs-resources/blog/can-technology-unlock-unburnable-carbon.
(1) GCCSI, 'Environmental, Social and Governance (ESG) Assessments and CCS', October 2020, https://www.globalccsinstitute.com/resources/publications-reports-research/esg-assessments-and-ccs/