Sustainability

Microsoft will buy more than 10.5 GW of clean energy projects from Brookfield Asset Management and its Brookfield Renewable affiliate to help the technology company run its data centers and other operations on carbon-free power all the time, the companies said May 1.

“This first of its kind agreement, which is almost eight times larger than the largest single corporate [power purchase agreement] ever signed, is a testament to our ability to reliably deliver clean power solutions at scale to our corporate partners and accelerate the energy transition," Connor Teskey, CEO of Brookfield Renewable and president of Brookfield Asset Management, said in a news release.

Between 2026 and 2030, Brookfield will deliver wind, solar and “new or impactful carbon free energy generation technologies” to Microsoft in the United States and Europe. The agreement between the companies could expand in size and to locations outside the U.S. and Europe, they said.

Microsoft had previously contracted for about 1 GW of clean power from Toronto, Canada-based Brookfield, the companies said.

Across its global operations Microsoft had contracted for more than 13.5 GW of clean energy in 16 countries as of the end of 2022, according to its most recent sustainability report.

U.S. corporations entered into deals for 12.9 GW of clean power in 2023 and have at least 38 GW of operating projects, the Clean Energy Buyers Association said in its most recent Deal Tracker report.

Brookfield owns about 33 GW, and its project development pipeline totals about 155.4 GW, according to the company.

In recent years, the urgency to combat climate change has become increasingly evident. As governments worldwide implement policies to reduce carbon emissions and promote sustainable practices, businesses are facing mounting pressure to adapt. On March 6, the Securities and Exchange Commission adopted its final rules designed to enhance public company disclosures related to the risks and impacts of climate-related matters.

Amidst this call for action, private equity firms have a unique opportunity to make a significant impact by investing in green companies. Not only does this align with societal and environmental priorities, but it also presents lucrative investment opportunities.

Investing in green companies can enhance a private equity firm's reputation by showcasing its commitment to sustainability and responsible investing. This not only attracts socially conscious investors but also positions the firm as a leader in the transition towards a low-carbon economy. Ultimately, prioritizing investments in green companies can differentiate a private equity firm from its competitors and open doors to new partnerships and opportunities. Here's why private equity should prioritize investments in green companies.

1. Addressing environmental challenges

Private equity firms can play a crucial role in addressing pressing environmental challenges by investing in green companies. Innovative solutions are being developed by these companies to combat climate change, reduce pollution and preserve natural resources. A private equity firm's investment in these ventures can contribute to the development and adoption of sustainable technologies and practices, thereby contributing to a cleaner and more sustainable world. In the long run, the investment by private equity firms in sustainable technologies and practices can lead to significant environmental benefits. These include reduced carbon emissions, improved air and water quality, conservation of biodiversity and the preservation of ecosystems. By driving the growth and scalability of green companies, private equity firms can be instrumental in creating a lasting positive impact on the planet.

2. Capitalizing on market growth

Consumer awareness, regulatory pressures and technological advancements are driving the green economy's rapid expansion. The growth opportunities in renewable energy, energy efficiency, waste management and sustainable agriculture are substantial. This growth trajectory presents an opportunity for private equity firms to invest in companies that are well positioned to benefit from the transition to a low-carbon economy. In addition to offering attractive returns, these investments are aligned with long-term sustainability goals.

Private equity firms can contribute to the transition to a low-carbon economy by providing the necessary capital and expertise to support and scale up green businesses. By investing in companies that are developing renewable energy technologies, implementing energy-efficient practices and promoting sustainable practices in agriculture and waste management, private equity firms can drive innovation and accelerate the adoption of environmentally friendly solutions. This not only helps mitigate climate change and reduce environmental impact but also creates new job opportunities and stimulates economic growth in the green sector.

3. Mitigating risks

Businesses across various industries face significant environmental risks. Regulatory compliance costs and supply chain disruptions are just a few of the risks companies face when dealing with environmental issues. Investing in green companies allows private equity firms to mitigate these risks by supporting businesses with robust environmental management practices, resilient supply chains and sustainable business practices. Environmental stewardship can enhance brand reputation as well as mitigate future liabilities, thereby protecting investment returns.

4. Meeting investor demand

Despite some recent corporate pushback on ESG, investors, pension funds and asset managers are still continuing to consider ESG factors when making investment decisions, reflecting a growing recognition of sustainability's financial importance. Investments in green companies can help private equity firms align their portfolios with the sustainability goals of investors. In addition to enhancing investor relations, private equity firms are perceived as being leaders in responsible investing. Incorporating ESG factors in investment decisions can not only enhance investor relations and position private equity firms as leaders in responsible investing, but it can also lead to long-term financial benefits. By investing in green companies and aligning portfolios with sustainability goals, private equity firms can tap into the growing market for sustainable investments and potentially achieve competitive returns while also making a positive impact on the environment and society.

5. Driving innovation and efficiency

Green companies are catalysts for innovation and efficiency across industries. Private equity firms can contribute to technological advancements, operational efficiencies and sustainable business models by investing in these companies. Sustainable companies are creating a better future for the planet through renewable energy projects, clean transportation solutions and resource-efficient manufacturing processes. Through private equity investment, these innovations can be scaled, amplifying their impact and fostering sustainable growth.

Private equity investment provides green companies with the necessary capital to expand their operations, develop new technologies and penetrate new markets. This financial support allows them to increase their reach and influence, accelerating the adoption of sustainable practices and solutions on a larger scale. By scaling their innovations, green companies can have a greater impact on addressing environmental challenges and driving long-term sustainable growth.

Private equity can play a critical role in driving positive change in an era defined by environmental challenges and sustainability imperatives. By leveraging their capital, expertise and networks, private equity firms can accelerate the transition to a sustainable economy while delivering attractive returns for investors. Green investing isn't just a moral imperative; it's a strategic decision aligned with long-term value creation and societal wellbeing.

Private equity firms are great candidates to lead the charge when it comes to investing in green companies and supporting their growth and innovation. Their expertise in financial management and business strategy can help these companies navigate challenges and scale their operations. Additionally, their extensive networks can connect green companies with valuable resources, partnerships and opportunities for collaboration, further driving sustainability efforts.

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By Enel

Today’s rapidly evolving energy landscape presents organizations like yours with challenges and opportunities. Factors such as climate change, energy market volatility, stakeholder demands and regulatory changes are driving the need for energy strategies focused on decarbonization.

Developing a strong strategy, implementing tangible measures and choosing suitable energy solutions to help you achieve your targets are all essential for enhancing your brand reputation and competitiveness. It’s no secret that your portfolio should be diversified and balanced, encompassing a variety of solutions that make short-term and long-term impact on carbon reduction and wider energy efficiency measures.

But let’s zero in on a strategy that should be at the very foundation of every decarbonization roadmap: energy flexibility.

The rewards of being flexible with energy

Energy is no longer simply a line item on your budget. It’s an asset you can harness, control and monetize. Strategic, more flexible energy use is a low-hanging fruit that not only makes an immediate positive impact on your organization’s energy infrastructure – it enables a cleaner, more sustainable electric grid as well.

By strategically reducing energy use during times of grid stress, your organization can directly contribute to greener peak capacity on the grid, while also reducing your own carbon footprint. You can do this by participating in grid programs like demand response and/or installing on-site generation and storage resources like solar and battery storage systems.

Grid operators need to ensure that energy supply and demand remain in balance. At times when supply and demand struggle to meet (e.g., during heatwaves when demand surges), the grid has traditionally relied on peaker plants to provide capacity and ensure grid stability. However, peaker plants are fossil-fuel powered and expensive to build and maintain.

More flexible sources of capacity, like stored renewables or demand response programs, are proving to be more cost-effective and environmentally conscious methods of ensuring grid stability. As a result, grid operators incentivize organizations to be more flexible with their energy use. By participating in demand response, for instance, organizations like yours can get paid for reducing – or curtailing – energy consumption during times of grid stress.

Demand response – the classic example of energy flexibility

When the grid faces an imbalance, utilities and grid operators dispatch their demand response network. In response to these events, organizations with flexibility in their operations earn payments for agreeing to be on standby and reduce electricity consumption. There are many demand response programs across North America. Frequency, duration, payment potential and response time may differ, but many programs are available with low-level commitments, with short-duration events only a few times a year.

Most organizations have flexible elements of their operations that can be part of a demand response curtailment plan. Think about your own facility’s infrastructure. Strategies like turning off unnecessary lighting, raising HVAC set points and reducing production lines are classic examples of energy flexibility. These efforts translate into kW or even MW that can be part of an energy curtailment plan to earn revenue and you can directly attribute them to carbon reduction efforts – you are being more efficient with energy use and you are avoiding drawing energy from the grid at times when fossil fuels would have to be burned to power peaker plants.

Amplifying energy flexibility with on-site solar and storage

Whereas demand response unlocks your existing energy flexibility, on-site solar and battery storage can help you unlock new energy flexibility. If you have available roof space or land, installing on-site solar panels is a great way to reduce carbon emissions from your operations, by transitioning your energy consumption from the carbon-intensive grid to carbon-free solar generation.

Pairing solar generation with battery energy storage amplifies your energy flexibility and decarbonization efforts. With batteries, your facility gains the ability to store excess solar power for later use, optimizing your consumption of renewable energy. You can strategically shift your energy usage from high-priced hours to low-priced ones, reducing your overall energy costs.

Battery storage is also a perfect complement to incentive programs like demand response, enabling you to strategically discharge stored renewable energy in support of grid stability and greener peak capacity, while minimizing disruption to your operations.

Conclusion

Energy flexibility is lucrative for individual organizations, essential for the grid and beneficial for the planet. With energy flexibility at the core of your strategy, you can achieve quick wins while driving your decarbonization roadmap forward. An energy partner like Enel North America can help you develop energy reduction plans, implement solutions, continually optimize and drive meaningful change.

Citigroup said that 71% of its energy sector clients either lack a substantive low-carbon transition plan that accounts for scope 1, 2 and 3 emissions or have a high-level plan in place but have “unclear ability to execute” on it, the bank disclosed in its latest climate report last week.

The report found that 42% of Citi’s energy clients lacked a substantive transition plan for greenhouse gas emissions across their supply chain, while 29% of energy clients don’t have a clear strategy in place to execute on their high-level transition plans.

The bank agreed to disclose the progress of its energy and power clients’ transition plans as a result of a shareholder resolution proposed by As You Sow in November, which has since been withdrawn. Citi Chief Sustainability Officer Valerie Smith told ESG Dive that while As You Sow’s proposal varied from the final disclosures, the bank “had a sense for what the disclosure could be that would make sense in terms of [its] strategy.”

Citi’s energy clients include companies predominantly related to oil and gas production, but also include bioenergy, carbon capture, utilization and sequestration, direct air capture, hydrogen and renewable energy companies, according to its 2021 Task Force for Climate-related Financial Disclosures report. Its power sector clients are power generation companies, utilities and others in the electricity sector like battery, carbon capture, utilization and sequestration, hydrogen fuel cell, nuclear and solar companies. 

Smith said Citi had recently completed a two-year process building a net-zero review template to review the energy and power sectors when it received As You Sow’s proposal, and had been previously thinking about how to show investors it was helping clients transition.

“The core of our net zero commitment was really around supporting our clients in the transition,” Smith told ESG Dive April 1. “We think [the transition plan assessment] will be a very useful way for us to demonstrate to our investors and other readers [of the report] that we are in fact helping our clients to transition.”

Citi’s clients in the energy sector are doing better in their transition plans for scope 1 and scope 2 emissions — which Smith said the bank assessed separately for the sector because those are what the clients have control over — according to the report. The findings also concluded that 37% of clients were taking steps to decarbonize their operations and 37% had comprehensive and ambitious plans with “demonstrated ability to execute.”

When assessing energy clients’ scope 3 preparations, the report found that they were less aligned: 20% were assessed as having all the core elements in place and taking steps to decarbonize, while only 8% had comprehensive plans and a demonstrated ability to execute. 

Smith said while a lot of companies are making progress on their scope 1 and 2 emissions plans, “a lot of clients are sort of somewhere in the middle,” when looking at the full scope of strategies undertaken to curb emissions.

“When you think about sort of how demand affects supply, you would just expect to see that demand-side transition happening first,” Smith said. “What we see on the energy side is that there are a lot of different strategies that our clients are engaging with in order to think about their near term decarbonization and longer term transition.”

As You Sow Chief Counsel Danielle Fugere said in a release that the organization commends Citi for its “transparency and responsiveness to shareholders” in providing this disclosure, but the results of the energy sector’s full-scoped emissions transition plan assessment “indicates that Citi must begin addressing this critical shortfall to meet its own climate commitments.”

This is also the first year that Citigroup, a founding member of the Net Zero Banking Alliance, disclosed its facilitated emission for the energy and power sectors as part of its TCFD report. The bank reported it facilitated 2.9 million metric tons of carbon dioxide equivalent of scope 1 and 2 emissions in the energy sector and 3.5 million metric tons of carbon dioxide equivalent in the power sector. Those are the equivalents of burning nearly 16,000 and over 19,000 railroad cars of coal, respectively, according to the Environmental Protection Agency’s GHG equivalencies calculator.

The firm only calculated its facilitated scope 3 emissions for the energy sector, where it facilitated 15.5 million metric tons of CO2e — the equivalent to burning over 85,000 railroad cars of coal, according to the EPA’s calculator.

However, Smith noted that all of the report’s metrics — which also includes financed emissions and additional data aligned with the TCFD’s recommendations — are intended to be viewed as a suite of data, rather than individually. Additionally, she said the industry is still in the early days of the climate data market, contributing to a time lag in the data analysis, as the report is based on its clients’ fiscal year 2022 financial reports and 2021 sustainability reports.

“I believe that the disclosure we had this year, helps to increase the transparency, helps to begin to orient the investor in terms of where we're headed, and our work with our clients, and also hopefully shares with the market our learnings,” Smith said.

The disclosures come shortly after Citi agreed to a shareholder proposal put forth by the New York City Comptroller’s office, asking the company to disclose its financing ratio of low-carbon energy supply to fossil fuel supply. JPMorgan Chase had similarly agreed to the green financing ratio proposal the comptroller’s office proposed earlier in March.

As our nation marks the 54th Earth Day next week, and we face the urgency of addressing climate change and the risks that it poses to our communities and our economy, we must acknowledge the vital role that the power sector needs to play to facilitate the transition to clean energy.

With the Inflation Reduction Act spurring $464 billion in investment from the private sector in clean energy projects and other technological improvements across the electric power sector, the time is ripe for utilities to play a larger role as leaders in moving the country towards a more sustainable efficient, and equitable energy future.

It is no secret that underrepresented communities are disproportionately affected by climate change. Many of these marginalized groups receive the brunt of extreme weather events, including floods, fires and hurricanes, and research has found that low-income households in the U.S. have longer and more difficult post-disaster recoveries with longer-term negative financial impacts. At the same time, these groups are exposed to higher levels of pollution from dirty power plants, refineries and diesel truck emissions.

They also face obstacles to accessing clean energy technologies compared with more affluent communities. Utilities should support electrification of transport, buildings and industry because it is both in their own financial interests and that of their shareholders. Electrification means more capital invested by power companies. If done right, electrification will be a low-cost option that can benefit consumers. This includes pursuing strategies such as deep hybrid electrification to manage electric grid capacity needs and avoid cost escalation to consumers.

Technologies like heat pumps and electric vehicles are highly efficient, have lower operating costs and are becoming more affordable. The expanding infrastructure for these advancements will depend on the power sector.

So, what can power companies do to support this evolution?

Power companies should develop decarbonization strategies in line with 1.5°C pathways.

To accomplish this, utilities need to maximize the opportunities afforded by the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. They also need to consistently support policies, like the EPA’s 111 rule to curb emissions from new and existing power plants.

Time and again the EPA has had a successful track record in forecasting the feasibility of pollution control standards despite claims that they will be too expensive or too difficult to meet. In fact, we found that the standards themselves can help drive innovation and progress while growing the economy, reducing costs and improving public health.

Given the increasing urgency of the financial risks of the changing climate, utilities companies must engage more proactively with state and federal policymakers.

For example, we know that new and upgraded transmission is critical to achieving our decarbonization goals and avoiding the worst impacts of an overheating planet, so utilities should play a constructive role in supporting development of transmission and not simply protect their service territories from external forces.

While utilities can be involved in climate policy engagement and advocate for policies that support meaningful climate commitments, many frequently also undercut that support through lobbying at the state and local level. For example, a recent Ceres report looked at the policy engagement of 12 of the largest utilities in the U.S and found that all have lobbied both for and against Paris-aligned policies over the last three years.

Power companies should also actively engage with industry associations to influence these groups’ advocacy on climate policies.

It is critical that companies assess their trade associations’ climate lobbying and engage with them so that these influential organizations reflect the views of their member companies and advocate in favor of their long-term interests.

The power sector’s sustainability plans must also comprehensively incorporate justice and equity, specifically access and affordability, as these are fundamental requirements for building a viable system.

While climate change poses enormous risk, it also presents tremendous opportunities — but all must have access to these opportunities. For example, utilities should provide upfront support to low-to-moderate income customers for residential electrification and decarbonization measures to prevent them from being stuck on the existing fossil fuel systems, which face the prospect of higher costs due to a shrinking customer base and reduced gas usage.

Energy equity creates multiple shared benefits among the customer, utility and those who invest in the utility company, helping optimize the overall system. This will lead to tangible benefits, including lower energy bills, improved air quality, better health and job opportunities.

As we reflect on another upcoming Earth Day, we must recognize that environmental sustainability and financial stability go hand in hand, and that electrification powered by utilities will lead to a brighter future.

Silfab Solar expanded its glass recycling partnership list by signing a new purchase agreement with Solarcycle in an effort to reach its sustainability goals.

Under the agreement, Silfab will send its older or underperforming glass modules to Solarcycle for recycling. Solarcycle will then sell the glass back to Silfab, which will use the recycled parts to produce its solar panels.

The agreement comes a month after Solarcycle announced its plans to establish a $344 million solar glass manufacturing facility in Cedartown, Georgia, 300 miles from Silfab’s new $150 million solar panel manufacturing plant in Fort Mill, South Carolina.

The two solar industry firms' partnership will not only help grow their buyer-supplier relationship, but also contribute to their sustainability goals.

Using Solarcycle’s low-carbon glass will help Silfab reduce its manufacturing climate impact by over 30%, according to the release. One way the solar panel maker is trying to achieve that is by working with third-party recyclers verified by the Solar Energy Industry Association, the company said in its 2022 ESG Impact Report.

Silfab’s Fort Mills facility is expected to open in Q3 of this year and will add 1 gigawatt cell production and another 1.3 gigawatts of module production, according to the solar panel maker’s release. Solarcycle’s Cedartown facility is expected to begin operations in 2026.

“Solarcycle is an ideal partner because of its demonstrated success and innovative processes that already have made Silfab a more sustainable operation,” Silfab President and CEO Paolo Maccario said in a statement. 

The added proximity will also help reduce the companies' shipping climate impact by more than 50%, according to the release.

Silfab is the latest customer that will benefit from Solarcycle’s upcoming Georgia facility. Last month, Solarcycle signed an agreement with Qcells. Qcells' two Georgia facilities in Dalton and Cartersville will supply panels for Solarcycle to reuse.

On March 19, Nucor, Microsoft and Google announced the Advanced Clean Electricity request for information, or RFI, a joint initiative to stimulate development and deployment of reliable, low- or zero-carbon electricity generation technologies like advanced nuclear, next-generation geothermal and long-duration energy storage.

The initiative aims to aggregate the three companies’ demand for clean electricity in a way that “accelerate[s] the development of first-of-a-kind and early commercial projects,” the companies said in a news release provided by Nucor.

Eligible projects have until April 12 to respond to the RFI. The companies will notify selected projects of their intent to proceed by mid-June, with power purchase agreements to follow in early 2025, the news release said.

Each of the Advanced Clean Electricity partners aims to zero out its carbon-equivalent emissions by 2050 at the latest. 

Nucor is working toward its goal of net-zero emissions by 2050 in part through a $15 million strategic investment in NuScale Power, which includes an agreement to supply low-emissions steel for NuScale projects and possible colocation of NuScale SMRs at Nucor steel mills.

Google’s and Microsoft’s emissions-reduction goals are more ambitious than Nucor’s. Google is aiming for net-zero emissions from company operations and a 50% reduction in Scope 1, 2 and 3 emissions from a 2019 baseline by 2030. Microsoft aims to be “carbon negative, water positive and zero waste by 2030,” to match 100% of its electricity generation at all times with zero-emissions resources by 2030 and to remove the equivalent of all its historical emissions by 2050, according to the Advanced Clean Electricity RFI’s website.

Though all three partner companies have invested heavily in building efficiency, solar panels and renewable energy power purchase agreements, those efforts may not be enough to achieve their sustainability goals. The 24/7 resources sought in the RFI can “fill gaps in wind and solar production and support grid reliability … needs that today are still being met by fossil fuel generation,” according to the RFI’s website.

The Advanced Clean Electricity initiative aims to spur the growth of new energy-generation technologies that might otherwise stall due to high upfront development costs and uncertain commercial demand. 

“We hope that our work will catalyze similar initiatives amongst other key offtakers in the energy market or inspire others to join us down the line,” the initiative’s representatives said in an email to Utility Dive.

The partner companies expect to sign offtake agreements for technologies that are not yet cost-competitive compared to existing commercial power sources, lobby policymakers and regulators for favorable “ecosystem improvements,” and partner with utilities and energy providers on supportive rate design, the news release said.

Those ecosystem improvements could include reforms to expand transmission and reduce interconnection bottlenecks, the initiative’s representatives told Utility Dive. 

“Interconnection delays could create a risk, but we are committed to working with all stakeholders, including utilities and [grid system operators], to maximize the odds of success and reduce system-level roadblocks,” the representatives said.

The initiative’s website cites 14 evaluation criteria for clean energy technologies, including maturation of technology, potential capacity factor above 50%, project capacity above 50 MW or the ability to aggregate smaller projects to achieve equivalent output, the ability to trace electricity output and produce hourly Energy Attribute Certificates, the potential to scale the technology’s total output beyond 100 GW by 2040, and a pathway to cost-competitiveness with existing generation technologies over a similar timeframe. Projects must be located in the U.S., “with a preference for projects in [the] PJM” region, according to the website.

“If there is a project or technology that can meet the criteria specified in the RFI to provide the clean, firm power we need, we are eager to hear from them,” the initiative’s representatives said

The Securities and Exchange Commission passed its highly anticipated climate disclosure rule March 6, nearly two years after the agency released its initial proposal. The final rule — a pared-down version of the original — scrapped scope 3 emissions disclosures entirely and scaled back scope 1 and scope 2 reporting requirements.

The regulation’s narrower parameters come against a backdrop of strong pushback from companies and mounting political criticism. The SEC said it received over 24,000 comments since releasing the rule in March 2022, including around 8,100 in the 72 hours leading up to the Macrh 6 open hearing, Chair Gary Gensler told reporters. The agency announced plans to vote on the rule last week, following reports of it dropping scope 3 requirements from the rule.

Though the climate rule was approved, it passed with a 3-2 vote count, with three Democrats — Gensler, Commissioners Caroline Crenshaw and Jaime Lizárraga — supporting it, and two Republicans — Commissioners Hester Peirce and Mark Uyeda — opposing it. Despite their party affiliations, Crenshaw was nominated by then-President Donald Trump and unanimously approved by the Senate in 2020, while President Joe Biden nominated Uyeda in 2022. The tight vote stood in contrast to the unanimous approval of the commission’s only other agenda item — amendments to the national market system stock order execution disclosure requirements.

The split vote hinged on the commissioners’ views on the SEC’s authority — or lack thereof — to probe companies for climate-related disclosures. Even the rule’s supporters argued the agency had not gone far enough, while its critics alleged the agency had gone too far.

The conflicting opinions from either side of the aisle set the stage for what followed soon after the 866-page rule was approved and made its way to the Federal Register. Environmental groups such as Sierra Club and Earth Justice said they were considering legally challenging the SEC’s “arbitrary removal of key provisions” from the final rule, while a coalition of 10 Republican states said they had launched a lawsuit in a U.S. federal appeals court to block the implementation of the climate disclosure rule. 

“While the final decision is more watered-down than we initially anticipated, it’s important to note it was a bill designed to get a yes vote, which it ultimately did,” Alyssa Rade, chief sustainability officer at supply chain decarbonization platform Sustain.Life, said in an email to ESG Dive.

The SEC is overextending its authority

Peirce, the longest-tenured commissioner, said during her testimony that though the agency had dropped scope 3 reporting requirements and put forward a proposal that was different from the original, it still sought to “spam investors with details” about climate.

“These changes do not alter the rules’ fundamental flaw: its insistence that climate issues deserve special treatment and disproportionate space in commission disclosures and managers’ and directors’ brain space,” Peirce said. 

She said she did not support the rule because the commission failed to justify this “disparate treatment,” and such climate-related disclosures would “overwhelm investors, not inform them.” Peirce also said the commission could “trigger a hodgepodge of requirements tailored to meet the demands of a fast and ever-expanding panoply of special interests” that could include stances on abortion, cannabis or even war.

Peirce further questioned the SEC’s authority to demand such disclosures, and said the agency wasn’t created to satisfy the wants of every investor, but to serve the “interest of the objectively reasonable investor seeking a return on her capital.”

“We lacked the expertise to oversee these special interest disclosures and only a mandate from Congress should put us in the business of facilitating the disclosure of information not directly related to financial returns,” Peirce said.

Uyeda’s testimony mirrored Peirce’s criticisms. He said the commission had “ventured outside of its lane and set a precedent for using its disclosure regime as a means for driving social change.” He added that if it remained unchecked, there was potential for “further misuse of the commission's rules for political and social issues and an erosion of [the] agency's reputation as an independent financial regulator.

Peirce and Uyeda both opined that the rule could have been re-proposed rather than approved. Gensler later told reporters that re-proposals are a process the agency has not used “in decades,” and he is confident the agency followed all requirements of the Administrative Procedure Act.

“I think this final climate risk disclosure role is well within the agency's mandate,” Gensler said. “It's solely focused on disclosures to investors [and] it’s grounded in materiality.”

The SEC “is doing what it was designed to do”

Crenshaw delivered the commission’s most pointed criticism of the rule’s absence of scope 3 reporting. While she supported the approval of the rule, she told the agency it had a remit to go much further, including maintaining the proposed rules scope 3 requirements and broader scope 1 and scope 2 reporting requirements. Crenshaw said that, while the finalized rule “is better for investors than no rule at all,” it “adopts an unnecessarily limited version of [climate-related] disclosures.”

“The Commission has clear authority under the Securities Act and the Exchange Act to require disclosures that are in the public interest and for the protection of investors, as today's rule is,” she said. “This well-established authority has been consistently relied upon and affirmed and reaffirmed across dozens of disclosure rulemakings over multiple decades. And this authority would have supported a more robust rule.”

Before the vote commenced, Gensler said that the “SEC has no role as to climate risk itself,” but the agency did have a role with regard to disclosures. However, during a media roundtable after the vote, he noted that the final version of the rule was “responsive to the various comments [made] by investors and issuers.”

Lizárraga, who cast the final deciding vote, said that the climate-related disclosures proposed by the commission were “no different from many of the commission’s existing disclosure requirements,” and responded to “investor demand for standardized and comparable information on climate related risks and impacts.”

He added that the rule should also prevent greenwashing, as it holds registrants liable for any materially false or misleading statements regarding climate risk.

Lizárraga said the commission was well within its authority to propose climate disclosure rules because climate risks can be material to investments and voting decisions, and these risks, ultimately, can have a material impact on a company’s bottom line.

“The commission is doing what it was designed to do: Protect investors and foster transparent capital markets by improving the reliability, consistency and comparability and material climate risk disclosures for investors,” Lizárraga said.

The climate disclosure rule will go into effect 60 days after it is entered into the Federal Register, which it still has not been as of press time.

Amid a sustainability push from regulators and investors, just one-fifth of organizations say they’re meeting or exceeding their decarbonization goals, according to a new study from French multinational utility provider Engie. The study’s findings are based on responses received by 515 senior decision makers across industries during the third quarter of 2023.

Although two thirds of surveyed organizations said they put in place some form of carbon reduction commitment, the lack of coherent focus, internal governance bottlenecks, budgetary constraints and data challenges are impeding progress, Engie reported.

“A lot of roadblocks to achieving goals are really cross-functional and can’t be solved by one group or team alone,” Abby Davidson, managing director of strategy and implementation at Engie Impact, a consulting subsidiary of the company, told ESG Dive. “Ultimately, decarbonization is a business transformation,” requiring alignment across business units, she said.

Decarbonization efforts have gathered momentum across companies as laws and regulations — including the European Union’s Corporate Sustainability Reporting Directive, the passage of two California climate disclosure bills in October, and the Securities and Exchange Commission’s climate reporting proposal — add pressure on leaders to show results.

However, despite this increase in demand for transparency, corporations have struggled to implement their sustainability initiatives and decarbonization solutions. The report identified five major roadblocks to execution: Multiple business priorities; governance and decision-making complexity; limited budgets; technology and tracking impediments; and a lack of internal skill sets.

A key problem is programs are often implemented in a piecemeal way, according to Davidson.

Engie’s research found many organizations take a “siloed approach” to decarbonization and treat it like any other corporate initiative. As a result, they fail to tap into the benefits that come from a more holistic way of advancing decarbonization strategy, one which requires organizations to acknowledge the complexity of meeting long-term carbon reduction goals and recognizes the scale of the effort. Such an approach also entails a coordinated approach across the organization, where all business units are able to help advance a common set of objectives.

More than one-third of respondents said their organization takes a hands-off approach to decarbonization, deeming it low priority or as an isolated approach with minimal cross-fertilization. Further, 1 in 5 organizations surveyed said their business model is not compatible with long-term decarbonization commitments.

“Executives who embrace a holistic approach do so knowing it necessitates a fundamental reassessment of how their business functions,” the study noted.

Poor data management stalls execution

Ineffective data management can stand in the way of decarbonization implementation, a challenge identified by a large swath of survey respondents. Two thirds of respondents said meeting long-term decarbonization commitments would require a complete transformation or significant change in how their organizations manage technology and data. Only 40% of organizations said they have a centralized repository for decarbonization data, or what researchers called a “single source of truth for decarbonization data” in their organizations.

“You can't make progress or monitor what you can't measure, and so I think companies aren't set up to measure emissions data … this is a transformation [needed] in how they gather data and measure data,” Davidson said.

The top three metrics used by organizations to measure success included the overall reduction in scope 1 and scope 2 emissions; long-term financial return on investment; and impact on brand perception and value.

In resource-constrained times — budget and investment constraints were the top inhibitor to implementation, according to respondents — Davidson stressed the importance of a long-term view when assessing the impact of decarbonization initiatives.

“What we encourage companies to look at … a total cost of ownership model, so looking at a broader perspective on the variables that go into owning a particular asset and looking at the holistic picture over time,” she said.

Companies, she added, also need to be open to new ways to finance decarbonization efforts, especially among firms that can’t allocate capital expenditures for the transformation of manufacturing facilities.

“Engie and others have models in the market [that bring] energy savings as-a-service where we will own the asset and the company will pay it back through energy savings and keep the capital expenditure off their books,” Davidson said.

Getting buy-in at the top

The study said progress on decarbonization should be championed at the executive and board levels, but only  one-third of executives surveyed described their board as “decarbonization champions.”

“Boards are under increasing pressure to have people on the board of directors who understand and can effectively govern decarbonization strategy for the business,” Davidson said. “It’s very important for the board to oversee and be able to govern decarbonization as they would any business transformation.”

Engie commissioned research firm Meridian West to conduct its survey.

The 12 largest U.S. electric utility companies have lobbied unevenly for climate policy aligned with the goals in the Paris Agreement — sometimes working against their own interests, says a January report from corporate sustainability group Ceres.

“We've seen a number of examples across Fortune 500 companies and in the utility world where companies are taking strong steps to decarbonize, but their lobbying is not aligned,” said Ceres managing director and report co-author Steven Rothstein. “They say they're for a policy, and then they advocate against it.”

This disconnect is sometimes the result of companies failing to align internally on strategy, and sometimes the result of their membership in a trade association that opposes policies supported by the utility, Rothstein said in an interview.

Of the 12 electric utility companies the report examined, Ceres found that all had advocated for Paris-aligned climate policies in the last three years, but all had also opposed Paris-aligned climate policies in the same timeframe.

“If a company is advocating for something, but then they join a trade association that advocates against it — that's hurting their strategic plans,” Rothstein said. “But the answer isn't always to leave a trade group — though that may be appropriate in some cases.”

In one recent example, investor-owned utility Eversource parted ways with the American Gas Association last August over AGA’s lobbying against electrification.

Dan Bakal, Ceres’ senior program director of climate and energy, said this was a “significant development” for a “fairly sizable company.”

The utility companies studied by Ceres were American Electric Power, Dominion Energy, Duke Energy, Exelon, FirstEnergy, National Grid, NextEra Energy, Pacific Gas & Electric, Sempra Energy, Southern Company, WEC Energy Group, and Xcel Energy.

“For these companies that are primarily electric utilities, they do also have some gas distribution business, but a lot of them are choosing now to focus on the electric side of their business because they recognize that that's what's going to expand two to three-fold over the next couple of decades — whereas gas has a much more questionable, to declining, future,” said Bakal.

Bakal said that it was encouraging to see American Electric Power address this misalignment in an internal assessment, where AEP rated whether or not trade associations it belongs to are aligned with it on policy positions, partially aligned, or misaligned and “undermining AEP’s pursuit of its clean energy strategy,” the assessment said.

Ceres analyzed industry associations that included the AGA as well as the Edison Electric Institute and American Clean Power Association. In a comment, EEI spokesperson Sarah Durdaller said the group and its member companies have been the “strongest supporters” of the clean energy provisions in recent legislation like the bipartisan infrastructure law and Inflation Reduction Act.

“Already, 50 EEI member companies have set ambitious forward-looking carbon emission reduction goals, 40 of which are aiming for net-zero or equivalent by 2050 or sooner,” Durdaller said. “As the owners and operators of the energy grid, we also are making the investments needed to deliver resilient clean energy to sectors across the economy.”

While the report indicated “substantial inconsistencies” in the climate lobbying of utilities, Bakal said he thought it was encouraging that utilities have overall been “very supportive” of the Inflation Reduction Act.

“We do recognize that policies, sometimes at the state level, can be challenging — and we can't expect every company to just support every policy if it might not be a well-designed one, so there can be some disconnects,” he said. “But we do expect companies to be as transparent as possible, and be transparent about why a specific policy proposal might not work for them.”

AES, Constellation, Google and Microsoft have joined forces with energy marketplace administrator LevelTen Energy to create the Granular Certificate Trading Alliance and design a new marketplace for trading time- and location-specific renewable energy certificates, according to a Dec. 14 announcement.

The new trading platform, which is expected to go live next year, will be designed to facilitate purchases by corporate and utility energy buyers who are looking to meet 100% of their energy needs with clean energy on an hourly, 24-7 basis, according to LevelTen chief operating officer Jason Tundermann.

A transparent, easily accessible energy marketplace should send more accurate signals to renewable energy developers about where projects are most needed, Tundermann said.

Some of the same companies that pioneered the concepts behind today's power purchase agreements, known as PPAs, are now leading the development of “granular certificates,” a new energy product for the next generation of clean energy ambitions, Tundermann said.

Like renewable energy certificates, or  RECs, granular certificates can be sold by renewable energy generators to corporations or utilities looking to make verifiable claims about the amount of clean energy that powers their operations. But unlike most of today's RECs, Tundermann explained, granular certificates include information about when and where the power was generated — attributes of interest to organizations hoping to verify that they source clean energy 24-7, 365 days of the year.

Although Constellation has already facilitated 24-7 energy contracts for a handful of customers, the data needed to execute these deals is still hard to come by, said Mason Emnett, senior vice president for public policy at Constellation. Registries that document the output of energy projects don't typically track data on an hourly basis, he said. Nor is there a simple means of locating projects or developers who can meet specific needs for buyers looking to fill difficult gaps when renewable generation is scarce, Emnett said.

And as a provider of clean energy, he said, “we need all that data to stand behind the claim we are making to the customer.”

LevelTen doesn't see granular certificates replacing power purchase agreements, which will likely remain the more affordable option for long-term power procurement, Tundermann said. Instead, he envisions a future scenario where a clean energy buyer might enter into a PPA or series of PPAs to cover the bulk of its energy needs, using granular certificates to cover times when contracted wind or solar plants aren’t generating.

LevelTen intends to launch a platform creating both a forward market that would allow buyers and sellers to trade granular certificates based on the anticipated availability of clean energy at a specific point in the future, as well as a spot market where trading takes place on a more immediate basis if, for example, expected generation falls short of demand.

Emnett agreed with Tundermann that the creation of a marketplace for granular certificates could impact future renewable energy development, and siting in particular.

“The intent of the structure is to inform the development of resources by identifying where is the relative value,” he said. But he said Constellation also hopes that the marketplace will drive greater demand for granular certificates and 24-7 energy projects by making these options more easily accessible to companies that can't afford to hire an entire team of people dedicated to energy procurement.