Final Exam Flashcards
What is sustainability (original definition)?
In 1987, the UN Brunt. Comm. defined it as “meeting the needs of the present, without compromising the ability of future generations, to meet their own needs”
What is sustainability (modern definition)?
Refers to matters affecting the well-being of the environment, society, and/or economies
What is double materiality?
How a business impacts sustainability AND how sustainability consequences affect a business
What are the 3 pillars of sustainability?
Environmental, social, and economic
What is in the sub-content of the environmental pillar?
Ecosystem services, green engineering & chemistry, air quality, water quality, stressors, resource integrity
What is in the sub-content of the social pillar?
Environmental justice, human health, participation, education, resource scarcity, sustainable communities
What is in the sub-content of the economic pillar?
Jobs, incentives, supply & demand, natural resource accounting, costs, prices
What new term do businesses use instead of ESE?
Environmental, social, governance
What is governance?
Reflects the responsibility/efforts of a business’ management/board regarding sustainability issues.
Why did the term ESG become controversial?
Anti-sustainability pushback and so it is now less frequently used
Why (and who) publishes a ESG/sustainability report?
ESG reports are growing importance to investors, help avoid poor ratings relative to peers, and raises awareness on a company’s own governance of sustainability factors. All public and some private oil & gas companies publish it.
What is the Rio Conference (AKA Earth Summit)?
In 1992, the United Nations Conference on Environment and Development (UNCED) held this conference to develop Agenda 21 and the UNFCCC.
What is Agenda 21?
Agreement by 178 states to coordinate efforts for sustainable development. Have 21 goals for the 21st century. Later became 17 goals to achieve by 2030.
What is the United Nations Framework Convention on Climate Change (UNFCCC)?
190 parties/states agreement to coordinate efforts to combat climate change and its adverse effects. Focused on stabilizing greenhouse gas in the atmosphere. Calls for annual meetings called Conferences of the Parties.
Who developed the Sustainable Development Goals (SDGs)?
The united nations development program, the international finance corporation, and IPIECA (global oil & gas association) through a study under Agenda 21.
What are the 17 sustainable development goals under Agenda 21?
No poverty, zero hunger, good health & well-being, quality education, gender equality, clean water & sanitation, affordable & clean energy, decent work & economic growth, industry innovation & infrastructure, reduced inequalities, sustainable cities & communities, responsible consumption & production, climate action, life below water, life on land, peace justice & strong institutions, partnerships for the goals
What is climate change?
Long-term shifts in temperatures and weather patterns
What is global warming?
The increase in global temperatures since the beginning of the industrial age. Rising temperatures are already having negative consequences which are expected to intensify.
What is the major contributor to increased global temperatures?
Greenhouse gasses. They are created through the production and consumption of coal, oil, and gas. Measurement of temperature changes often refer to the start of the industrial age when fossil fuel consumption grew.
What is the primary greenhouse gas emitted from fossil fuel combustion?
Carbon dioxide. Atmospheric CO2 has been measured since 1958 and reflects a substantial rise. It is estimated CO2 has risen 50% since the industrial revolution started.
What causes an increase in CO2 in the atmosphere?
Widespread scientific consensus says: it increases due to anthropogenic (human) causes; and flaring and machinery combustion in oil & gas production (despite efforts to reduce substantially). Despite CO2 fluctuating naturally over time (being emitted and absorbed by land and water), the current rate and degree of change are unprecedented.
What makes up the atmostphere?
Mostly nitrogen, oxygen, and argon (which are not greenhouse gasses). CO2 is a very small portion of the total atmosphere but still the most abundant greenhouse gas currently in the atmosphere.
What is CO2 equivalance?
It represents global warming potential through potency and duration. CO2 is 1 (79.4% of emissions) and Methane is 28 (11.5% of emissions). CO2 is the least potent but most abundant greenhouse gas. CO2 remains in the atmosphere for 300-1000 years while methane lasts for a decade.
What is the secondary greenhouse gas emitted from fossil fuel combustion?
Methane. Atmospheric methane has been measured since 1983 and reflects a significant rise. It is estimated methane is responsible for 30% of the rise in temperature since the industrial revolution due to its potency.
What causes an increase in methane in the atmosphere?
Majority of current emissions are anthropogenic (from agriculture and organic waste from growing population). It also relates to fossil fuel production and consumption (about 40% of methane emissions)(leaks, tank venting, and pneumatic controls help decrease). It is also emitted and absorbed naturally by wetlands with decomposing plant life and rich soils. (EPAS REGULATIONS ALSO HELP DECREASE)
What is Conferences of the Parties (COP)?
Annual meeting held to coordinate issues, establish commitments, and monitor progress regarding climate change. Established the Kyoto Protocol and Paris Agreement.
What is the Kyoto Protocol?
Joined by 190 states to work towards individual emissions reduction targets. It was never ratified by the US and was superseded by the Paris agreement.
What is the Paris Agreement?
Superseded the Kyoto Protocol with stronger measures. Joined by all countries and aims to limit increase in global temperatures to no more than 2 degrees celcius above pre-industrial levels and take efforts for 1.5 degrees. Agreement in 2015, effective since 2016. US withdrew 2017 and rejoined 2021. All parties must make nationally determined contributions (NDCs). Regularly must report progress toward NDC’s at stocktakes (currently not meeting goals).
Are global greenhouse gas emissions growing?
Yes, despite increasing awareness and mitigation efforts.
Are renewable energy sources growing?
Yes, but growth has been outpaced by overall growth in energy demand.
What is coal consumption at and how is it being decreased?
Coal, the highest emitting GHG fossil fuel, accounts for 25% of global energy mostly in developing Asian nations. COP29 raised climate financed for developing nations to $300 billion.
What is shareholder capitalism?
Focuses on generating returns for shareholders within laws and societal norms. Only goes beyond if it benefits the corporation. Traditional view of corporate responsibility.
What is stakeholder capitalism?
Notion that a business should voluntarily protect and advance broader interests of society in its pursuit of profits.
What is a non-governmental (NGO) organization?
Advocacy or service group usually with environmental and/or social objective. (ex of oil & gas opposing: sierra club, greenpeace, world wildlife fund, center for biological diversity, environmental defense fund)
What are multilateral organizations?
Global or regional multilateral organizations that are involved in energy and sustainability issues that affect the oil & gas industry. (ex: UN, World Bank, IMF, WTO, OECD)
What are governments/regulators?
Agencies that create or enforce regulations that impact the oil & gas industry. Regulations can restrict operations, increase compliance costs, and result in fines. (ex: SEC, BLM, BOEM, EPA, FERC, Texas railroad commission)
What is the public?
Public perception of a business and its practices can impact its standing in the community, ability to hire and retain talent, and ability to get cooperation and approvals.
What are consumers?
Consumers impressions of a company, industry, and products affects demand and pricing. Changing patterns and preferences creates product risks and opportunities.
What are investors?
The investment and lending community has increasingly been demanding sustainable behavior and reporting from public companies.
When did large public companies begin issuing ESG/sustainability reports?
2005
What is greenwashing?
Many initial reports that were inadequate because they lacked thoroughness and substance and included false or exaggerates claims.
What did the demand for improved sustainability reporting lead to?
Organizations that proposed frameworks. (Voluntary: GRI, SASB, CDP, TCFD) (Mandatory: EU CSRD, IFRS/ISSB, SEC, California)
What is the focus of sustainability reporting?
Material topics, climate-only focus, or broad sustainability focus. Could be organized by topic or industry. Could have outward focus (impact on ES) or inward focus (ES impact on company) or both (double materiality).
What has happened to investment practices?
Bulk of investments are held by broad funds managed by asset managers. Individual investors can’t vote on shareholder proposals. So sustainability minded investors pressure asset managers. Some sustainability oriented funds exist that exclude fossil fuel producing companies.
What asset manager made a strong sustainability promise? When?
Blackrock in 2020 in a letter to clients/investors. The CEO also issued a letter to CEOs demanding sustainability reporting through SASB and TCFD. He faced pushback from republicans and hydrocarbon producing states, so he is less vocal now and doesn’t say ESG anymore.
What is greenhushing?
Companies addressing ESG but downplaying those efforts to avoid criticism from ESG opponents.
What is the “alphabet soup”
Proliferation of acronyms used for organizations and their standards. They try to align their required content and formats. (ex: SEC, FASB, ASC, IFRS, IASB, GRI, SASB, TCFD, GHG protocol, CSRD, ESRS, EFRAG)
What financial reporting standards are used in the US and non-US companies?
US: SEC, FASB, GAAP; Non-US: IASB, IFRS
What is the GRI?
Voluntary standard that covers environmental, economic, and social topics. Outward focus (how company impacts the environment and society). It has multiple topic standard and a few industry standards (one of which is oil & gas).
What is SASB?
Widely used and voluntary covering a broad range of sustainability topics. Designed primarily for use of investors. Inward focus (how the environment and society impact operations and value). Organized by industry. Has been consolidated with IFRS/ISSB. (ex: declining revenue, higher costs, higher cost of capital). Demonstrates business opportunity by embracing more-sustainable practices. Demonstrate physical and transition risks to business.
What are the 4 SASB industry standard grouping for the oil & gas industry?
Exploration & production, Midstream, Refining & marketing, and Services
What are the 4 SASB topics for the upstream oil & gas grouping?
Greenhouse gas emissions, air quality, water management, biodiversity impacts
What is the TCFD?
A voluntary climate focused standard. Often referenced by other standards for guidance on climate reporting. Inward focus (investor oriented). Requires address of governance, strategy, risk management, and metrics and targets. Now consolidated with IFRS/ISSB.
How does the TCFD organize climate related risks?
Risks related to energy transition (policy, tech, market, reputation). Risks related to physical impacts of climate change (acute: extreme weather like flooding and wildfires; chronic: drought or sea level change)
What is the GHG protocol?
Referred by the TCFD as guidance on how to measure and report greenhouse gases. It allows measurement of GHG emissions on either an operated basis (control) or equity basis (ownership). Scope 1 is direct emissions, scope 2 is indirect emissions purchased, scope 3 is indirect emissions from what’s purchased.
What is the ISSB?
IFRS announced in November 2021 the creation of the international sustainability standards board to help strengthen/consolidate reporting standards. It has taken over operations of SASB, IIRS, CDSB, and TCFD. In 2023, they published 2 new mandatory standards.
Is the US involved in sustainability reporting?
No, SEC climate reporting rule is pending court challenge. And FASB hasn’t set standards because it is discouraged by the SEC as political interference.
Is the EU involved in sustainability reporting?
The CSRD (corporate sustainability reporting directive) issued comprehensive sustainability reporting requirements in 2023. The standards are called ESRS (european sustainability reporting standards) and incorporate double materiality. The standards were developed by the EFRAG.
What is California climate law?
Both public and private businesses in California that have total annual revenue of over 1 billion must report Scope 1 and 2 GHG emissions beginning 2026. Public disclosures must be verified by assurance provider.
What is shareholder capitalism? pt2
Pursuit of profit instead of common good. Advocates agree that businesses should comply with laws and regulations, but not what those laws should be.
Why do laws and regulations fail?
One size fits all doesn’t work, vague, implementation weakened by lobbying, inadequate enforcement, regulatory capture, late, stale, jurisdiction shifts.
What is the objective of sustainability standards?
Increase transparency, identify areas of material impact, make standardized disclosures, disclose risks and opportunities, set performance targets, demonstrate high level commitment, enhance regulation by highlighting areas that need improvement
What are 3 wind energy categories?
Land-based, offshore, distributed (small, local use)
What areas have the highest wind power capacity?
Not all areas are good for wind generation. The distance between generation and consumption creates grid requirements. China is the #1 country in wind capacity and Texas is the #1 state.
What are the components of a wind turbine?
Rotor blade, gear box, nacelle, generator, power cables, tower, transformer, switchyard. 70% of tower and nacelle equipment is manufactured in the US. Domestic content for blades is less than 25%.
Is turbine capacity, rotor diameter, and hub height increasing or decreasing?
Increasing
Why are US offshore wind projects having difficulties?
Rising costs, supply chain constraints, permitting delays causing unconstructed projects to become unprofitable.
What are US solar energy sources?
Photovoltaic (large utility scale or small scale on rooftops), and a very small amount of solar thermal such as parabolic troughs and solar towers.
What is Photovoltaic Technology (PV)?
Panels that convert light (photons) from the sun into electricity (voltage)
What is Concentrating Solar Power systems (CSP)?
Use of lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam. Used as a heat source for a conventional power plant.
What is the 2022 “Inflation Reduction Act”?
Includes subsidizing energy and climate related provisions like increasing tax credits. Allows direct payments of tax credits (cash) or the sale of tax credits to other taxpayers.
How do you account for IRA tax incentive credits?
Some are tax income items or as government grants. The US has a proposed FASB standard on grants pending till March 2025, but uses the IFRS standard for now.
