Monthly Archives: December 2020

Will 2021 Be the Year Big Finance Goes Forward on Climate Change?

In a recent report, the Board of Governors of the Federal Reserve acknowledged for the first time the impacts of Climate Change on financial markets and overall stability, doubling down on a recent statement by Chairman Jerome Powell that the Federal Reserve is “actively … getting up to speed” on Climate Change risks and its impacts to the financial system. The Federal Reserve distinguishes between sudden shocks to financial conditions and long-term, gradual changes. The recent report notes that Climate Change risk is a combination of shocks that result in economic vulnerabilities over time, which are difficult to research and measure.

In the Federal Reserve’s view, acute hazards, such as storms, floods, droughts, or wildfires, can quickly change future economic conditions or the value of assets which could result in significant financial instability. In addition, public perception of risk could affect perceived values, too.

The Federal Reserve proposes several changes to address Climate Change risk, such as:

• Insisting on increased measurement and disclosure within financial markets and investors to improve climate risk pricing and reduce asset price volatility

• More research on the relationships between climate, the economy, and markets to improve predictability of Climate Change events and effects

• More planning on adapting to the physical effects of Climate Change through technologies and policy changes, to reduce physical risks of Climate Change.

2020 is also the year that momentum rose in the Security & Exchange Commission (SEC) to take more seriously Environment, Social, and Governance (ESG) issues of private companies. SEC Commissioner Allison Herren Lee wrote in an op-ed that the SEC is obligated to consider Climate Change in investment decisions, as it affects “… the livability of the planet.”

The first step in effectively addressing these issues is to develop consistent reporting standards for ESG. Recently, the International Federation of Accountants proposed a board – expected to be formed in 2021 – to develop new international sustainability standards to determine necessary measurements and reporting standards for different industries or company types.

It is likely that President Biden-selections to replace senior officials in the Federal Reserve and SEC in 2021 will likely push this process along more vigorously.

CCES has the experts to help you form and execute a useful Climate Change program to determine goals and progress and inform your stakeholders. Contact us today at karell@CCESworld.com or at 914-584-6720.

3 Overlooked Areas To Maintain Proactive Systems

Last month, I wrote that having a viable energy program is like going to the doctor. The general practitioner may not solve your problem, but he/she will tell you if you may have a problem which should be addressed early on. Catch a potential problem and solve it before it becomes serious and costly. Have as a goal for 2021 the practice of examining your energy and/or environmental compliance program – even if they seem to be functioning fine and shows you are in control. Such a review may reveal problems that will only get worse, risky for compliance, and costly in the future, if not addressed. Therefore, pay attention and react to:

• Process changes. Even a small change in one area or a need to make more of a certain product in another can have significant impacts on energy and environmental compliance. Many changes in processes impact environmental compliance. For example, changes made to the procedures to make certain chemicals to, say, reduce water usage, may result in changes in emissions of critical air toxics or changes to energy usage. These need to be estimated and, if necessary, modify applicable permits and determine whether compliance is maintained and additional (or saved) energy usage. All probable process changes or new equipment should be evaluated for environmental compliance and energy usage. This should not only go for process changes at the individual step level, but larger impacts, too, such as the number of batches of compound run. While you may focus on controlling big energy or greenhouse gas emitting processes, using a “run of the mill” process more can net out significant reductions made elsewhere, costing you much.

• Regulatory and policy changes. It is tempting to keep your energy and environmental compliance systems which are working well, at the status quo. But things change, and one of the things that affects either the most are new or revised regulations. So, make the time to follow regulatory changes in your jurisdiction. However, do not just follow new regulations, but also new policies and cultural changes that affect requirements and agency or public expectations.

• Technology and infrastructure. It is important to keep up with changes in technology or applications to assure the ongoing effectiveness of your environmental compliance or energy program. Keep track of not only new equipment and its uses, but also their complex relationships to determine potential upheavals when it comes to environmental compliance and energy usage. New technologies are usually “cleaner” than the ones being replaced, but not always so or not in all aspects (for example, some, while reducing air toxic emissions, may use more energy). So perform a thorough analysis of how it affects your current permits and energy usage.

Over time, developing a system to monitor changes in these seemingly “innocuous” areas can help strengthen your environmental compliance and energy systems and ensure that your facility does not unknowingly float into non-compliance or suddenly raise energy usage that might result in shortfalls or higher costs.

CCES has the experts to help you strengthen your environmental and energy systems to detect issues before they become costly and risky. Contact us today at 914-584-6720 or at karell@CCESworld.com.