Houston recently hosted the annual CERAWeek, a major energy industry conference. S&P Global’s email newsletter about the event included interesting tidbits:
“Attendees from across the energy spectrum said they remain focused on sustainability topics like climate and the low-carbon transition, but they also acknowledged that the path to get there may be slower than previously expected. This slowing momentum is due in part to the Russia-Ukraine war, which led Europe to rethink its reliance on Russian energy. It’s also a result of massive growth in artificial intelligence — more AI means more datacenters, and that means huge increases in electricity demand.
Here’s how Larry Fink put it on stage the first day of the conference: ‘Across the board, we have to think about power and energy in a pragmatic way.’ Fink is the CEO of BlackRock, the world’s largest asset manager with $11.6 trillion in assets under management. In recent years, Fink has highlighted the importance of decarbonization in his influential CEO letters. ‘I still believe that,’ he told the audience March 10. ‘But I also caution that any decarbonizing technology is highly inflationary right now.’
Fink said that wind, solar and other energy sources have a role to play. ‘But let’s be clear — we are going to be depending on dispatchable power for a long, long time,’ he added, especially with the ‘unbelievable need’ for electricity to power growing AI usage.”
In short, “decarbonizing technology is highly inflationary right now” and AI growth will be fossil-fueled. With EPA’s newly announced massive deregulatory offensive to support fossil fuels, he may be right on that second point. On the other hand, Fink’s credibility on climate/ESG matters is questioned by those who believe he backtracked on previous commitments in response to social and political pressures.
The newsletter also contained this interesting graphic showing some results of S&P Global’s 2024 Corporate Sustainability Assessment (CSA):
I find the gap between the (“substantive” rather than “material”) financial impacts and physical risks interesting. It shows that while physical climate risks may be widespread, potential losses/impacts are less significant than expected. Proponents of double materiality may point to this as evidence supporting the value of identifying impacts beyond financial materiality. Those who prefer a focus on financial materiality could argue the gap demonstrates that companies are expending much effort on a non-financially material matter.
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