The ‘E’ in ESG: Environmental performance for pipelines

When portfolio managers make decisions that affect our CPP or RRSPs, we want them to pay close attention to the hard financial data. Things like a company’s earnings, profits and debt levels. But now, many are adding “ESG” to the mix of factors they weigh when deciding which companies to invest in.

ESG measures involve three components: environmental, social, and governance. And ESG disclosure has fast become an important standard that investors use when deciding where to invest. Its effect on the energy and pipeline industries is increasing daily.

That’s why we’re introducing a three-part blog series to examine what’s behind E-S-G. This week, we explore the ‘E’ in ESG.

 

Environmental performance

 

The environmental component of ESG is where investors look for data to help them understand whether a company faces risks related to environmental impacts. In this category, investors weigh companies’ reporting on carbon emissions, air and water pollution, biodiversity, energy efficiency, waste management, and water management, among other things.

 

Here are five factors that many pipeline companies report on as part of environmental performance:

 

  1. Spills and releases – these measures include liquid hydrocarbon spills and natural gas releases. For liquids spills, ESG reports typically cover barrels of oil spilled, versus barrels of oil safely transported. For natural gas releases, investors consider the environmental impacts of emissions from the gas released, as well as the potential for forest fires that may result from a pipeline rupture. Canadian Energy Pipeline Association (CEPA) members have a 99.99 per cent safe delivery record. Although most industries would consider that record outstanding, for CEPA members no incident is acceptable, and we continually strive to achieve our goal of ZERO incidents.
  2. Absolute GHG Emissions – this category relates to how the company is performing in reducing its total GHG emissions over time. For example, companies would set targets to reduce total GHG emissions over a specified period, and report on how they’ve performed in reaching those targets.
  3. GHG Emissions Intensity – Emissions intensity is determined by dividing the amount of absolute GHG emissions by some unit of output, such as Gross Domestic Product, energy used, population, or barrel of crude oil produced. Source: Canadian Energy Centre.
  4. Other Airborne Emissions – this category focuses on Canada’s target of reducing methane emissions from upstream oil and gas by 40 to 45 per cent. Provincial and federal governments began implementing these regulations January 1, 2020.
  5. Land and Water Management these measures cover biodiversity and land reclamation, as well as water and waste management.

 

Canada is a global ESG leader. And CEPA members’ commitment to safely delivering the responsible energy we all need is a big reason for this. To learn more, visit the 2020 transmission pipeline industry performance report.

In next week’s About Pipelines blog, we’ll look at the social component, or the ‘S’ in ESG.

If you want to learn more, check out some of our other recent blog posts: