ESG Wrap — Oil’s winning streak, Eskom’s criminal cartels

9fin team

13 March 2023•6 min read

This is the weekly ESG Wrap, which highlights Featured 9fin ESG content, such as TLDRs for all deals, news stories that have interested the ESG team this week, and 9fin ESG product updates.

9fin Featured Content

Petroleum Geo-Services (PGS) — ESG QuickTake (9fin) (07/03/2023)

TLDR: Petroleum Geo-Services (PGS) is heavily dependent on oil and gas exploration for its revenues. Seismic data acquisition has been criticised for its potential impact on marine life stemming from underwater noise pollution. PGS is not on track to meet its 2030 emissions intensity target and it does not provide detailed information on how it will meet its 2050 net zero target. The company has some ongoing tax disputes in Norway and Brazil.

Azelis — ESG QuickTake (9fin) (06/03/2023)

TLDR: Azelis has a carbon intensity reduction target but it is not SBTi-verified and the group does not have a net zero target. Azelis reports that it plays a key role in the global palm oil supply chain. In November 2020, Azelis' US IT infrastructure was targeted by a cyberattack which, according to the group, did not have a significant impact. The group is involved in three pending claims related to health risks from its products. One of Azelis’ US subsidiaries is involved in pending litigation relating to health injuries to factory workers.

News Stories

Oil companies line up for billions of dollars in subsidies under US climate law (07/03/2023)

The oil industry, which previously opposed president Joe Biden’s climate law, now stands to claim billions of dollars of US tax credits established by the legislation. The law also includes generous incentives for lower-carbon technologies and fuels where oil and gas executives argue they hold a significant advantage. Oil companies are starting to invest in carbon capture technology, biofuels and hydrogen, all supported by the IRA’s green subsidies.

Britain’s Top Private Companies Told to Improve Board Diversity (13/03/2023)

An update from the government-backed Parker Review revealed that almost 96% of FTSE 100 companies hit a target of at least one ethnic minority director. The Review is now widening its scope and will require 50 of the UK’s largest private companies to ensure at least one ethnic minority director is on their main board by December 2027 — along with boosting representation among senior management teams. High yield companies that will likely be affected by this new rule include Ineos Ltd and Thames Water Utilities Ltd.

Treasury Secretary Yellen warns that losses tied to climate change could 'cascade through the financial system'(07/03/2023)

Treasury Secretary Janet Yellen has warned that climate change is already having a significant economic impact and could cause extensive losses to the US financial system over the coming years. Yellen made these comments during the first meeting with the Climate-related Financial Risk Advisory Committee (CFRAC), an advisory board that was set up by the Financial Stability Oversight Council last year with the aim of boosting US action to minimise climate risk to the economy. “As climate change intensifies, natural disasters and warming temperatures can lead to declines in asset values that could cascade through the financial system,” she said during the meeting. “A delayed and disorderly transition to a net-zero economy can lead to shocks to the financial system as well.”

VW puts European battery plant on hold as it seeks €10bn from US (08/03/2023)

Volkswagen is putting on hold plans for a battery plant in eastern Europe and prioritising a similar facility in North America after estimating it could receive €10bn in US incentives. The decision is the latest fallout from president Biden’s $369bn package of subsidies and tax incentives for green technology that is attracting European companies to the US. One person with direct knowledge of decision making at VW said that the company was “waiting” to see how the EU would respond to Washington’s incentives. The European Commission will publish a Net Zero Industry Act next week as part of its response to the Biden plan. It is looking to loosen rules on state aid and is reassessing whether to deploy EU-level subsidies. However, an early draft outlined last week has fallen short, according to industry executives.

William Hill owner 888 set to receive biggest fine ever from the gambling watchdog (09/03/2023)

888 is bracing itself for the biggest fine ever imposed by Britain’s gambling watchdog. It initially put aside £15m to cover penalties linked to an investigation by regulators into its ‘social responsibility and anti-money laundering obligations’. But industry sources stated that the figure could be even higher, topping the Gambling Commission’s biggest to date, the £17m penalty paid by Entain last year. According to Richard Williams, gambling and regulatory partner at Keystone Law, “It doesn’t look great that companies aren’t learning from mistakes, even if alleged failings are historic and relate to failings that took place when the operator did not own the entity.” Read 9fin’s 888 QuickTake.

Retailer Casino probed over alleged financial manipulation and insider trading (13/03/2023)

France’s financial prosecutor revealed that it has been investigating food retail group Casino for financial manipulation and insider trading, which allegedly took place between 2018-2019 whilst the group was facing short sellers and was heavily indebted. The details of the investigation were revealed on the same day Casino owner Jean-Charles Naouri announced a deal to combine the group’s French supermarket unit with Teract, a smaller food retailer. Casino declined to comment on the investigation. It also reported a full-year loss of €316m on Friday and higher debts than expected in its core French operation.

Intelligence links senior members of SA Cabinet to criminal cartels in Eskom (04/03/2023)

According to intelligence reports acquired by Daily Maverick, two high-ranking officials in president Cyril Ramaphosa’s Cabinet have been linked to four criminal syndicates that are operating within Eskom, the South African Energy Utility. These cartels have been identified as responsible for instances of malpractice and sabotage at Eskom facilities. Equipment purchases have been reportedly made without the actual machinery being delivered. The investigation into Eskom by journalist Kevin Bloom of The Daily Maverick follows former CEO André de Ruyter’s allegations against a senior member of the African National Congress (ANC), whom he accused of being involved in internal corruption.

Biden vows to veto Republican attempt to block DoL ESG rule (01/03/2023)

US president Joe Biden has said he will veto a move by Republican politicians to remove a rule allowing retirement plans to consider ESG factors in investment decisions. Members of the Republican-controlled House voted by 216-204 on Tuesday 28 February to approve a resolution that would nullify a recently introduced Department of Labour (DoL) rule allowing retirement plan fiduciaries to consider climate and other ESG factors when they make investment and voting choices.

Harbour Energy to Cut Jobs as Windfall Tax Burns Profits (09/03/2023)

Harbour Energy Plc expects “significant” job cuts in Britain after the country’s windfall tax mostly wiped out full-year earnings. The company is reviewing its UK operations after the government started taxing North Sea producers. The company, which pumped more than 200,000 barrels of oil and gas a day last year, has said some opportunities in Britain will no longer be pursued and it will target growth abroad. Clients can read 9fin’s Harbour Energy ESG QuickTake.