With Climate Change, Where Will Be the Next Energy Capital?

No matter how civic leaders try to spin it, the Houston economy is still very much tied to oil and gas. Below are three reports that recently came out on the state of the economy of Greater Houston area. You will see that each report highlight the fossil fuel industry as being the economic engine for Greater Houston area. There is little mention of any other economic factors, other than services, which are largely here to support the fossil fuel industry. When we look at the global activity to decarbonize the economy to mitigate climate change, this continued reliance on a single economic driver may be a problem.

Economic Outlook for Greater Houston

Texas A&M Outlook for the Texas Economy –

  • Houston posted the largest monthly increase with 8,000 jobs, half of which occurred in professional
    and business services (often linked with the region’s energy sector).
  • The Greater Houston region added 30,000 jobs in the first quarter alone amid strength in the energy and manufacturing industries. (the manufacturing is largely oil and gas related.)
  • Increased drilling activity and weaClimate Change and Texas Economykness in the U.S. dollar supported 5,800 manufacturing jobs over
    the past two months. At the metro level, manufacturing employment surpassed 4 percent growth seasonally adjusted annual rate (SAAR) in both Austin and Houston, translating to 900 and 1,800 industry jobs this year, respectively.
  • The wave of professional and business service jobs grew higher, adding more than 50,000 jobs across the state in just six months. Many of these jobs supplement the energy industry and are located in the financial sectors of Dallas and Houston.

Greater Houston Partnership – Economy at a Glance

  • The region’s leading exports in ’17 were petroleum products ($18.2 billion), basic chemicals ($12.9 billion), oil and gas extraction ($11.5 billion), agricultural, construction and mining machinery ($3.5 billion) and plastics and resins ($3.4 billion).

Greater Houston Partnership Employment Forecast 2018

Approximately one-third of Houston’s GDP is tied directly to oil and gas. This figure doesn’t include energy’s impact on wholesale trade, transportation, and professional services. Nor does it account for how much of their paychecks energy workers spend at the grocers, in local restaurants or at the drug store. Factor in those expenditures and energy’s impact on local GDP is significantly higher.

Risk of Decarbonization

Although it may be less apparent in the US, there is a global push to decarbonize our energy and transportation systems. My concern is that the Greater Houston region is underestimating the pace of this global energy transition. This is problematic for the Gulf Coast in the mid to long-term. For the short-term things are looking pretty good with oil prices lingering around $70 a barrel. However, when we look at global factors relating to the decarbonization of our world economy, it is hard to be as optimistic. Much of the world is taking climate change seriously and is taking steps to mitigate greenhouse gas emissions.

Some indications of the risk include:

Climate Change Policies
Carbon Brief Map of Climate Change Policies

Oil and Gas Majors Are Taking Note of Climate Change

The large major oil and gas companies are taking note of the global climate indicators and appear to be conceding to some degree that business-as-usual may need to change. Shell and BP are both publishing reports in 2018 that will provide greater insight into operational risks due to climate policy. The realize the near term political climate is pushing for policies that are intent on keeping the planet below two degrees Celcius temperature increase. Chevron has provided some insight as to what the near to mid-term would look like with lower oil demand due to climate-related policies. Chevron does not see peak demand in the near term but concedes that there is a future where there will be less oil demand. This will increase competition among oil and gas companies and result in lower cash flows. Exxon Mobil and BP both see peak demand coming in the next couple of decades. The peak is driven by a shift to renewables and to electric vehicles, as well as improved efficiency of internal combustion engines.

Greatest Risk is Shift to Electric Vehicles

As seen in the LNNL graph below 72% of petroleum goes to transportation. The longevity of the oil and gas market is driven by the continued consumption of oil by the transportation sector. However, forecasts point to a growing number of EVs and improved efficiency of autos which will lessen oil demand.

Climate Change Changes Energy Mix

Lawrence Livermore National Lab US Energy Consumption 2017

BP predicts 300 million electric vehicles by 2040. This will account for 15% of all vehicles. The most recent Bloomberg New Energy Financing research estimates that by 2040 there will be 530 million EVs on the road. This potentially could displace 8 million barrels of oil per day, 336 million gallons. By 2040, over 50% of car sales will be EVs. Recently, Aurora Energy Research reported in Oilprice.com that similar to the BNEF report, it sees 540 million EVs on the road. EVs will make up a little over one-quarter of total vehicles on the road. More concerning is that the firm estimates that with EVs and improved efficiencies of internal combustion engines (IEC) total revenue loss by oil and gas companies may be around $21 trillion.

China Leads the Way

Who is leading the pack? China. Being a leader in EV technology and high-tech manufacturing is one of the key focus areas of China.  As part of its Made in China 2025 strategy, the government is pouring billions of dollars into EVs to make it happen. When the worlds second largest economy is looking to electrify the transportation sector, primarily driven by strategic concerns related to importing much of its oil and gas supply and the choking smog largely attributed to the internal combustion engine, it may be time to think beyond the short-term gains being reaped from the most recent resurgence of the regions oil and gas sector.

Natural Gas May Not Pick Up the Slack

As more EVs are on the road more power generation will be needed.

It is possible that combined cycle natural gas plants will be built to provide the additional power required to power the fleet. However, with unsubsidized renewables having a similar levelized cost of energy as natural gas plants,

building more natural gas plants to offset the decrease in fossil fuels used to fuel the transportation sector is not certain.  A recent Greentech Media analysis finds lithium-ion storage looks to compete head to head with gas peakers by 2022 and beat out peakers by 2027. See below.

Climate change and energy storage

Greentech Media Image – Storage and Nat Gas Peakers 

Where are Public Leaders?

In the Greater Houston area there needs to be more leadership to diversify beyond the oil and gas sector. There has been much excitement around how the Greater Houston survived much of the last oil bust cycle due to its growing export market. However, when you look at what was being exported, a good bit of it was and continues to be petroleum products.

The Greater Houston area must take concrete steps to seriously diversify the region’s economy. The Amazon HQ snub should be a wake-up call. Dallas is more attractive than Houston to Amazon.

Exporting more oil and gas products vs. importing is not really diversification. Further, it does nothing to limit the reliance of the economy on the fossil fuel industry. Houston is not seen as anything more than an oil and gas town. Otherwise, we would not have been the only large city not making it to the top 20 of the Amazon search.

There was a step forward with the announcement of the new Innovation District in Midtown. This is a $100 million project led by Rice University, in partnership with the city and business leaders, to kick-start the high tech start-up community. Hopefully, there is more being planned than this one initiative.


How does Texas Measure Climate Risk to Power Grid?

How does Texas Measure Climate Risk to Power Grid? The short answer is that it doesn’t.

I attended the Gulf Coast Power Association (GCPA) Houston monthly luncheon last week. It is always a great opportunity to learn something new about the power sector and talk with a bunch of energy experts. Today, Colin Meehan, Director Regulatory and Public Affairs with First Solar, gave a talk on “Solar Power in Texas.” It was a good presentation and Colin did a nice job explaining how solar is entering and will continue to enter the Texas market at an increasing rate.

There was one specific slide in the presentation that caught my attention. This slide looks at different ERCOT power generation capacity addition scenarios out to around the year 2031. One of the items that jump right off the page is the amount of solar that ERCOT anticipates coming online in each of the scenarios. Currently, solar makes up the second largest percentage of new generation capacity being considered for the Texas market; second behind wind. According to the ERCOT Generator Interconnection Status report, as of March 2018, 23 GW of solar is now in some stage of the interconnection process.

Meehan Solar First Solar

Things are looking good renewables in Texas. But that was not what really got my attention. What grabbed my attention was the Extreme Weather bar in the graph. First, it was good to see that there is some consideration as to how future weather conditions could impact power generation in the state. I was curious to learn more about what the extreme scenario entailed so I checked out the ERCOT Long-term System Assessment. I find that the ERCOT LTSA extreme weather scenario assumes there is a long-term condition that impacts water-intensive generating resources. In a previous post, I discuss how the Texas grid, as well as most of the US grid, is too water dependent.

In this particular LTSA scenario, ERCOT assumes a six-year drought occurs during 2022 and 2027 leading to significant stress to the power system. This includes derating the water-cooled generation systems, as well as the complete outage of these systems. ERCOT uses a drought prediction tool to build this scenario. This tool uses historical water usage data, current reservoir data, and current generator information.

What is missing here is a consideration of future weather patterns due to climate change. I have written on a couple occasions, most recently the article on How Smart Companies are Using Block Chain to Improve Resilience in Wake of Climate Change and The Key Reason the Texas Power Grid is at Risk to Climate Change. Many of our state’s key decision makers are still having difficulty coming to terms with climate change. This is unfortunate and climate risks should not be ignored particularly when long-term decisions are being made for power generation in Texas.

The capability to assess climate risks is available, particularly when considering future water risks due to climate change. The National Climate Assessment does a nice job laying out the risks for Texas and the southeast.  Hopefully, we will see the latest version sooner rather than later, but it appears to be held up.

In any case, new report or not, the data is available for Texas energy planners to start taking account future water conditions for the state. Water is not the only concern, another issue will also include the placement of power generation systems in areas with increasing likelihood of more intense tropical storms and hurricanes.

Increasing storm intensity, including flooding, as well as sustained droughts are two conditions that are discussed a good bit in Texas, depending on the most recent crisis. However, what is less discussed are changes in wind patterns and cloud coverage.

If Texas expects to have wind and solar providing a significant portion of the generation capacity, should we not take into account how future climate change may impact the ability of these resources to perform? The data and models are available to consider changing cloud coverage and wind patterns. I have come across a large number of studies for Europe but only a handful for the US.

With so much at stake, an effort must be made to consider climate risks. As the second largest economy in the US and the 10th largest globally, Texas plays a significant role in driving the global market. How does the state maintain this position or advance, if we can’t keep the lights on?

Mitigating Climate Risk in Harris County, TX – The Problem with Being a First Mover

Harvey appears to have gotten the attention of some of our local policymakers. Harris County appears to be the first to realize that Harvey is likely not to be a once-in-a-lifetime event and significant steps should be taken to mitigate climate risk.

Fulshear, TX

There has been some question as to how our elected officials would respond to Harvey in regards to long-term rebuilding efforts and reducing the likelihood of future flooding. There had been a call by some developers, even before Hurricane Harvey was over, to keep moving down the same road with business as usual. Also, the region’s previous responses to other recent flooding events did not provide a lot of hope that much would happen in regards to land-use and development regulations.

However, on December 5th, Harris County Commissioners approved new regulations for floodplain development. The new regulations include requirements for pier and beam foundations and for homes to be built at a higher elevation in some flood-prone areas. Also, it requires that new construction is built at a 500-year standard rather than the current 100-year storm standard.  There is also a high-wind standard in place for new construction.

There are some question as to what the impact these new regulations will have. New construction in Harris County is likely to be a bit more expensive as builders build up. This could be higher development costs to build up the land in the area with fill dirt and/or to build homes to a higher elevation. All of this is cost will be passed on to the homeowners. There will be some tolerance by homeowners for this premium to have greater peace of mind, but only so much tolerance. What is also likely to happen is that some developers will choose not to build in Harris County and move on to other nearby counties. Residents will decide how far out builders can go.  Commuting time and congestion will limit the movement away.

Did Harris County Jump the Gun?

It is great to see Harris County take a leadership position and pass regulations to mitigate against flooding and wind events. However, did they get too far out ahead of the other counties and local jurisdictions? Harris County is just one part of a large region.  Will being a first mover in land-use regulations be an advantage for the County? If the surrounding counties do not take similar action, does Harris County regulatory activity push development out?  Professor Festa at the South Texas College of Law suggests that these regulations would be a disincentive to build in Harris County and would lead to urban sprawl. Should Waller, Fort Bend and Montgomery County expect a development boom?

This may be the case. Those that are typically not supportive of development regulations did not appear to push back too much. Some builders say housing costs will go up a bit to meet elevation standards and the costs will be passed on to customers. The assumption here is that customers are willing to take on some additional costs for peace of mind. However, could another reason for minimal pushback be that developers feel they can move on to these other counties with minimal risk to their business? There is a significant amount of development already happening in these surrounding counties and residents are quickly following. Fulshear is a great example. With the new expansion of  Farm-to-Market Road 1093, the infrastructure is there to move a lot of people to Fort Bend County.

Beyond the direct economic implications of losing development to surrounding counties, a second issue is that working in isolation does not solve the upstream flooding problems. If more development is pushed north and west. There will be more impermeable surfaces surrounding Harris County which may result in greater flooding risk to the county and further downstream. All of these bayous and rivers are interconnected; water flows in this region from the northwest to the southeast. Shrinking the permeable surface around Harris County is not good for Harris County. That is why there is such a push for the third reservoir and to conserve much of the remaining Katy Prairie.

I applaud Harris County for taking these steps. They have realized more quickly than the rest of the region that Harvey type flooding is not a one-off event and action must be taken.  However, they cannot be successful and our region cannot thrive if the regulatory activity takes place in isolation. Mitigating storm risk, whether it is flooding, extreme heat, hurricanes, etc, must be done at the regional scale. The interdependencies of our economic and natural systems are too great not to act together.



From the Inside Looking Out – Impacts and Aftermath of Harvey from Houston

Originally appeared in the American Society of Adaptation Professionals Blog on September 8th, 2017.

When Hurricane Harvey was finished with Houston, it had dumped a record 51 inches of rain, exceeding the average total yearly rainfall by one inch.[1] Overall, approximately 27 trillion gallons of water fell from Harvey after making landfall.[2] To those familiar with the eighth wonder of the world, the Houston Astrodome, Harvey’s rain would fill the Astrodome 86,000 times.

Current estimates for property loss across Texas is valued at $150 billion to $180 billion, HH Rescueabout 10 percent of the total GDP of Texas.[3] This number does not take into account loss of economic activity and productivity, displacement of families, or injury and illnesses directly associated with the storm and its aftermath.

There is considerable discussion about what could have been done to prevent such a catastrophe. It is easy to look back after the storm and second guess previous decisions that led to the current region’s footprint. We have been asked whether any City could have prevented the flooding. I would suggest not. Cities don’t build to 40,000 year flood events[4] or storms large enough to place the entire City of New Orleans under 128 feet of water.[5]

That being said, the Houston metropolitan area did heighten its flood risk. The 9,000 square mile region has paved over large portions of coastal prairie and swampland with impermeable surfaces and allows development along the bayous and reservoirs without flood mitigation standards. The Houston region been able to develop in this manner because 500 plus year storms have been infrequent and due to local, state and federal resources, recovery has been relatively quick. However, we have now seen three 500 plus year storms in the last three years and the strain of providing loss recovery from FEMA, the insurance industry and state are starting to show. A shift from business as usual will require a change in mentality from loss recovery to storm risk mitigation, and by all indications from FEMA Director Long, communities should make this shift sooner rather than later.


There is a lengthy list of items the Houston region could have done to limit damage. For example, limiting development on the reservoirs, increasing building foundation heights, low impact development, on-site storm water detention and placing on-site generation above ground level. In recent years some of these standards have been put in place for new construction. However, a substantial amount of funding must be identified, as well as infrastructure design standards updated, to rebuild this infrastructure to mitigate storm risk. Fortunately, communities can begin to look into the growing number of resilient design standards, such as ASCE’s Envision and look to resilience bonds to fund this work.

Rebuilding is already underway in Houston. As Mayor Turner stated, “we are a can-do City” and “we are not going to engage in a pity party.” As the City begins these efforts, it cannot ignore the coming storm risk due to climate change, nor can any surrounding communities. This rebuilding effort should not be done in silos. Development in one community impacts the viability and livability of other communities. Currently, there are a patchwork of jurisdictions with varying building standards and infrastructure requirements. As communities look to rebuild, it is imperative that they begin to coordinate with their neighbors to implement strategies that can enhance the adaptability and resilience of all communities.  Regional collaborative models have been developed across the country to improve adaptive capacity and resilience of communities. These collaboratives are not mandates or regulations. We all know that regulation and mandates are fighting words in Texas. Rather, these are frameworks and strategies that can identify cost effective, market-driven solutions. There are a variety of local, state and national resources that have experience developing these strategies. It is in the region’s best interest to begin to reach out to these organizations to rebuild a more resilient community.

Houston and Detroit – Twin Cities?

Why is Texas letting the clean energy transition move ahead without it? There are a lot of people asking this question. The new head of the Greater Houston Partnership affiliate Center for Houston’s Future, Brett Perlman was recently  asked this question by the Houston Chronicle. He suggested that if Houston does not get its act together, the City may no longer be a relevant player in the energy industry as the transition moves forward.

Why is it important to ask this question? Because the transition is real and it is enginehappening at a pretty decent clip. In the latest issue of the Economist there is an article about the coming demise of the internal combustion engine due to recent technological breakthroughs of electric vehicle battery technology.  Battery prices have gone from $1,000 per kWh in 2010 to $130-$200 per kWh today. With this reduction in pricing it is anticipated that by 2025 EV’s will make up 14% of total global car sales, per the Economist article. This number of EV’s may continue to raise as more countries and automakers make statements of going fossil fuel free by 2040 and shifting resources to EV R&D and production. How much of this is greenwashing, time will tell. However, with decreasing technology costs and changing consumer attitudes we may be close to that uptick in s-curve.

Houston is a bit vulnerable to the oil and gas roller coaster as has been demonstrated time and time again. This vulnerability was demonstrated during a time when oil and gas was the only game in town. Granted there was some really expensive hydrogen options, some very short range EVs and a bunch of compress fossil fuel options. However, now there are some true alternatives and these alternatives are quickly coming to price parity with our traditional transportation fuels and their range is becoming just as good as the internal combustion option.

A recent University of Houston Bauer College of Business Institute of Regional Forecasting report presents a good picture of how the Houston economy is still very much dependent on the oil and gas market and one can draw some interesting conclusions on what may happen to the Houston economy if prices remain low or go lower. in reality we are already in a long-term low price market. Shell CEO Ben van Beurden predicted we are in a “lower forever” oil price environment. This is at a time when demand for transportation fuel has been increasing due to growing transportation demands. So what happens if demand starts to fall due to EV’s?

Much of this oil and gas activity has some tie to Houston and Texas. Oil and gas is  a global industry but Houston has some involvement at some point whether it is R&D, refining, transportation, manufacturing, oil field services, financial/transactional, etc. We are responsible to some degree for the 36.9 quadrillion BTU’s of petroleum production in the US and make much of the 27.9 quads used in transportation. See the LLNL chart below.

Houston is a major player in the transportation market due to our position in the production of oil and gas and refining fuels. So, why not build on this, extend a bit beyond fossil fuels. The City has the engineering expertise and the industrial base to play an active role in making a clean energy transition. If we do not do so, we face a double climate risk. Risk from physical climate change and risk from an economy that is stuck in time and being left behind. I discuss this in an earlier blog post

There is no definite timeline for when this transition will really ramp up and significantly reduce demand for fossil fuels. There is plenty of skepticism among if and when this will actually happen. However, different from the past, the technology is quickly becoming cost competitive with traditional fossil fuel transportation options. The infrastructure needs to be built out, attitudes and perceptions of electric vehicles will need to be changed, costs will need to continue to come down, etc.

Much of it appears to be dependent on battery storage. The deployment of EVs is anticipated to increase significantly as the price points, size and weight of batteries decreases. The intermittency problem of renewables also is largely dependent on battery and other physical storage options.


Quick Tips for Cities – Climate Adaptation and Insurance Companies

Insurance companies are becoming more and more sophisticated in their ability to assess risk related to climate change  aKatrinaNewOrleansFlooded_edit2nd in turn develop the appropriate products, strategies and instruments toitigate climate risk.  They have been and are increasing their use of catastrophe models, improved long-term weather forecasts and scenario analysis to better understand their risk and their long-term ability to insure certain assets. They have also begun to focus more on loss prevention and promoting risk reducing behavior.

Insurance companies have also been moving toward providing greater support to the public sector in reducing loss and improving risk mitigation. A significant step occurred in 2012 with the UNEP Financing Initiatives Principals for Sustainable Insurance (PSI). This framework was put in place to deal with environmental, social and economic risks and opportunities. Further action was taken in 2015 at the UN World Conference on Disaster Risk Reduction  in Sendai, Japan. Here we see insurance companies sign a global framework, titled the Sendai Framework for Disaster Risk Reduction, to help public governments prepare for disaster risk and improve community resilience. There are five key components of this program and they include.

  • Strong public-private partnerships drive disaster risk reduction and resilience at the local and national levels.
  • Resilience in the built environment is driven by the public sector setting adequate minimum standards, and the private sector voluntarily working towards optimal resilience.
  • All financial investment and accounting decisions, public and private, are risk-sensitive.
  • A resilience-sensitive public and resilience-sensitive businesses drive each other towards resilient societies.
  • The identification, disclosure and proactive management of risks carried by companies and public sector entities is standard practice.

If cities have not already, they may want to start the conversation with their insurance providers to see how they can leverage and deploy their climate risk knowledge as they plan to build out new infrastructure and renovate old infrastructure. It is in both the City’s and the insurer’s interest that more focus be placed on risk mitigation and prevention, rather than focusing solely on loss recovery.

Better designed infrastructure, that is developed for impending climate shifts will significantly reduce loss and limit the time and resources required for community, economic and environmental recovery.

Once a City has been able to quantify and better understand the hazard, property inventory, vulnerability and potential loss, it should begin to also look into what can be done to pay for the infrastructure to mitigate this loss. I discussed ways to pay for this infrastructure in an earlier post.

Jumping the Gun on Climate Asset Risk Disclosure?

sinking oil rigOne of the primary focus areas of this site is to push for greater transparency in the market around climate risk to the private sector (here and here). I mentioned in a previous post that the oil and gas sector alone could potentially see $2.2 trillion of stranded fossil fuel assets, with the United States potentially seeing the greatest loss. It is vital for the sustainability of the private sector and our global economy that shareholders and stakeholders are aware of what potential risk that may be faced by companies. The practice of disclosure will benefit both the company and its shareholders. It will force companies to take a hard look at their operations and risk management strategies and assess what actions may need to be taken to mitigate this risk. It will help current and future shareholders to better understand the risk they face when investing in a company.

For the last 15 years, the Climate Disclosure Project (CDP) has been working to get companies, as well as the public sector, to voluntarily disclose their greenhouse gas emissions and carbon related activities. The belief is that disclosure of this information by both the private and public sector will result in more effective management of carbon, as well as better management of climate risk. In their most recent report,  CDP was able to have over 1,000 companies disclose their climate data, out of a pool of 1,839. Not a bad number for a voluntary disclosure program. Of those reporting, the highest percentage of reporting came from the IT and healthcare industry, while, not surprisingly, the lowest percentage came from the energy and utility sector, 40% and 38%, respectively.

However, although we are seeing a lesser percentage of the energy sector participating in the 2016 CDP report, we may be seeing a growing number in the next few years. In the last couple of years we have seen a growing trend in the number of carbon asset risk resolutions that are being presented to company boards. According to the CERES Shareholder Resolution Database, 75 resolutions were brought before shareholders. The majority of these resolutions for carbon asset risk disclosure are power companies and oil and gas companies. There were also a smattering of banks, a real estate company and some mining companies. The mining companies appear to have the most success in getting these resolutions passed. They went three for three in the resolutions proposed and passed. These mining companies include Rio Tinto, Anglo American and Glencore Plc.  Although we saw over 40 oil and gas companies with resolutions proposed, only 10% of them passed. This includes ExxonMobil and Occidental Petroleum, on their second try in two years, as well as Suncor in 2016, BP in 2015 and Royal Dutch Shell in 2015. Chevron and Anadarko withdrew their resolutions in 2017. However in 2016, they were pretty close with more than 40% of shareholders voting for carbon risk disclosure.

In any case, what we are looking for are small wins and I think we saw some this year. Further, it is likely that we will continue to see more disclosure resolution activity as the SEC further defines its materiality requirement in its Guidance Regarding Disclosure Related to Climate Change. Under this guidance, the SEC only requires disclosure of climate risk if there appears to be a material risk to the company. There is still some interpretation as to what is “material” related climate risk to a company. That is why we see the ongoing push back by much of the energy sector on disclosing these risks. They argue there is still significant climate, consumer and regulatory related uncertainty that makes this risk difficult to quantify at this time. It is anticipated that this argument may lose some of its strength as we continue to refine our global climate models and the downscaling of these models.

A group that is out front that is trying to better define climate risk and promote the disclosure of this risk is the Task Force on Climate-related Financial Disclosures.  They are actively developing resources, guides and scenario tools to help companies better determine their risks and report on them. At the end of 2016 they came out with their recommendations for how companies should prepare and provide climate risk-related financial disclosures. The focus is on helping the business community, lenders/investors and regulators through the development of a framework that makes providing, understanding and using this data a bit easier.

There is some argument that at this time the Task Force has gone a bit too far. The IHS Markit organization has just come out with its own report that pushes back on the TCFD recommendations arguing that although it is a good framework that is useful for assessing climate risks, it is difficult to tie these climate risk indicators to actual financial impacts. They argue there is still too much uncertainty on the scale and timing of these climate risk factors and financial decisions by investors could be skewed by these indicators.

My take on this, is that it is good to have a healthy dialogue between these groups. There is still some uncertainty on the scale and timing of climate events, regulations and changes in customer preferences. It is possible that investors may take this climate risk disclosure information and potentially jump the gun and divest when it would be fine for them to stay invested for the near to mid-term. So, we need to continue to refine our frameworks, models and scenario tools to ensure we have the best information available. However, we don’t need to wait until it is perfect with 100% certainty. sinking oil rig