Digitizing the Oil and Gas Industry

  1. In a landmark Dutch court decision a few weeks ago, Royal Dutch Shell Plc was ordered to slash its emissions harder and faster than planned. While Shell has pledged to reduce its emissions of greenhouse gasses by 20% by 2030 and become net-zero by 2050, the Hague ruled that it must slash emissions by 45% by 2030 compared to 2019 levels. While this ruling is only legally binding in the Netherlands, it sets a precedent for other nations currently dealing with climate-change related lawsuits against oil and gas producing companies (over 1800 lawsuits). The industrial equipment utilized by oil and gas producing companies are susceptible to methane leaks, flares, fluid overflows, among others. Methane leaks, being the most detrimental to the environment, are currently poorly managed and poorly predicted.
  2. Andium is a company focused on remote field monitoring of industrial assets, recently narrowing their focus on the oil and gas industry. They are an IoT platform using smart sensors and camera tech to both monitor and make predictive forecasts that target leaks and other issues oil and gas companies may experience. Their marquee service is their flare tracking, which allows clients to track any excessive flaring and be immediately alerted and mitigate unnecessary emissions and gas leaks to stay in compliance, lower emissions, and save money (mostly through regulatory fees).
  3. The main stakeholders for Andium are oil and gas companies (who are also some of the main investors of the startup), and regulators across the board. In order to market their services effectively to oil and gas companies, Andium must demonstrate an accurate and robust understanding of what emissions regulations are and the alert mechanisms for when a company may be on the brink of failing. In addition, if a possible stakeholder for Andium is ‘The World’, sustainability becomes a lofty goal for the company to aspire too, creating alerts that aren’t solely linked to regulations, but specific emissions benchmarks.
  4. In context of the Hague’s decision, Andium has positioned itself as a very likely and important partner for oil and gas company. Their IoT technology can make business processes more efficient, while also maintaining a regulatory backbone that can monitor and risks the company may have. A few challenges Andium may face can be related to shifting and constantly changing laws around the world–Andium must maintain and consistently update their regulatory backbone based on judicial decisions around the globe. In addition, there is a high reputation risk if a client ends up emitting too much methane due a failure in Andium’s monitoring technology.

Sources:

  1. https://www.worldoil.com/news/2021/5/26/shell-loses-precedent-setting-climate-change-case-in-dutch-court
  2. https://andium.com/
  3. https://techcrunch.com/2021/04/08/andium-is-watching-oil-fields-for-emissions-and-just-got-money-from-the-biggest-oil-companies-to-do-it/

Putting the S in ESG

  1. ESG stands for “Environmental, Social, Governance” and has been the de facto label in finance for investments that meet the goal of sustainability. Financial institutions, companies, governments, etc. have begun issuing and financing ESG-linked products. These products are financial instruments that are in direction of a sustainability goal. For example, a government or corporation can issue a bond to finance anything. Governments and corporations do this routinely as debt is often a cheaper form of financing than equity. Debt is used to finance projects, such as expanding a business, building a public transportation system, or just about anything else that the debt taker will later use to pay back the debtors. ESG-linked debt is used specifically to finance ESG-linked projects. Governments will issue green bonds to finance renewable energy projects like offshore wind, companies will issue green bonds to speed up the transition to clean energy or to finance the expansion of a sustainable branch of business. Green bonds are the most common form of sustainable finance, and the chief reason is that it is the easiest to evaluate from a data point of view. Green projects are very similar to non-green projects in that they have a timeline to success, the cash flows are predetermined, and it is easy to assess when a project is high risk or not. This breadth of data does not exist for the social element of projects. There is both a lack of understanding and a lack of analysis of the social risks and social impacts of a particular project.
  2. https://thesfactor.co/
    The S-Factor is a company that attempts to remedy this gap in impact investment. From their website, they “measure individual companies’ socio-economic, socio-cultural and socio-political impact on people, starting with its employees, and incorporating the systemic impact in the communities where it does business”. They have created a platform and model measuring multiple social impact criteria, focusing on sentiment, controversy, government, ethics, supply chain, and best practices. Similar to Sustainalytics, they generate an S-Factor Score and Rating, comparing companies across their sector, their geography, and their product offering.
  3. The main stakeholders for this company are impact investors (including large financial institutions). The company’s product may be released to be utilized by individuals, much like Sustainalytics or Morningstar can be used, however it is definitely geared towards investors. The whole point of the company is to disrupt the current understanding of ESG investment, one that they believe is catered towards the “E” with a disregard for the “S”, leading to “impact washing” of investments.
  4. Personally, I believe that this company is offering something extremely valuable for investors, the main question is “why should they care?”. The company’s pitch currently truly appeals to impact investors that really care about holistic impact, as the current impact investment landscape is currently largely focused on environmental sustainability. Changing the conversation around impact, to include other (social) factors is paramount to the long-term success of this company. Moreover, I am not sure if there is a legitimate financial value-add for financial institutions to look to other impact factors. This is not the case with environmental impact analysis (because of how similar those investment criteria are to traditional financial ones).

Aurora Solar and the data-centric approach to ‘smart solar’

  1. Within the world of solar panels, installers deal with the problem of “too much” and “not enough” data. While an odd problem to be presented with, solar panel installation companies currently do not leverage large amounts of geospatial data, but do require a significant amount of analysis on a per-property basis. The result is a much larger overhead for individual customers whose costs are largely spent on analysis of their property as opposed to the costs associated with actual installations.
  2. https://www.prnewswire.com/news-releases/aurora-solar-raises-250-million-to-digitize-solar-installations-301297510.html
    Aurora Solar, funnily enough, does not install solar panels on rooftops. Using geospatial data, Aurora uses larger amounts of data (focusing on blocks, neighborhoods, regions, etc.) as opposed to individual rooftops, to analyze and publish what types and kinds and shapes of solar panels are required for each individual property. Leveraging a shift towards renewable energy, Aurora wants to empower the individuals working in the US and elsewhere around the world installing, managing, and paying for solar panels on their rooftops.
  3. Aurora is a software platform, offering a SaaS offering to solar panel installing companies. These companies use their data to assess and plan for individual installations. A main, albeit not direct, stakeholder is the renewable/solar energy consuming market. Without this market, there is no market for solar panel installing companies.
  4. While Aurora’s sales pitch is quite strong and unique, the company needs to have a competitive offering with what individual solar panel companies may be doing. For example, if it is still cheaper for companies to conduct their own analysis and design on a per-client basis, Aurora may not be an attractive alternative. Moreover, accuracy needs to be a priority. As a SaaS platform, the quality of the geospatial data being utilized needs to be a central focus, leveraging tech that smaller companies may not have access too and may not know what to do with. As I mentioned in the first post, the problem lies in both too much and too little data. Aurora must digest this swath of information and convey it to differing stakeholders in unique but equally powerful ways.

New Tech to Monitor and Offset Business Carbon Emissions

  1. While a lot of companies are addressing offsetting efforts with a focus on individual (retail/consumer) efforts, few are focusing on helping small businesses and other larger institutions in their offsetting and sustainability efforts. My last post focused on a company “Tickr” that helped individuals pick and choose investments that abided by their sustainable and environmental inclinations.
  2. https://www.bizjournals.com/atlanta/news/2020/08/07/08-07-20-a-cloverly-50onfire.html
    This week I am discussing a new company called Cloverly which is an API-first plug-in focused on providing offsetting efforts for companies and other small businesses. The company demonstrates how much carbon is utilized in the life-cycle of a product sold. With an “activity” focused model, Cloverly calculates emissions from shipping, packaging, transportation, etc. A focus on “everyday” activities gives Cloverly the power to help small businesses understand which parts of their regular day-to-day business has the largest effect on the environment and empowers those businesses to make offsetting decisions based on those calculations.
  3. The main stakeholders for this technology are SMEs (small and medium enterprises). The technology relies on adoption by SMEs to track their carbon emissions and make informed decisions on ways to offset those emissions. Further, the company is making profit from the tool itself, not the actual carbon offsetting purchases the businesses are making.
  4. The company needs to have a really strong sales pitch focusing on both the utility of offsetting projects and the need for companies to monitor their carbon emissions. As the company provides both as a service, it is only necessary for the company to sell to customers who may need 1 or both of these APIs. I think tying offsetting as a solution to carbon emissions is a very powerful tool for this company as it convinces potential clients that Cloverly can both identify a problem and provide a solution for the users of their technology.

ESG Investing Made Easy

  1. With respect to civic engagement, there is both a lack of awareness and trust in the financial system to generate returns and a positive impact on the environment and other relevant social issues. The burden is currently on individuals to find and source mechanisms of positively engaging with the markets to generate a return while positively impacting areas of interest.
  2. https://www.thisismoney.co.uk/money/diyinvesting/article-8898823/Tickr-investing-app-good-does-work.html
    This article is describing a company based out of the UK called Tickr which is focused on impact investing. The company utilizes two main mechanisms for enacting this sort of engagement with customers and investors. First is a focus on ESG linked ETFs (exchange traded funds) which are composites of companies pooled within a similar sector (in this case sustainability, renewable energy, impact, etc.). Second, is providing easy access to investing in carbon offsets. The company provides and directly demonstrates the impact an individuals’ investments have (the carbon reducing impact, the projects an individual is investing in, etc.).
  3. The main stakeholder is the public, specifically the financially engaged public that are otherwise investing with more mainstream applications like Fidelity, Vanguard, and Robin Hood. The technology is only effective, both from a company POV and an impact POV, if there is a large scale adoption among the public.
  4. In order to deploy the technology, the company needs to attract an engaged customer base interested in having their investments actively and visually demonstrate an environmental and social impact. Second, this impact needs to be visible and significant enough for individuals to sacrifice a possible higher return in favor of ESG-linked affect. Finally, the technology needs to be user-friendly and facilitate trading in as similar a mechanism and with the same ease as competitors. At the end of the day, consumers want a product that is easy to use and can achieve the same utility as competitors while generating an additional impact above and beyond the competitor space.