H2Tech - Q3 2022 - 35

SAFETY AND SUSTAINABILITY
Best environment, social and
governance practices: Technical safety
studies in capital projects
K. VILAS, BakerRisk, Houston, Texas
As gas prices spike worldwide, proponents
of fossil fuels and alternative energy
are speaking out. Companies providing
alternative energy solutions such as hydrogen
(H2
), ammonia (NH3
), methanol,
biofuels and renewables (wind, solar,
etc.) see this as a chance to demonstrate
the need to move away from a reliance on
oil. Supporters of oil and gas are voicing
the need to increase domestic production
and create strategic alliances to decrease
dependence on international supplies.
The prevailing opinion of fossil fuel
boosters is that restrictive policies and environmental
regulations constrain energy
production. Concurrently, investments
and government funding are propping
up the establishment of alternative energy
sources.1
Are governments doing too
much to limit the ability to produce more
oil and gas in favor of cleaner alternatives?
Oil and gas executives gathered for a
conferencea
in the first week of March
2022 and offered differing opinions. The
conversation was not focused on government
subsidies and funding; the executives
were discussing the impact of environment,
social and governance (ESG)
strategies on their ability to secure investment
in projects and business. ESG
strategies now appear to be influencing
the business strategies of the energy sector
with the same urgency as the push for
climate change.
Why ESG? ESG is not a new concept.
With ties to corporate social responsibility
(CSR), ESG is a concept that can be
traced back several decades, with formal
publications and literature showing up as
early as the 1930s. A literature review on
the topic2
tracks CSR and its evolution,
providing the context for CSR from being
limited to generating profits to the
belief that companies should focus on
FIG. 1. Overview of ESG (figure adapted from University of Houston's framework development
course: ESG in Energy).6
H2Tech | Q3 2022 35
developing shared value. This shared value
is a major component of responsible
investing, which is widely understood as
the integration of ESG factors into investment
processes and decision-making.3
In 2021, some$120 B was poured into
sustainable investments-up from $51
B in 2020-and estimates indicate that
one-third of all assets contain sustainable
investments. With approximately 72% of
U.S. adults expressing interest in ESG, it
is not surprising that experts predict that
within the subsequent 5 yr, 100% of assets
under management will incorporate
ESG factors.4
It is this investment focus
on ESG that is making companies take
notice, with most major industries quickly
incorporating ESG into their corporate
focus and reporting.
More climate transparency leads to
more profitable investment, and better
sustainability disclosures benefit companies
and investors.5
The financial sector
has spoken-businesses with more
genuine ESG profiles have and will continue
to exceed their peers, therefore
receiving funding from managed investment
companies.
The ability to obtain large amounts
of funding at favorable rates is essential,
considering that low-carbon projects
are capital intensive compared to traditional
fossil fuel assets.6
As a result, many
young companies being established in
the low-carbon space are defining ESG
metrics and reporting expectations up
front in support of funding applications.
This takes us full circle back to the comments
from oil and gas majors.a
It is becoming
easier for ESG-focused startup
companies to obtain funding than established
major private and public companies
that have been slower to place ESG
strategies at the core of their business. A
brief overview of the core concepts of
ESG is summarized in FIG. 1.

H2Tech - Q3 2022

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