BlackRock, the world’s largest asset manager ($7.43trn), announced that it would put climate change and sustainability at the heart of its strategy.

According to The Economist, last week Larry Fink, company founder and CEO of BlackRock, said in a letter sent to their clients and the bosses of companies in which they invest, that climate change is now a “defining factor” in business prospects that will also fundamentally reshape the finance industry.

BlackRock will demand greater disclosure from all companies on their carbon emissions and climate risks. It will double its offering of sustainable funds, targeting a $1trn within a decade. It will divest any investment that is heavily dependent on revenues coming from thermal coal electricity generation.

No tree-hugging for the cynics.  

Mr. Fink acknowledges that climate change is the biggest concern of its firm clients. Also, they are integrating climate analysis within the risk management tool they sell to other financial firms; hopefully responding to the fact that no financial model can be competitive without integrating sophisticated climate models in it.

On an earthlier level, they also will dump company directors who fail to act on climate change. Why? Through a recent analysis published by the Institute for Energy Economics and Financial Analysis (IEEFFA), it’s estimated that they lost over $90bn due poor investments in fossil fuel companies. Also, in the letter Mr. Fink writes “Climate change has become a defining factor in companies’ long-term prospects”. Last September, when millions of people took to the streets to demand action on climate change, many of them emphasized the significant and lasting impact that it will have on economic growth and prosperity – a risk that markets to date have been slower to reflect.” And then continues to say, “Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk.”

BlackRock also joined the Climate Action 100+ initiative which pledges to reduce emissions, be more transparent and stronger governance. Basically, pressing big polluters to clean up. They are also looking to strengthen their analysis of environmental, social and governance (ESG) risks, having new tools to analyze the impact on climate.

No newcomer

In his 2018 letter entitled “A sense of purpose”, Mr. Fink said that firms should do more that create shareholder value, according to The Economist.  Hopefully this two-year journey from “A sense of Purpose” to “Defining factor” will soon translate into “Profitable Sustainability is the only way we do business”.

Today we are celebrating the 50th anniversary of Earth Day. A day to celebrate efforts made throughout the world to protect the environment and avoid catastrophes like 1969 Santa Barbara Oil Spill that created a wave of protest which ultimately lead to the creation of this day.

With the current situation, we’ve seen pollution levels decrease, but also seen some government using this as an opportunity to relax environmental regulations. Why is that? They argue we must recover lost time and produce more, at the cost of the environment and even human lives. Human lives? It might seem far-fetched but Marshall Burke, Earth System Professor, used data from the US government to measure the levels of PM2.5 in China, considered the biggest cause of death from air pollution. He estimates that with the lower levels of pollutions forced by the quarantine approximately 77,000 lives were saved. This proves how environmental causes can save lives. But it’s not on in China where we’ve seen decreasing levels of pollution.

A Different Earth Day

But are we going to see major shift in how we perceive environmental causes and energy consumption?

In this period, energy consumption has been greatly reduced. The U.S Energy Information Administration (EIA) says that electricity demand for the commercial sector has dropped 4.7% and as factories shut down the industrial sector will reduce their consumption by 4.2%. Now it’s a great time to think about efficiency.

Companies can react in two ways. Relax their internal environmental policies or see this as an opportunity to change their perspective on energy consumption and pollution. This change of perspective can be applied into different strategies. From the obvious like decreasing the number of business flights for meetings or a more widespread home-office policies. But there are more refined options, like monitoring your energy consumption and applying AI and machine learning processes to analyze energy consumption to optimize it.

We have an opportunity to keep the momentum going. It’s not only animals coming back to the cities and it’s not only a clearer sky. It’s healthier lives, and the possibility to maintain a more efficient world and transform how we relate to energy and pollution from now on.

Dear C-suite and VP of Sustainability forget about the mounting pressure between delivering results and investing in “nice-to-have” projects. In the case you were the sponsor, let´s forget about the “intangibility” of those projects you approved and by which you were questioned by board members, shareholders and your own team.

Total Societal Impact, as defined by the Boston Consulting Group, is the total benefit to society from a company’s products, services, operations, core capabilities, and activities.  In the past (2017 aka 3 years before COVID-19), they argued that companies that do well integrating TSI efforts into a company’s strategy, organization, and business model, will find they can create value for shareholders and also make a real difference in the world.

Does TSI equals ESG (Environmental, Social and Governance)? Not strictly but let us, for simplification purposes, say yes. ESG is the standard by which investors evaluate companies, and TSI is how the ESG elements plus others not directly measured in the direct business operation as such, are embedded into the company strategy.

No matter how we call them, they were all nice-to-have initiatives for most companies stretching their own growth targets.  Also, the data coming in bulk with each ESG related initiative, was considered a by-product with no real impact for the business.

To see one extreme of our new reality and a glance of the collective future, the oil prices war that jump started in parallel with the Pandemic, forced oil prices below to $30 a barrel.  This triggered an instant operating and labor cost reduction in the Oil industry.  Why was this possible? Perhaps because the Oil industry is the most advance in terms of Digitization and resiliency. Lessons learned from years of facing market volatility in a capex intensive industry.

For oil companies, digitization refers to the collection and analysis of data, whether it is streaming from pumps on oil rigs, or from headsets on field workers. The aggregation of large data sets enables statistical analysis and the use of artificial intelligence or machine learning to enable accurate and safe remote operations while saving millions in facilities inspection and maintenance, especially in offshore rigs. All the above are must-haves’ items for the Oil industry in the form of investment in sensors, cloud computing, advanced analytics tools, data science teams, and a general corporate restructuring.

What about the instant and progressive economic shockwave driven by the Pandemic in other industries with less or no digital capabilities?  Are they being able to take instant action to mitigate operational cost? Are they being able to sustain the operability of their critical assets by keeping their people safe at home as much as possible?  Can they measure the impact of their minute-by-minute critical decisions? Can they truly turn their products, services, operations, core capabilities, and activities to reduce the risk of negative or even cataclysmic events?  Is their longevity currently at stake?

The one in a 100-year event or black swan currently under way, have changed the way many nice-to-haves existed in the past.  On a societal level, we might have changed forever.  It will be difficult to conceive to buy products or to work for a company that doesn’t operate in a testable no BS way with clear ESG criteria or the criteria that is defined for your own context.

On a managerial level, it will evident that the ability of operating remotely, for example, is just as critical or maybe more critical than investing in growth in order to survive.  Also, the well-known resiliency and instant informed decision-making capabilities, will be more important than a disconnected and unmeasurable philanthropy. Data finally will not be a byproduct of pet projects, on the contrary just as for the Oil industry, it will become the main feed to walk-the-walk in our new reality.

Dear C-suite, society and environment, be certain that every initiative that in the past depended on trends, on hugging a tree or on having corporate superpowers, will now count with by the most tangible and ascertainable facts our generation have ever seen to be approved.  Forget about the need of achieving target quarterly earnings without guaranteeing your company longevity first.  If you are feeling pressured to boost near-term shareholder returns at the expense of long-term existence, the value to society and the environment, rest assured that you’d be in a different reality that happened before the second quarter of 2020.

Geronimo Martinez

CEO & Co-founder

S2G Energy

The energy digitization business segment enabled Energisme to brave the volatility of the markets to launch on July 6th, their initial public offering on Euronext Growth in Paris.

The company, which offers a software solution to improve the energy performance of companies, intends to raise approximately 8 million euros through a firm price offer at 4.65 euros per share. More than 85% of this total amount is already secured in the form of subscription commitments from around ten institutional investors. The subscription period ends on July 16th for the public offering and the global placement, the start of share trading is expected on July 22nd. At the end of the transaction, the first six current shareholders, including its key executives, will retain majority control of the business.

 “Created in 2004, the company was initially active in remote meter reading, before reorienting itself at the end of 2015 towards the management of energy data from buildings, industries, and energy players thanks to the implementation of a high-tech software platform,” explains Thierry Chambon, CEO of Energisme. “This platform makes it possible to collect and process all the data related to the flows of electricity, gas, water and heating networks generated by its client companies,” said the director.

Between 2016 and 2019, the company raised a total of 16 million euros from dozens of individual investors. These funds were used to build this platform in SaaS (software as a service) model, which provides it with recurring revenues (initial contracts of 3 to 5 years, subscriptions, and high loyalty) while avoiding costly industrial investments for customers. With its main R&D expenses now made, the product of this IPO (initial public offering) will be used up to 75% to strengthen the company’s commercial development, especially abroad (Italy, Spain, Germany and the United Kingdom ). The balance will be used to finance his working capital requirement. 

Established with 114 significant accounts, including Suez, Axima, Sodexo, Legrand, Spie, Veolia, Colas, Total Lubrifiants, Energisme intervenes, in real-time, for all types of energy: water, gas, steam, electricity. The company had 102 employees at the end of May, 85% of them engineers. It already has a network of partners who offer its white label solution. “In addition to the additional revenue expected from our customer base, our indirect sales network now in place provides us with considerable development potential and, thanks to our SaaS subscription model, we have solid visibility on our growth future”, says Thierry Chambon.

For the current financial year, it forecasts a turnover exceeding 4 million without providing any indication of its result. According to analysts at Euroland Corporate, consulting and listing sponsor of the company alongside Mainfirst, its net profit should be almost at equilibrium in 2021. By 2022, they expect a profit of 2 million euros for a turnover of 16.2 million and attribute to the company a pre-money valuation of 20.2 million euros after a classic IPO discount of 15%.

With information from https://www.agefi-quotidien.fr/

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