By EDF Blogs

By Kate Gaumond, Analyst, EDF+Business 

When I worked on the trading floor at Goldman Sachs, one of the major services we provided our corporate clients was risk management. Sitting on the commodity desk, we bought and sold financial products that allowed the world’s biggest consumers and producers to manage their exposure to the often fluctuating price of natural resources like aluminum, crude oil, and natural gas. Companies take action to manage this price risk in order to provide long-term stability for the company and its investors.

Now as a member of the EDF+Business team, I focus on a different kind of risk: climate risk. And just like financial risk, it needs to be managed for the long-term benefit of all stakeholders involved.

Methane Risk is Climate Risk

Investors are catching on, recognizing that information about climate risk is vital to maintaining robust portfolios of well-managed companies. And for investors to be serious on climate, they have to be serious not just on carbon dioxide, but on methane as well.

Beyond contributing to climate change, methane poses a specific reputational risk to the long-term future of the oil and gas industry. Oil and gas operators are betting on the idea that natural gas could be the cleaner burning fuel of the future. However, until the methane problem is fixed, operators are leaking away much of the climate benefit of natural gas, and tarnishing their product’s brand of “clean” energy.

Fortunately, investors have a unique business-minded voice, and important power, to influence industry and policymakers to ensure that climate risk, like any other material risk, is managed and disclosed to everyone’s gain.

Shareholder Resolution Successes

One kind of powerful leverage investors have to call for better methane management is through direct company engagement. This engagement can involve collaborative problem-solving between investors and operators to best address methane risk. Another route is shareholder resolutions. In 2017, investors filed 17 total methane resolutions with companies across the natural gas value chain. And this year these resolutions had unprecedented success.

The resolutions that went to a vote achieved near majority turnout. Resolutions for ExxonMobil, Kinder Morgan, and Occidental all received roughly 40% votes. And while those votes do not obligate a company to respond, the investor voice is a persuasive one to management. When 40% of a company’s shareholder base wants information, it is in the company’s best interest to act. For example, just months after the near 40% vote on methane, ExxonMobil announced a sensible and innovative plan to manage methane emissions on all upstream and midstream XTO assets. Investors spoke and management listened.

Methane management disclosure still has room to improve. The oil and gas industry prides itself on continuous improvement, and investors must hold these companies to high standards on methane risk management, calling for clear reduction targets and detailed action plans on how to achieve them.

Regulations and Returns

Not limited to company engagement, investors can use their voice to advocate for sensible and effective policy as well. In an industry as fragmented as oil and gas, investors understand that smart, common-sense methane rules are necessary to ensure that the best operational practices are standard across the industry, minimizing the risk of long-term reputational damage to natural gas. In 2017, investors engaged on policy at the state, national, and international level. Investors testified in front of EPA hearings to stop short-sighted attempts at delaying US federal methane rules. Internationally, investors co-signed a letter to Canadian policymakers to strengthen the proposed methane rules in order to best protect investors’ stake in the oil and gas industry.

Especially considering today’s political environment, investors will need to continue to leverage their voice to make policy makers understand the business case for smart regulations. Investors have the unique ability to hold companies accountable for their public statements, and to their lobbying and trade association memberships that attempt to dismantle risk-reducing rules.

Looking to 2018

Investors understand the risk methane poses to their portfolio, and are increasingly tilting their portfolios towards companies that are seriously addressing climate risks like methane. Astute operators recognize this trend and are listening to the voices of their investors. The risks of unresponsiveness are too great to ignore. With the progress of 2017 as a springboard, operators should only expect investor engagement on this material risk to grow.

Written by Dominique Browning

Why am I not surprised? Murray Energy CEO Bob Murray has bragged that EPA chief Scott Pruitt is working off his polluter protection playbook—a three-page memo from the coal company that outlines what the fossil fuel industry wants Pruitt to accomplish. According to Murray Energy,...

Tom Neltner, J.D., is Chemicals Policy Director and Maricel Maffini, Ph.D., Consultant Pursuant to a consent decree with the Natural Resources Defense Council (NRDC), the Environmental Protection Agency (EPA) is developing drinking water regulations to protect fetuses and young children from perchlorate, a toxic chemical that inhibits the thyroid’s ability to make the hormone T4 essential […]

The post EPA’s latest analysis shows perchlorate risks to fetal brain development first appeared on EDF Health.

By Tom Neltner

Tom Neltner, J.D., is Chemicals Policy Director and Maricel Maffini, Ph.D., Consultant

Pursuant to a consent decree with the Natural Resources Defense Council (NRDC), the Environmental Protection Agency (EPA) is developing drinking water regulations to protect fetuses and young children from perchlorate, a toxic chemical that inhibits the thyroid’s ability to make the hormone T4 essential to brain development. The rulemaking is part of a long process that began in 2011 when the agency made a formal determination that Safe Drinking Water Act standards for perchlorate were needed. Under the consent decree, EPA should propose a standard by October 2018.

In the latest step in that process, EPA’s scientists released a draft report in September that, at long last, answers questions posed by its Science Advisory Board in 2013: does perchlorate exposure during the first trimester reduce production of T4 in pregnant women with low iodine consumption? Does reduction in maternal T4 levels in these women adversely affect fetal brain development? According to EPA’s scientists, the answers are Yes and Yes.

For several years, EPA and the Food and Drug Administration (FDA) have developed and refined a model that would predict the effect of different doses of perchlorate on levels of T4 in pregnant women. The latest version of the model addresses women during the first trimester, especially those with low iodine intake. This is important because iodine is essential to make T4 (the number four indicates the number of iodine atoms present in the hormone); perchlorate inhibits its transport from the blood into the thyroid. The risk of perchlorate exposure to fetuses in the first trimester is greatest because brain development starts very early and is fully dependent on maternal T4. If the mother gets insufficient iodine to offset the perchlorate inhibition, she will not produce enough T4 for the fetal brain to develop properly. When free T4 (fT4) levels are low but without increase in thyroid stimulating hormone (TSH), the condition is known as hypothyroxinemia. When T4 production is lowered further, the pituitary gland releases TSH to increase T4 production by a feedback loop mechanism.

EPA’s scientists reviewed 55 research studies and concluded that “Overall, the results of this literature review lend support to the concept that maternal fT4, especially in the hypothyroxinemic range, is critical to the offspring’s proper neurodevelopment” and “the impact of altered fT4 is seen even with small incremental changes in fT4 (and in populations with fT4 across the “normal” range).”[1] From the literature search, EPA identified IQ, motor skills, cognitive and language development and reaction time as measurements of neurodevelopment that enable them to quantify the effects of perchlorate exposure in the first trimester.

EPA also estimated the impact of perchlorate exposure in the population of pregnant women in the first trimester and with low iodine consumption; in other words, how many pregnant women will become hypothyroxinemic due to perchlorate exposure thus increasing the risk of adverse neurodevelopmental effects in their children. They predicted that a dose of:

• 0.3-0.4 micrograms of perchlorate per kilogram of body weight/day (µg/kg bw/day) is associated with a 1% increase in pregnant women with hypothyroxinemia; and
• 2.1-2.2 µg/kg bw/day is associated with a 5% increase in pregnant women with hypothyroxinemia.[2]

While these percentages appear small, they represent a significant number of potentially affected children since neurodevelopmental harm is likely irreversible. EPA did not estimate the number of pregnant women or children potentially affected. We did. Based on four million children born in the US each year,[3] an estimated 400,000 were born to women with hypothyroxinemia. A 1% shift in the population of women with hypothyroxinemia associated with perchlorate exposure would correspond to an increase of 4,000 impacted children; if there is a 5% shift, the number of impacted children born to hypothyroxinemic mothers would increase to 20,000.

The agency is accepting public comments until November 20, 2017 and will convene a peer review panel to review its findings in January 2018. After considering the panel’s feedback, EPA will develop a Maximum Contaminant Level Goal (MCLG) and, eventually, a drinking water standard for perchlorate. The model’s conclusions and identification of a new reference dose are also expected to inform EPA’s standards for hypochlorite bleach to limit degradation to perchlorate and FDA’s assessment of its decision to allow perchlorate to be added to plastic packaging and food handling equipment at concentrations as high as 1.2%.

EDF and NRDC submitted joint comments to EPA supporting the draft report and its analysis.  We also made the following general observations:

1. Incremental changes in free T4 (fT4) are fundamental: Critical neurodevelopmental adverse effects could be missed by measuring full range maternal fT4. Windows of susceptibility are common in all organs during development. Hormonal control of brain development is no exception. Therefore, adverse neurodevelopmental outcomes will vary based on the time and duration of decreases in fT4 levels. We appreciate seeing the agency building a model based on this fundamental principle of developmental biology.
2. EPA’s scientists provide an essential service: Academic researchers laid a solid foundation for the analysis. Without their work, typically funded by government grants, we would not have the evidence necessary to recognize the harm from perchlorate at the levels under consideration. But it took the independent scientists at EPA, building on a model developed by FDA, to provide the objective rigorous review of the evidence and adapt the model.
3. The peer-review process works: The agency rose to the challenge of two previous peer-review panels, one established by EPA’s Science Advisory Board and the other by EPA’s Office of Water. The panels operated in a transparent process and provided independent and objective review of the analysis by EPA, and we expect that this third and final panel will do the same. However, the integrity of the process depends on credibility of the experts on the panel. Screening out these experts because they receive government funding as EPA is now doing is irresponsible. It undermines the quality of the review and the credibility of the process.

[1] EPA, Draft Report, at page 5-61.

[2] EPA Draft Report, Section 7.1, Table 35 and Section 9, Table 40.

[3] Centers for Disease Control and Prevention, National Vital Statistics System, Birth Data accessed on November 4, 201 at https://www.cdc.gov/nchs/nvss/births.htm.

By Victoria Mills

US businesses turned out in force at COP 23 in Bonn, demonstrating to the rest of the world that they are committed to action on climate change, despite the US government’s withdrawal from the Paris Agreement. In fact, 2017 has been a banner year for corporate climate leadership: over 1700 businesses signed the We Are Still In declaration, and nearly half of all Fortune 500 companies now have climate and clean energy goals.

Now, there’s an immediate opportunity for companies to show leadership on climate change here at home: speaking up in defense of the Clean Power Plan, which the current Administration wants to eliminate.

Here are three reasons for your business to publicly defend the Clean Power Plan before the EPA comment period ends in mid-January.

1. The Clean Power Plan is good for your business & the economy

The Clean Power Plan establishes a predictable framework for continued progress in reducing carbon pollution from the power sector, and gives companies from all sectors the flexibility to use the most cost-effective opportunities to reduce emissions.

Repealing it would end the country’s most substantial effort to address climate change, which poses significant risks to businesses, communities, employees, and customers.

Additionally, millions of Americans work in the clean energy sector, which is adding jobs far faster than the rest of the economy. Rolling back the Clean Power Plan would slow job growth by reducing demand for clean energy in the United States.

At the same time, the global market for advanced energy technologies has reached $1.4 trillion, and countries like China are stepping up to meet that growing demand.

US manufacturers of clean energy and related technologies will be at a disadvantage globally if demand for their products shrinks here at home.

2. Defending the plan underscores your sustainability leadership

If you want your company to be a sustainability leader, speaking up for smart climate and energy policies like the Clean Power Plan is part of the package. For example, publicly supporting the plan should be a no-brainer for companies that signed the We Are Still In declaration, or have set goals to reduce greenhouse gas emissions or switch to renewable energy. It shows your stakeholders that you’re walking the talk, which is what they expect.

• Investors are increasingly scrutinizing companies’ engagement in public policy, and demanding consistency with their sustainability goals.
• Customers and employees broadly support policies that cut carbon pollution.
• Millennials, in particular, care deeply about climate change and are significantly more likely to support companies they perceive to have strong environmental values.

The business case for climate leadership & the Clean Power Plan: why company voices matter now
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3. Business voices CAN shape the Clean Power Plan’s future

Victoria Mills, Managing Director, EDF+Business

Under existing law, the EPA cannot simply revoke the Clean Power Plan by fiat. It must take public comments into account when drafting and finalizing a new rule or withdrawal, and justify its reasoning for departing from its past decisions. Moreover, the Supreme Court has ruled three times that the Environmental Protection Agency must address harmful carbon pollution, so even if the agency repeals the Clean Power Plan, it must come up with a replacement.

As an American business, you are uniquely credible in communicating the value of sensible climate policy to the US economy, and can underscore the flawed reasoning behind efforts to roll back the Clean Power Plan. But that will only happen if you take your place at the table of stakeholders, and speak up.

Here’s what to do:

• File public comments to the EPA on the proposed repeal by January 16, 2018.
• Talk publicly about why energy efficiency and climate change matter to your business, through op-eds, blogs, social media channels, and shareholder communications
• Register now for the Ceres/EDF webinar on Tuesday, November 28 from 1 – 2 pm ET on the future of the Clean Power Plan and opportunities for businesses to weigh in.

Defending the Clean Power Plan is about much more than the plan itself: it’s about speaking up for action on climate change, access to clean energy, low-carbon innovation and a stable framework for long-term planning and investment. It’s about leadership. Will you make your voice heard?

Follow EDF+Business on Twitter, @EDFbiz

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Tom Neltner, J.D., is Chemicals Policy Director and Maricel Maffini, Ph.D., Consultant Every 15 years, the Environmental Protection Agency’s (EPA) Office of Pesticide Programs (OPP) reviews the safety of registered pesticides. The current cycle ends in 2022. As part of that process, the agency is evaluating the safety of hypochlorite bleaches. In January 2017, EPA decided […]

The post EPA proposes limits on hypochlorite bleach to reduce degradation to perchlorate first appeared on EDF Health.

By Tom Neltner

Tom Neltner, J.D., is Chemicals Policy Director and Maricel Maffini, Ph.D., Consultant

Every 15 years, the Environmental Protection Agency’s (EPA) Office of Pesticide Programs (OPP) reviews the safety of registered pesticides. The current cycle ends in 2022. As part of that process, the agency is evaluating the safety of hypochlorite bleaches. In January 2017, EPA decided it would consider the risks posed by degradation of the hypochlorite into perchlorate.

This is important for two reasons: 1) degraded bleach is less effective as a pesticide, and 2) perchlorate is a chemical that interferes with the production of thyroid hormone, a critical hormone for fetal and infant brain development.

On September 22, EPA proposed changes to the pesticide label to minimize the degradation for hypochlorite bleach used to disinfect drinking water, and the agency is accepting comments until November 21, 2017. The label would advise users to:

• Minimize storage time;
• Maintain pH of the solution between 11 to 13;
• Minimize exposure to sunlight;
• Store at lower temperatures; and
• If practical, dilute with cool softened water upon delivery.

EDF submitted comments to EPA supporting EPA’s proposal and requesting specific changes to the proposed language, including making the advice to users mandatory. We also asked the agency to extend the label requirements to hypochlorite bleach used to treat produce and to disinfect food handling equipment. Bleach appears to be one of several significant sources of perchlorate contamination of food. Improving management conditions will reduce degradation and preserve effectiveness regardless of the whether the bleach is used in drinking water or to treat vegetables.

EPA’s proposal is an interim decision. We also were pleased to see that OPP is committed to continue working with EPA’s Office of Water (OW) in its assessment of the risks of perchlorate to pregnant women and young children. We asked OPP to incorporate the OW’s findings in additional interim registration decisions for all uses of hypochlorite bleaches.

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