US power utilities giving investors the ESG data they want under new reporting template

Initiative spearheaded by the Edison Electric Institute industry body with investor input

The Edison Electric Institute (EEI), the body which represents US investor-owned electric companies, launched an ESG/sustainability reporting template at the end of August, which aims to provide investors with more uniform and consistent ESG/sustainability data.
The launch comes after its pilot template in December 2017. Twenty-one EEI member companies, representing about 65% of the industry by market capitalisation, participated in the pilot. Version 1 of the template has been used already by a number of EEI members. As of now, AEP, Alliant Energy, CenterPoint Energy, CMS Energy, Duke Energy, El Paso Electric, Entergy, Fortis – Central Hudson, Fortis – UNS Energy/TEP, PPL Corporation, WEC Energy Group, and Xcel Energy have published their data.
Duke Energy helped pilot the initiative and was among the first companies to utilize the template for disclosure last year and has recently published updated data. Duke’s disclosure includes a description of sustainability growth strategy and sustainability governance which are going to be particular to each company. The quantitative data presented is likely to be easily cross-referenced between companies. It includes electricity generated and generation capacity – including fossil fuel and renewable sources in detail as well as in summary, GHG emissions, non-generation CO2e emissions, emissions of nitrogen oxide, sulfur dioxide and mercury, fresh water resources and waste products. AEP’s disclosures, which followed soon after those made by Duke, follow the template for qualitative and quantitative data and information.
What makes this initiative most interesting is the significant amount of investor input into the whole process of designing the pilot and the template. There have been examples of industry bodies getting their members together to come up with standardized disclosures of different elements of sustainability, supply chain risks, etc. But it’s rare to see investors involved in the process right from the very beginning. The EEI press release even has a quotation from one of the investor participants. The Deputy Global Head of Sustainable Finance for JPMorgan Chase, Marisa Buchanan, is quoted as saying: “As ESG goes mainstream, the disclosure template will help lenders, investors, and EEI member companies engage on the most important ESG and sustainability matters for the electric power industry.”
RI spoke to Richard McMahon, VP Energy Supply and Finance at EEI to learn more about the story behind the template. “The electric power industry is in the capital markets every day,” said McMahon, “we’re the most capital-intensive industry out there, and we have very good and close relationships with the financial community. We felt that our companies have been reporting on sustainability for a long time, but the EEI has a number of task forces and groups that consist of a lot of the major financial banks, institutions and investors, and they said to us you have a good story to tell on ESG but you need to do it in a way that’s more focused on investor needs and not just on the story that you want to tell. That really kicked off this collaborative effort.We engaged all of the largest institutional investors in the discussion; we went to them and said what’s the information that you’re looking for when you’re doing your ESG assessment? We went through a pilot period to identify qualitative and quantitative metrics that they were most interested in.” After the pilot was launched, EEI went back to investors for further feedback.

“The investors told us that they wanted concise, comparable information.”

McMahon continued: “What’s interesting is that a lot of these ESG projects that are out there that aren’t investor driven tend to be voluminous. What the investors told us was that they wanted concise, comparable information. They wanted to be able to look at the entire peer group and make a good cross-company assessment. We just published our first round, we are the only industry group to design an ESG template, and the feedback we got from investors was that they want more industries to do the same. We hope this initiative will spur that.” EEI has undertaken further outreach and engagement in the ESG field, and is in discussions with TCFD and SASB. It is also working with the gas industry to initiate a similar template there.
Asked about the scope of the participation, MacMahon said: “At the holding company level we have 42 companies, though there are a lot of operating companies underneath that. We anticipate that the entire group will make these disclosures. We are also going to put a page on our website which has links to all of these disclosures, which are typically housed on the sustainability websites of these companies.”
There are currently no plans to collate the information on a single site, similar to the UK’s gender pay ratio data and the proposals for modern slavery statements, but, McMahon added, “We’ve had discussions with Bloomberg about putting the template on their site, and with SNL Financial [part of S&P]. The investors have also asked for this information to be available in spreadsheet, so companies are providing that too. We’re leaving the collating to them, but the most important thing is to make it consistent.”
McMahon went on to say that emissions and renewable generation data was not the only part of the ESG world that the electric power industry was leading the way in. “Our industry also has a good story to tell on gender diversity at the senior level,” he said, “22% of our CEOs are female compared to 6% in the S&P 500. That development came about because of our focus on ESG and engagement with investors.”
The engagement process continues, as McMahon noted that EEI was to have a meeting in New York soon with a major investor which is designed to get more feedback on the templates now that a number have been released.