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ESG in the Energy Industry — Embracing Change

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How did we get here and what is the challenge?

The evolution of an energy company’s environmental, social and governance (ESG) profile demonstrates the tremendous power of capital markets. In just a few years, ESG moved from a footnote on public disclosure to the forefront of investment decisions and operators’ corporate strategies, a change largely propelled by investors rather than governments.

Driving the discussion are institutes like the Principles for Responsible Investment (PRI). Nearly 3,000 firms that manage more than $100 trillion in assets under management back the PRI, a U.N.-supported initiative stating firms will incorporate ESG issues into investment analysis and decision-making processes. This does not mean the firms will base investments solely on ESG performance, but they will consider ESG aspects alongside their traditional processes. Our discussions with investors show that ESG is becoming another pillar of the decision-making process, along with asset quality and financial performance.

Why? Investors are using a company’s ESG profile to predict its resiliency to future changes. If you know how an executive team is incentivized (governance), you can properly model how the company will react to certain shocks. Quantifying a producer’s greenhouse gas footprint (environmental) will help measure how exposed it is to future regulatory changes. Analyzing a company’s demographic profile (social) can indicate the diversity of its thought process.

The challenge the market faces is that analyzing a company’s ESG profile is largely new and it is difficult to access trusted data. The market is ahead of regulation on this one – there are no generally accepted accounting principles that companies must adhere to. Investors tell companies that ESG will be factored into decisions and companies respond by voluntarily disclosing information, typically at their discretion. It is hard to cut through the smoke and really understand how two companies compare. In parallel, corporate clients position themselves as industry leaders and work to understand the ESG data landscape to ensure they set the right policies to appear favorable relative to peers.

What is Enverus’ solution?

Realizing the need emerging in our client base for integrated, normalized, quantitative data on the ESG performance of energy companies, we built Enverus ESG™ Analytics.

Enverus ESG™ Analytics is the energy industry reference for corporate ESG, providing full visibility into companies’ rankings, how they compare among their peers, and who and what are the most environmentally responsible and investible opportunities in the space.

This solution is delivered in the Prism platform and saves time by eliminating in-house data collection and providing fast analysis and benchmarking tools. The product casts a wide net, collecting the best available energy-related ESG data and distilling it down into an easy-to-digest, transparent format.

Learn more about Enverus ESG Analytics here: https://www.enverus.com/solutions/energy-analytics/ep/esg/.

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Nick Volkmer is vice president of ESG and Renewables at Enverus. Nick joined Enverus in 2015 and initially focused on onshore U.S. asset valuation and optimization, where he led the Gulf Coast research team. He now heads the ESG team, helping clients navigate carbon-focused investments. Nick graduated from Queen’s University with a degree in engineering chemistry and earned his CFA charter in 2019.

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