A New Year’s Resolution for U.S. Nuclear Utilities
- Jan 6, 2022 3:16 am GMT
Welcome to 2022. Here is my ‘new years’ resolution’ for publicly traded nuclear energy utilities in the U.S. These firms have communicated to shareholders and stakeholders about sustainability issues, including climate change, but what does that means when it comes to reporting on their operations and measuring accountability for compliance with their ESG reports (environmental, social, governance).
In 2022 the opportunity exists for these firms reaffirm their sustainability claims to their stockholders and stakeholders by forming a national effort to develop a new SASB (Sustainability Accounting Standards Board) standard, or modifying an existing standard, that addresses Environmental, Social and Governance (ESG) reporting requirements associated with the development, construction, and operation of nuclear reactors for electric power generation, process heat, hydrogen production, and desalinization of sea water.
By way of background SASB Standards connect businesses and investors on the financial impacts of sustainability. SASB has published a standard for electric utilities and power generators, but its coverage does not address the technology development efforts now underway for 4th generation advanced reactors and new types of light water reactors such as small modular reactors and mini reactors nor their uses beyond electricity production.
Compliance with SASB standards forms the basis for materially significant reports to investors on how well a firm is doing relative to the principles of environmental, sustainable, and governance (ESG) elements of its operations and that of its supply chains.
- The environmental data elements of an ESG report cover items like climate change, pollution/waste management, as well as prospective actions like green buildings and clean technologies.
- The social data elements of an ESG report cover relations with internal and external stakeholders, not just stockholders.
- The governance data elements of an ESG report in broad terms it covers all aspects of corporate behavior internally and externally.
Companies prepare ESG reports in compliance with SASB standards and its “materiality map.” SASB’s Materiality Map identifies sustainability issues that are likely to affect the financial condition or operating performance of companies within an industry. In part its an exercise in risk management.
SASB identifies 26 sustainability-related business issues which encompass a range of 'Disclosure Topics' and their associated 'Accounting Metrics' that vary by industry. So far 77 industries are covered, but the nuclear energy utility industry, its suppliers, and especially firms involved in new reactor development, are not covered by one.
The reason a nuclear utility or a reactor technology developer, or both in a partnership, would want to prepare and publish a materially significant ESG report is to attract “green investors” to fuel growth and/or to bring their technologies to market
There has been a paradigm shift, especially among investors who want their funds to be a force for good. They care about what their funds and investments are doing and given a choice will select an ESG compliant firm every time. A firm that meets these requirements can attract more capital or lower the cost of capital.
The opportunity for publicly traded utilities is to organize a task force on a peer-to-peer basis identify either changes to the current SASB standard for Electric Utilities & Power Generators or to work with SASB to develop a revised or a new standard that establishes a basis for ESG reporting for the nuclear energy industry.
The two main benefits of such a task force being successful are to enable ESG driven investors to justify putting their funds into nuclear energy utilities, and to tell the story of the industry to the public as well as business and government decision makers.
Collaboration with the American Nuclear Society and the American Society for Mechanical Engineers would bring added value and credibility to the effort. Whether this effort would also involve trade organizations for nuclear utilities that live and work inside the DC beltway could be an option as well.
As for who else thinks this is a good idea, the World Nuclear Association and the GEN IV forum have published reports and white papers advocating ESG reporting for the nuclear industry. Just last week the European Union published a draft taxonomy labeling nuclear energy is being “green.” If you pursue this idea, you will be in good company.
World Nuclear Association
on Nuclear Energy & Sustainable Finance
The World Nuclear Association (WNA) on (12/20/21) published an examination of the issue on its website. WNA’s publication of this document becomes a globally significant touchstone for all other advocates for nuclear energy to assess how they might approach the issue. Here is a summary and a link to the full document – Nuclear Energy and Sustainable Finance
- Increasingly, jurisdictions are taking policy and regulatory steps to enhance the role of the financial system in the transition towards low-carbon and sustainable economies.
- These regulatory actions focus on three broad themes: disclosure, risk management and the mobilization of capital. There is a move towards mandatory disclosure internationally.
- Over 20 countries have either implemented or are currently developing taxonomies. Some of the taxonomies issued to date specifically include nuclear energy while others currently exclude it. Many taxonomies under development intend to align with the EU taxonomy for sustainable activities.
- The ongoing evolution of environmental, social and governance (ESG) criteria presents both opportunities and risks to the nuclear industry.
- Multiple international initiatives are working to help mobilize capital for the sustainability transition by seeking to harmonize ESG standards and reduce market fragmentation. Some of these are likely to result in major changes to non-financial reporting and risk assessment by financial institutions
GEN IV Forum Report
The report said that nuclear energy has the potential to show up positively against a wide range of Environmental, Social and Governance (ESG) data collection and accounting metrics. This should allow nuclear energy to be considered as an investable asset class, thereby allowing nuclear companies and projects to access climate finance.
The report – Nuclear Energy: An ESG Investible Asset Class – was produced by a finance industry taskforce set up in 2020 by GIF’s Economic Modelling Work Group. “The report has been produced by the finance community for the finance community. It is intended to provide guidance to the finance community and wider stakeholders on how nuclear assets could report against ESG.”
See this summary of the GEN IV report and its significance in this World Nuclear News report from September 7, 2021
References: SASB Standards
SASB’s Materiality Map identifies sustainability issues that are likely to affect the financial condition or operating performance of companies within an industry. In the left-hand column, SASB identifies 26 sustainability-related business issues, or General Issue Categories, which encompass a range of Disclosure Topics and their associated
Accounting Metrics that vary by industry. SASB Materiality Map
Electric Utilities & Power Generators SASB Standard
The Electric Utilities & Power Generators industry is made up of companies that generate electricity; build, own, and operate transmission and distribution (T&D) lines; and sell electricity. Utilities generate electricity from a number of different sources, commonly including coal, natural gas, nuclear energy, hydropower, solar, wind, and other renewable and fossil fuel energy sources.
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