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Client Case Studies: Banking

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Case Study

A Bank Relies on Extensive Energy Data to Guide its Path to Net Zero

A Bank Relies on Extensive Energy Data to Guide its Path to Net Zero

Regulators, policymakers, investors, and much of the public are pressuring banks to reduce their exposure to polluting industries, such as oil and gas, in order to align capital allocation decisions with global net zero goals.1 While direct Scope 1 emissions from bank operations are low, indirect Scope 3 emissions from loans and investments are another story. It is clear that banks need to take a leading role in the transition to a net zero economy if the world is going to achieve emission targets set for 2050.

The head of the risk management and energy transition team at this Europe-based bank wanted to take a closer look at the firm’s holdings of oil and gas companies. All these companies are exposed to material environmental risks across their value chain, including indirect emissions from hydrocarbon combustion and/or direct environmental impacts from operations. Assessing the environmental impact is a complex task, however, requiring the team to identify external resources to help with the evaluation.

Pain Points

The risk management and energy transition team had been relying on a third-party to provide a commodity price forecast that could be stressed tested to look at a low-carbon trajectory. The lack of transparency had team members concerned, however, and they wanted to find a more comprehensive solution that could help assess an energy transition on fossil fuels and what the market could look like in 2050. In particular, they wanted access to:

  • News, insights, and events relevant for the energy transition.
  • Energy balances by country, to include fuel products.
  • Long-term price forecasts across all energy commodities − from oil to renewables.
  • In-depth analysis of existing/proposed carbon policies and resulting implications for the energy transition.
  • The ability to compute long-term energy demand under various scenarios.
  • Desktop access to the information, plus data delivery through an API to prepare reports and presentations.

The team knew that S&P Global Platts was a well-known provider of energy and commodities information, and asked to learn more about the offering.

The risk management and energy transition team was charged with developing the bank's net zero action plan and needed critical analytics and news to navigate the energy transition and inform strategic decisions.

The Solution

S&P Global Platts discussed a number of services that would provide the key data and analysis the risk management and energy transition team needed to understand the oil and gas market today, and how it could be reshaped over time. This would enable the team to:

Stay on top of developments

Real-time coverage of dedicated news, insights, and events relevant for the energy transition are collated in a single user-friendly location. Global reporting includes all sectors and commodities to provide a comprehensive view. In addition, special reports cover major events and policy shifts.

Evaluate risks and opportunities as energy transitions

The Global Integrated Energy Model (GIEM) is a comprehensive energy transition modeling tool that enables users to adjust inputs and assumptions and view demand for various sources of energy on a global and country level. It is a practical and customizable tool to study the evolution of the global energy system, with data spanning 143 countries, 10 end-use sectors, and 30 individual energy carriers from 1990 to 2050. Sensitivity analysis can also be measured in either units of energy demand or CO2 emissions.

Assess future prices and demand

Future Energy Outlooks provides additional analysis supporting outputs from the GIEM. It delivers an integrated forecast across energy markets, providing ‘most likely’ views of future prices and demand, while highlighting future outlooks that could materially impact commodity prices upward or downward. This includes long-term prices across all energy commodities, inclusive of probabilistic high and low case outlooks. Users can examine the potential of new technologies, policies, and consumer behavior, covering areas including hydrogen, alternative transport/electric vehicles, power storage, and renewables.

Zero in on carbon market fundamentals

Emissions & Environmental Market Services provides coverage of compliance and voluntary carbon market fundamentals, including balances, outlooks, credit price forecasts, scorecards, and evaluations. It also includes in-depth analysis of existing/proposed carbon policies and resulting implications for the energy transition. Reported emission data is aggregated and analyzed within the North American and European markets

Benefit from multiple delivery options

Data access via a powerful desktop option and an API meets multiple user needs for analysis and for internal reporting, presentations, and more that requires large amounts of data.

Key Benefits

Members of the risk management and energy transition team thought the S&P Platts offering would give them more confidence to make important strategic business decisions about the path to net zero. They decided to subscribe to the recommended components to gain access to:

  • An entire picture of the energy market, with an objective view and deep understanding of likely energy transition pathways and their outcomes.
  • An easy-to-use, globally-balanced energy demand model to test where and how demand for energy sources may shift under different scenarios looking out to 2050.
  • The ability to assess the relative market risks of a broad range of potential disruptions, or gauge the potential size of new opportunities as the energy system evolves.
  • Insights about the interconnected nature of technology, policy, and consumer preferences to explain what tradeoffs are likely and what the world may look like when they occur.
  • Important thought leadership pieces to understand events impacting the energy transition.
  • A seasoned analyst team to help answer questions and guide users as they run the GIEM model and create different scenarios.

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1"Seeking net zero? Just follow the money," S&P Global, April 28, 2021, www.spglobal.com/esg/insights/seeking-net-zero-just-follow-the-money