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China's Sinopec suspends talks for petrochemical investment, gas marketing venture in Russia: sources – The Globe and Mail

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The Sinopec logo is displayed at a gas station in Hong Kong.Bobby Yip/Reuters

China’s state-run Sinopec Group has suspended talks for a major petrochemical investment and a gas marketing venture in Russia, sources have told Reuters, heeding a government call for caution as sanctions mount over the invasion of Ukraine.

The move by Asia’s biggest oil refiner to hit the brakes on a potentially half-billion-dollar investment in a gas chemical plant and a venture to market Russian gas in China highlights the risks, even to Russia’s most important diplomatic partner, of unexpectedly heavy Western-led sanctions.

Beijing has repeatedly voiced opposition to the sanctions, insisting it will maintain normal economic and trade exchanges with Russia, and has refused to condemn Moscow’s actions in Ukraine or call them an invasion.

But behind the scenes, the government is wary of Chinese companies running afoul of sanctions – it is pressing companies to tread carefully with investments in Russia, its second-largest oil supplier and third-largest gas provider.

Since Russia invaded Ukraine a month ago, China’s three state energy giants – Sinopec, China National Petroleum Corp. (CNPC) and China National Offshore Oil Corp. (CNOOC) – have been assessing the impact of the sanctions on their multibillion-dollar investments in Russia, sources with direct knowledge of the matter said.

“Companies will rigidly follow Beijing’s foreign policy in this crisis,” said an executive at a state oil company. “There’s no room whatsoever for companies to take any initiatives in terms of new investment.”

China’s ministry of foreign affairs this month summoned officials from the three energy companies to review their business ties with Russian partners and local operations, two sources with knowledge of the meeting said. One said the ministry urged them not to make any rash moves buying Russian assets.

The companies have set up task forces on Russia-related matters and are working on contingency plans for business disruptions and in case of secondary sanctions, sources said.

The sources asked not to be named, given the sensitivity of the matter. Sinopec and the other companies declined to comment.

The ministry said there is no need for China to report to other parties about “whether there are internal meetings or not.”

“China is a big, independent country. We have the right to carry out normal economic and trade co-operation in various fields with other countries across the world,” it said in a faxed statement.

U.S. President Joe Biden said on Thursday that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret siding with Russia’s invasion of Ukraine.

Global oil majors Royal-Dutch Shell and BP PLC, as well as Norway’s Equinor ASA pledged to exit their Russian operations shortly after Russia’s Feb. 24 invasion. Moscow says its “special operation” aims not to occupy territory but to destroy Ukraine’s military capabilities and capture what it calls dangerous nationalists.

Sinopec, formally China Petroleum and Chemical Corp., has suspended the discussions to invest up to US$500-million in the new gas chemical plant in Russia, one of the sources said.

The plan has been to team up with Sibur, Russia’s largest petrochemical producer, for a project similar to the US$10-billion Amur Gas Chemical Complex in East Siberia, 40-per-cent owned by Sinopec and 60 per cent by Sibur, set to come online in 2024.

“The companies wanted to replicate the Amur venture by building another one and were in the middle of site selection,” said the source.

Sinopec hit pause after realizing that Sibur minority shareholder and board member Gennady Timchenko faces sanctions from the West, the source said. The European Union and Britain last month imposed sanctions on Mr. Timchenko, a long-time ally of Vladimir Putin, and other billionaires with ties to the Russian President.

Mr. Timchenko’s spokesman declined to comment on sanctions.

The Amur project itself faces funding snags, said two of the sources, as sanctions threaten to choke financing from key lenders, including Russia’s state-controlled Sberbank and European credit agencies.

“It’s an existing investment. Sinopec is trying to overcome the difficulties in financing,” said a Beijing-based industry executive with direct knowledge of the matter.

Sibur said it continues to co-operate with Sinopec including working jointly on implementing the Amur plant. It denied that there was a plan to team up with Sinopec for a project similar to the Amur Gas Chemical Complex in east Siberia.

“Sinopec is actively participating in the issues of the project’s construction management, including equipment supplies, work with suppliers and contractors. We are also jointly working on the issues of project financing,” Sibur told Reuters by e-mail.

Sinopec also suspended talks over the gas marketing venture with Russian gas producer Novatek over concerns that Sberbank, one of Novatek’s shareholders, is on the latest U.S. sanctions list, said one source with direct knowledge of the matter.

Mr. Timchenko resigned from Novatek’s board on Monday in the wake of the sanctions. Novatek declined to comment.

Novatek, Russia’s largest independent gas producer, entered a preliminary deal in 2019 with Sinopec and Gazprombank to create a joint venture marketing liquefied natural gas to China as well as distributing natural gas in China.

Beyond Sinopec’s planned Amur plant, CNPC and CNOOC were among the latest investors into Russia’s natural gas sector, taking minority stakes in major export project Arctic LNG 2 in 2019 and Yamal LNG in 2014.

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Colombia, Ecuador & Peru: Social engagement can make or break mining investment – MINING.COM – MINING.com

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Instead, mineral explorers and developers often see substantial projects halted in their tracks by staunch community-level opposition, even when projects had passed regulatory muster, says mining sector researcher, analyst and reporter Paul Harris, in an interview.

Related: Peru fails yet again to broker truce allowing Las Bambas mine restart

Legacy CSR programs are simply no longer adequate. The analyst suggests those wishing to do business in these jurisdictions take a more holistic approach toward meaningful engagement with host communities before engaging governmental authorities about their respective projects.

The solution, according to Harris, is companies today have to be willing to give up an ownership stake in their projects so that local communities and local and federal governments have more skin in the game.

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What 'demand destruction' means and how it fits into our investment strategy – CNBC

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China still holds the cards for global supply chains, whether or not Covid lockdowns frustrate businesses in the near term. An employee works on the production line of the screens for 5G smartphones at a factory on May 13, 2022 in Ganzhou, Jiangxi Province of China.
Zhu Haipeng | Visual China Group | Getty Images

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ESG investing has its faults, but here's what we can do to improve it – Winnipeg Sun

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Standardizing ESG reporting, and making it mandatory, would be a start toward reliable ESG investing

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“Scam” or “dangerous placebo” are some of the terms used by critics to denounce Environmental, Social and Governance (ESG) investing. Yet others see it as one of our last chances to pivot our financial world to a more sustainable and environmentally-friendly model.

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ESG, a form of sustainable investing, is increasingly being used as a measure of how well a company is using its investment money. For investors looking to instigate change, ESG scores help them decide if a company is worth their money.

Not a perfect system

ESG scores aren’t standardized, nor do all companies disclose their ESG standing.

This is despite ESG dating back to 2006, when the U.N. launched the Principles for Responsible Investment at the New York Stock Exchange. The initiative was backed by leading institutions from 16 countries, representing more than $2 trillion in assets owned at the time.

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ESG critics and optimists have called on the government to use its power to fine tune ESG metrics and finally standardize it, in order to give it more credibility.

ESG not what it seems?

In 2021, ESG investment saw issuance exceeding US$1.6 trillion, bringing its total market to more than US$4 trillion. Not only that, but Bloomberg expects ESG assets to exceed US$53 trillion by 2025.

Fierce critics like Tariq Fancy — who worked as the chief investment officer for investment management firm BlackRock before leaving in late 2019 — made headlines with his disillusionment over ESG’s true impact.

“That $4 trillion isn’t really $4 trillion,” Fancy said, in reference to the widely-circulated figure.

For Fancy, the “vast majority” of what’s happening is that companies are “recategorizing existing funds and moving money and shares around from one basket to another…

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“They’ve figured out that socially conscious investors will gladly pay more in fees for something with a ‘green’ label,” he said, adding that ESG funds have 43 per cent higher fees on average.

“Also, they don’t fund carbon capture and new innovations, for the most part they publicly overweight tech companies (Microsoft) and underweight oil companies (Exxon),” he added.

Also, regular investors mainly have access to secondary shares that are sold and purchased on a daily basis, which have little impact, argued Fancy.

“The changes we need immediately to flatten the [greenhouse gas] curve are collective actions led by the government — experts have been telling us this for decades,” he said.

As ESG investing rises, so do emissions

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Like elsewhere, Canadian ESG investment is increasing, but, again like elsewhere, the nation hasn’t reduced its emissions in the past year.

A March, 2022 report from the International Energy Agency said that global energy-related carbon dioxide emissions rose by six per cent in 2021 to 36.3 billion tonnes — a new record — as the world bounced back from the pandemic.

ESG does make a difference

Art Lightstone, climate activist and host of the Green Neighbour Podcast, acknowledges ESG has its critics. But for him, this class of investing is still making a difference.

“The fact that ESG investing has not only helped to launch several green tech companies, but also encouraged less socially-minded companies to compete in ESG spaces is now pretty much undeniable,” Lightstone said. “Tesla is invariably the best case in point. The amount of investment directed toward Tesla and other EV startups has been mind boggling.”

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While money can be moved from one shareholder to another, “that’s not where the story ends.” He cited the example of Tesla when it was “able to raise large amounts of capital [at market prices] with rather little dilution to its stock.”

“Tesla did this three times in 2020, and with that money they were able to build more factories, scale up their production, lower their per-unit costs, increase their profit margins, and therefore increase the economic viability of their entire operation,” he explained.

This expansion created a domino effect for legacy automakers such as GM and Ford, who are investing more in their electric vehicle programs.

Investing intentionally and collectively

Tim Nash, founder of Good Investing, a company with a goal to help at least one million Canadians invest intentionally, argues that informed decision-making can make the impact needed.

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“People spend more time choosing an avocado in the grocery store than they spend when choosing a mutual fund for their RRSP,” Nash said.

Instead, he urged people to think more about their portfolios and ways to diversify, including carving out part of their portfolios for investment just “for doing more good.”

“This is where we can invest part of our money into things like community bonds and impact investments,” he explained.

Community bonds, a debt financing tool, are issued by non-profit, charity or co-operative organizations. They allow these groups to take loans from community backers. The backers will eventually get paid interest for investing in an impactful project, while the organization enjoys access to capital.

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During the interview, Nash noted that he was located at the Centre for Social Innovation, a non-profit that owns two buildings in downtown Toronto.

“How does a non-profit own two buildings in downtown Toronto?” he asked. “Community bonds. That’s how they were able to access capital.”

Then there is also shareholder activism, and this is where Nash highlighted how shares that are publicly traded on a secondary market can be used as a powerful tool if used collectively.

“If I sell my shares, someone else is going to buy them. However, if enough people sell their shares that will impact a company’s cost of capital,” he said. “This is a very important metric when it comes to how a company operates.”

One example Nash cited as proof of effective shareholder activism is the increased cost of capital for fossil fuel companies. At the same time, there has been an unprecedented shifting of investment capital into greener energy.

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Better knowledge needed

The financial industry needs to delve into the environmental sciences, sustainability, and systems thinking to have a more well-rounded view on how to make a full impact, Nash says.

“I do think that a lot of the criticisms come from the financial industry, people who don’t have a background (in these topics),” he said. “ESG is a very broad concept… We need everybody rowing together in the same direction.”

While the government is in a position to lead, it’s still caught up in a four-year election cycle, he added.

“It’s even shorter if it’s a minority government, which we’re in right now,” he noted.

Time to start mandating metrics on ESG

Nash put the onus on the Ontario Securities Commission, which regulates companies listed on the Toronto Stock Exchange, to start mandating disclosures of ESG issues, as other regulators have done.

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For example, the SEC in the U.S. is focused on the climate aspect of ESG. It mandates that all publicly traded corporations publish their environmental compliance costs, and proposed new rules in March to standardize climate-related disclosures to investors. The rules would require businesses to disclose information about their direct greenhouse gas emissions, as well as the indirect emissions from the energy the business consumes.

In Europe, the trend tends to lean more toward the corporate governance aspect of ESG. Under the 2018 Non-Financial Reporting Directive of the European Union, companies are expected to disclose information on environmental, social, and employee-related problems, such as anti-bribery, corruption, and human rights performance.

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In Nash’s view, Japan is ahead of the curve with its Financial Services Agency actually mandating climate risk disclosure.

“Investors, I think, to some degree are demanding more data and information and disclosure than what governments are requiring,” he said. “This is an area where investors are asking tough questions and pushing that forward. That said, investors can ask, and companies get to decide how they respond. Many of them are responding in different ways.”

ESG optimists and critics alike want to see those regular investors emboldened to make the difference the world is waiting for.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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