Shaun Newman Podcast - #640 - Tammy Nemeth

Episode Date: May 16, 2024

She has a PhD in history from the University of British Columbia and was the editor and book review editor of the global H-Net H-Energy discussion network for 13 years. Tammy is a strategic energy and ESG analyst based in the UK. Her company ESG2 Insight offers bespoke research, analysis, and insights to help organisations understand the overlapping challenges of Energy, Security, Geopolitics and Environmental, Social, Governance. Comment here: https://www.frascanada.ca/en/sustainability/documents/cssb-ed-csds-2 CSSB draft disclosures is here: https://www.frascanada.ca/en/sustainability/documents Professor Griffith's paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4118755 Tammy’s contact info: [e-mail] Let me know what you think. Text me 587-217-8500 Substack:https://open.substack.com/pub/shaunnewmanpodcast E-transfer here: [e-mail] Website: https://silvergoldbull.ca/ Email: [e-mail] Text: [phone] – and be sure to let them know you’re an SNP listener.

This is Brad 14. This is Doug Casey. This is Tom Romago. This is Alex Kraner. This is Viva Fry. You're listening to the Sean Newman podcast. Welcome to the podcast. Folks, happy Thursday.

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a little silver and gold isn't going to hurt you. That's for darn sure. McGowan professional chartered accountants. That's Kristen and Team. They offer accounting and bookkeeping, consulting, business consulting and training, financial planning, and tax planning, and they've been looking to hire. So anyone who's out there, a CPA, would really, I'm going to be interested to hear her thoughts on what Tammy talks about today. So, Kristen, if you're listening, I'd be really interested to hear your thoughts along with everybody else's. And if you're a CPA looking for a new start, a new job, your first job, well, look no

further than McGowan professional chartered accountants. They are fantastic. They believe in supporting free speech and starting conversations, that that's kind of what you are and you're an accountant just saying magowan cpa.ca is where you can find out more information and possibly uh you know makes a magic happen um for today's episode i want to know what you thought uh so fire me a text um if you got questions for tammy i'd be interested to help with that too because what she's talking about you know some days i am dense folks and uh today she's like man dad i get that all right what are your thoughts do you have questions for

because, you know, the implications, implications, I don't know why that word sounds so foreign today. The implications of what she's talking about is pretty serious. So I think, you know, getting all of you involved in helping, you know, the discussion grow and evolve and maybe asking some really pertinent questions would be really interesting. So listen to it. Let me know what you think.

And if you want to carry on over to substack, today's substack I made free for everybody because I thought, you know, this seems like really freaking important that everybody should listen. So it's free. So head over to Substack. Sign up for the substacks. You don't miss him. All right. Let's get on to the tale of the tape.

She has her Ph.D. in history. And this is a strategic energy and ESG analyst based in the UK. I'm talking about Tammy Neymouth. So buckle up. Here we go. Welcome to the Sean Newman podcast today. I'm joined by Tammy Neymouth. So thank you for making some time today.

Well, thanks so much for having me on your podcast, Sean. I really appreciate you taking the time. Yeah, well, I'm very interested in today's where we're going with today's chat. So I guess I'm just going to hand it over to you. I want you to tell a little bit about yourself and then we'll get into all the different things that you're on to discuss. But before we get there, tell us a little bit about Tammy and we'll see what happens. Well, I have a PhD in history from the University of British Columbia. My research has been on the Canadian-Canada-US energy policy.

I look at how decision-making and policy-making processes have evolved since the end of World War II up until basically the present. I've lived in Europe for 20 years. I've taught the geopolitics of energy and the environment at a university in Germany. I live in the UK now where I founded a consulting firm called E. ESG squared insight. And with that company, I conduct research into issues that are on the horizon that are affecting basically the core elements of Western society. So that includes examining the trajectory of the net zero transition, which includes the

war on oil and gas, on agriculture, our standard of living, way of life, and so on. And it was through this research that I came to see what's happening. in the accounting sphere and what we're going to be talking about today to some extent. Um, before we get into all that, PhD in history, uh, I was a history, uh, graduated with a BA in history. I never quite got to my PhD. Um, what, what was your specific, uh, uh, and maybe you said it there and I just glazed over it as I was jotting down a few notes on this side. When you studied pH or history to your PhD level, what was, what area did you, um, sink your into? Well, I looked at this, the shift to a continental energy agreement. So from the end of

World War II, you know, the 1947 Ladoog discovery and so on, up until the energy chapter of the free trade agreement. And there was some controversy and I had to cut out the parts about the national energy program and the free trade agreement. But I published separately articles on, that aspect. And so then my dissertation ended at the the 1974 announcement that Canada was phasing out oil and gas exports to the United States. When you say you had to cut it, when you, sorry, when you say you had to cut it out, you're saying your professors didn't want you talking about it? Yeah, my external advisor. So my, my advisor was sort of, he was trying to be amenable to the external who was from Ontario. And the external

advisor didn't want me to write anything that was critical of the Trudeau government and the National Energy Program. So and then to go on to the energy chapter of the free trade agreement. So they said I had to stop at 1974 and that I could roll it into other publications afterwards, which I did. But I mean, it was, it was an experience to be told, sorry, you got to cut those two chapters, even though that was the whole framing of the analysis was this shift towards continentalism. I'm assuming that raised your tail feathers early on in your career of some of the ongoing of, well, education for one, but certainly criticizing the last name Trudeau and probably a

couple other things just in there, the fact that they're like, yeah, maybe don't write about that. even though it is Canadian history, even though it was terrible energy policy, even though a whole bunch of these things, on a PhD level, they're like, yeah, you can use critical thinking to this point here, this year right here, and don't do it anymore. Yeah, exactly. I mean, it was incredibly frustrating. And, you know, my dissertation ends up being cited all the time because I, you know, looked at the documentation. It was like, okay, what were they actually saying? What were the sort of policymaking processes? How are the officials providing their advice? What was being taken?

What wasn't and so on? And so it was really frustrating to be told, well, yeah, even though the documents say that you can't include it in your work, which, yeah. So that was frustrating. Well, that just shows you what year was this? So that was, I think it was finally all completed and everything in 2007. So, what is that, folks? It's a long time ago. 17 years ago?

17 years ago, they were already, and I, just for my own brain, right? To my own brain, I just go, 17 years ago, they were already putting their finger on the scale. And it probably goes a lot further back than that. So you've said right in the hop, right up, you know, you're looking into the things. future. You're looking at like what these policies are going to lead to. Let's talk about it. You you rattled off a whole bunch. I don't know where you want to start. Do you want to start accounting ESG net zero agriculture? Where does Tammy want to start? Um, well, we could look at say net zero because all of these things are intertwined, right? So with net zero, you have the pulling in

and the sort of embedding of ESG elements into how the economy will be structured. And then that has knock on effects to oil and gas in particular, but also agriculture. And if you start to undermine those things, then it affects our standard of living and our way of life, right? Because if you're not allowed to have an internal combustion engine vehicle in Western Canada in minus 40, I don't know how you're getting around. And how are you going to afford all these different things and it increases the costs of everything? And if you start getting it into agriculture, how are you supposed to farm in Saskatchewan or Alberta with an electric tractor? How does that work precisely?

Because, you know, everything gets banned eventually that runs on hydrocarbons. So how are you going to be farming those massive fields with a battery tractor? and what's that going to cost? And then if you're not allowed to dry your grain, then what happens? What happens to the quality of the grain? How much is spoiled? What then happens to the price of food? And so all of these things are affected by what's going on with the net zero transition

and embedding these ESG scores and whatnot into accounting. And I guess if I could describe it a little bit, When I was listening to Brian Moynihan, who's the president's CEO of the Bank of America, he was quite adamant a couple of years ago saying that it's really important to embed this stuff in finance, in accounting. Because if accounting does it, everybody has to do it. Because you change how accounting is done. And I know that it may seem rather esoteric. you know, oh my gosh, accounting, this sounds really complicated. But by including it there,

it ends up being part of everything that goes on for how a business operates and how you report on things. Can you explain to me how ESG or net zero or both are put into accounting? What does that even mean? Right. Okay. So right now, companies can voluntarily provide information. on their sustainability or environmental social governance ESG record and how it affects their operations, right? It's voluntary. They have an ESG report or, you know, it's something that they voluntarily put out there because they want to signal that they're sustainable, that they're helping out in their community. They're doing all these different things to be more green or whatever. But there's been a movement since I would say 2015, maybe a little bit earlier, but definitely

2015 is the big year and this movement was towards mandating and embedding this this reporting within the financial disclosures to make them legally enforceable so that a company then is liable for whatever they say about their sustainability targets and goals because they're tied to financials so when you have a financial report there's certain liability and legal issues related to those disclosures because it has to be audited, it has to be accurate, and so on. And now they want to do that with ESG. So whatever you're talking about what your company is doing with ESG, that will be now tied to your financials,

because it has to be issued at the same time as your financial reporting, either as part of your financial report or as an accompanying annex to it. And then that means you're liable for whatever you say. And if I can just kind of discuss a little bit about the history, the push came along the same time as the Paris Agreement. So we have Mark Carney and Mike Bloomberg. They set up a group called the Task Force for Climate Related Financial Disclosures or TCFD, and it created a framework. Then in 2021, when we had the Glasgow Climate Conference, a new organization called the International, called the International Sustainability Standards Board was created.

And they were supposed to produce a new global language of sustainability reporting. And they call it a new global baseline. And this is embedded in the IFRS Foundation. So it's like all of these acronyms and these little groups and so on. And so the International Sustainability Standards Board took the TCFD framework. They used that kind of as their baseline, and they built on it. And so they released their standards, their final standards last year. At around the same time in 2022 or so, Canada created the Canadian Sustainability Standards

Board with the purpose of implementing whatever, to work in lockstep as how they describe it, with whatever the ISSB produced. So they released in March their draft standards that's open for comment until June 10th. So this is what's really important is that Canada has now basically cut and pasted the ISSB standards and they called them Canadian in typical Canadian fashion, I suppose. And so they're open for comment until June 10th. And it's really important for as many people as possible to put a comment in to say, what are we doing? This is crazy. And I guess a little bit later in our conversation, I can talk about the eight or nine key points that need some pushing back on before they decide

that this is something everybody has to do. Okay. Let's say I'm, no, wait, I'm going to, I'm I'm going to, does this affect all business owners? Does this affect everyone in Canada? I assume on some level it affects everyone in Canada, but like this is this is aimed specifically at business owners, correct? Right. So originally it will be aimed specifically at publicly listed companies, publicly traded companies. So once, once these standards are finalized, whatever, then the

Canadian securities administrators, all the different provincial ones will decide what parts of it they want to keep and work that into a rule. Right. But they were very clear in the foreword of the standards that because they're requiring emissions reporting from the entire value chain of a company, companies that aren't publicly listed and independent entities will have to submit to it or comply to it yeah so and that's usually with the emissions reporting i'm going to try and pick on a company because i'm just trying to think of one that's publicly traded where i can just i'm trying to get my brain around what you're talking about forgive me i can be dense at times let's take west jet just for uh you know an example. You're saying that not only do they have to break down their emissions on saying a plane

trip across Canada and what the emissions are off of that, but then they have to break down every component of the plane and add up all the emissions that come in and the food that goes on the plane and I don't know how crazy we were going to get with this, like every employee that drives to the plane and on and on and on and then quantify that and put that in a report that goes alongside their financials and everything else. Like, am I, I feel free to just clarify because I feel like I'm really dense this morning. Or this is, this is the way it is supposed to be. So a moron like me sits across from you and I go, I just got, like, explain it to me like

I'm two and you probably already are. I'm just like, is that way, like, am I getting anything correct here? Yeah, that's, that's about it. So if I can just quickly describe what, what? but the different levels of emission accounting there are required in these, right? So there's three scopes of emissions. Scope one is the emissions that you're directly responsible for. So that would be for WestJet, all of the emissions in their operations that they control.

So the amount of fuel that their aircraft burns, the amount of energy that they use in their operations, all of those different things that they're directly, responsible for. Scope two would would be the emissions in the energy of like the lighting and the heating of their their particular offices and headquarters, probably a portion of the emissions in the airport, you know, like the energy that that comes from your utility supplier. And then scope three is everything else along the value chain. So as you pointed out, the travel of of your employees to and from work.

That has to be accounted for. They have to quantify that. They have to quantify that. They have to quantify the amount of emissions in the food that they're, that they're putting on the airplane, probably the blankets, the pillows, the, the emissions involved in disposing of the toilet matter, you know, like everything. And it also includes the transport of those things to the airline. And so that's called scope three.

And it's everything up and down the value chain. Now, the standards say, well, we know this is really hard to quantify, but do your best. Try to have it verified by a third party. I'm not sure how you do that. And if you can't do it in a really good manner, you can estimate. And typically, because these would be linked to the financials, companies would overestimate, right? Because you don't want to be held liable for underestimating.

And so then if I can give another example, let's say, for example, your Cargill. And Cargill is operating where they purchase livestock for processing. You as a livestock producer would be have to report your emissions of raising your cattle. So what's your emissions for raising your cattle, all of the different things involved in that, your bailor twine, your feed, the emissions and the feed that you give your, your cattle, and so on? So you're going to have to provide that number to cargo. They'll be asking for it. And so, I mean, it's absurd and crazy.

Okay. Here's my question, Tammy. And I forgive me once again, but I go, So, okay, I'm a rancher. We'll use cargo. I got 500 head of cattle. You know, we break down real fast. Oh, each cattle is one X, right?

So I got 500X. You give them that number. What's the big deal? Like, what happens then? Is it just a number on a sheet? And it's, or explain to me where this goes, because that's the one thing you said right up the hop is I'm trying to connect. Yeah, I give him 500X.

What do you do? It goes off into La La Land on this spreadsheet. What's the big deal? Where is this going and why is it such a big deal? So the reason why it's a big deal is that let's say the shareholders and investors into Cargill say you've set these targets where you're going to reduce your emissions by X amount every year. And because these targets, you might think that you're doing really good and that your emissions profile is nice and stable and whatever, they don't want stable, they want it to be zero. So every year you have to improve on whatever targets you've set.

So let's say for 2027, Cargill says we're going to reduce our emissions by 5%. And then in 2028, it'll be another 5% or whatever. So every year they have to get better, which means then that they'll be looking for livestock producers who are also providing better numbers. So those investors will be putting pressure on Cargill to lower their their emissions. And, you know, are they going to then start cutting livestock from southern Alberta because not only do they have higher emissions, because the energy that they use in their operations is from a natural gas power plant, which will count against them. They're also in an area of high to extreme high water stress, the way they're. these standards identifies. So then it's like, okay, well, we're trying to be sustainable.

Our investors are saying we need to improve biodiversity. We need to improve how we deal with water. You're purchasing livestock from an area that, you know, is looks bad for water. And it's got a higher emissions profile than beef that we can purchase from Mexico. So then it becomes a matter of, oh, well, if we're here to trim our emissions profile, who's the low-hanging fruit? And then that has to get better every year. So you might be safe for the first couple of years of them doing this, but by 2030 or 2032 or whatever it is, they could be diminishing where they get their livestock from. And with respect to livestock in Canada, if you're getting some of your cats,

from Ontario, they use a lot of hydropower. So the emissions profile of that farming operation will be better than the emissions profile from livestock coming from Alberta, Saskatchewan. In addition, Ontario and Quebec are not considered an area of high to extreme high water stress. So that's another great box for Ontario and Quebec. And meanwhile, Western Can you... What is high water stress? So within the standards, they mandate the use of industry-based guidelines. And these industry-based guidelines are based on the Sustainability Accounting Standards Board. So it's another one of these appointed bodies that develop stuff.

And they cover 11 sectors and 77 industries. So when investors are looking at what they invest in, And I think one of the interesting questions is I keep being told investors want these standards. And when I ask, well, which investors, I never get an answer. But the investors, I think that really want this are the institutional investors. So and the big pension plans. And so if they're looking to lower their emissions profile of all of their big body of investments, they want this data because it makes it easier for them.

And it's not an expense they have to pay for. because all of these different companies will be doing it for them. So anyway, they have to take into account these industry standards. So 29 different industries are covered by this characterization of water stress. So, for example, a home builder has to say whether or not how many houses they have in areas of high to extreme high water stress. And this water data comes from the World Resources Institute Aqueduct tool. And the aqueduct tool is only meant to give a sort of high-level look at different regions in the world. And it's not meant, and it has a little disclaimer on it that it's not meant for to be used in a granular way, like to look closely at what the local rules or anything are.

It's not meant for that. But investors don't know that. They'll be thinking, oh, this aqueduct tool says this is a bad area. It's high to extreme high water stress, meaning there's prone to droughts or it's dry or there's a lot of different. There could be flooding and whatnot. So investors will be like, whoa, this looks bad. I don't think I want this on my books. So that's.

And so Alberta and Saskatchewan, forgive me here in Western Canada where we say. it is considered under this tool to be high water stress. To extreme high water stress. Yeah. And southern Manitoba, southern Saskatchewan, southern Alberta. It goes like this across the map. It's really quite interesting. I'm trying to, I guess what I'm trying to get.

And once again, I hope we're doing a good job of it. Because if I'm sitting here as a cattleman, I'm going, okay, what the heck do I care? I give them my number. This is my, honestly, a little bit of a. fictitious number is kind of what it's like, oh, just estimate. Okay, fine, I estimated. Nothing happened and whatever. But over time, what they could see happen is more cattle. Let's just, you know, if you go far enough out, all of a sudden, it could look like in order to reduce the emissions for Cargill, they start buying more cattle from Ontario, maybe Mexico,

because honestly, it helps with their ESG score instead of buying from the farmers and ranchers that are literally right beside the Cargill plant here in Alberta of Saskatchewan because their ESG score because of high water stress or whatever else is tucked in there, all of a sudden makes them a rancher or cattle they don't want to bring in because of this weird score. I'm trying to understand this, but it's really confusing. And I feel like at times that's the bloody point. Yeah, it is. It's meant to, so that, you know, if you talk to accounting professionals, they're looking at this and it'd be like, oh, okay, data, more data is better.

And Mark Carney is often fond of saying what gets measured, gets managed. Well, everything will be managed because everything will be measured. And it also makes it so that emissions becomes the new currency. It becomes the only thing that matters for what anybody does. It doesn't matter if they're a credit risk. It'll matter if they're an emissions risk. So if you go to the bank or you want to sell your product to somewhere, they're not going to be looking at do you have a good product or do you have a good business plan or something like that?

They'll be looking at what's your emissions? If you have a high emissions number, we don't want your stuff because it's going to bring us down. And I think what it makes it even worse is the way that these standards are written, it's clear that the main element that they really care about is the emissions. And it's about putting climate at the center of every decision. Every business decision has to be centered around climate. And like, that's not the purpose of a business. But with the net zero plan, that that's what that's all they care about.

That's all that matters. And when you look at how the industry-based guidance is structured, it's not applied equally. So let me give you an example. An oil and gas company will have to, talk about their scope three emissions, including the emissions of people using their product. So you burning fuel in an SUV, that gets counted against the oil and gas company. So the oil and gas company has to estimate what the emissions profile is of people using their product.

And they also have to account for the emissions embedded in their reserves, proven, and probable reserves. So now your number has just gone, you know, out the window if you're a Suncor or an oil sands producer because they know where the resource is. They know, you know, to some great extent, what the proven reserves are. They have a great estimate for the probable reserves. And now they're going to have to account for the emissions embedded in there. And that contributes to their overall absolute emission profile. Meanwhile, wind only has to account for the material, the emissions in their materials, the top five. And it specifically excludes the concrete pad, which is where most of the emissions of a wind turbine are.

It's in that concrete pad. That's excluded from their calculation. what's also excluded is the energy used to create the wind turbines and the transportation, like moving that turbine from where it was manufactured out to where it's going to be deployed in the field. That's all excluded. Why does it get excluded? Exactly. Why is that excluded? You only have to take the top five materials and then you exclude all the things that could potentially put their emissions profile. That's artificially making it look better than it is.

If we're going to use this insane accounting scheme that's artificially making something look better than it is. And making oil and gas look worse. So then if investors are looking purely at the emissions profile, they'd be like, let's go invest in wind. Because even solar, solar has to take into account the electricity and energy involved in creating the solar panels. Well, why isn't that required for wind? So there's this distortion on how it's applied in order to shift the investment money so that the investment goes out of oil and gas and it goes into whatever is favored. And right now, what's favored is wind.

So then the investors will be like, okay, well, in order to help towards net zero and we need to keep our emissions profile down, we're going to take our money out of oil and gas and we're going to put it into wind because that's got a better profile. I don't know what to say at this point. Like to me, I'm just like, okay, part of my brain goes, one is, so eventually over the course of the years it takes to roll this out, eventually it's going to be harder and harder for businesses to interact with one another based on financial principles, which is pretty much what they operate on right now. And it's going to be more on how you interact with the climate and how you can make yourself look compared to these goals. So that's going to be one, I assume, even to the financial institutions, right?

Like, oh, you've got to have bad ESG score. We can't, you know, it's almost like your credit score. Or we can't deal with you until you improve your ESG, right? That's going to be one big, giant part of this, correct? Yes. So if you're a business, right now, you mentioned publicly traded, this is where it's getting enrolled out, but the way the publicly traded then is going to eventually come down is on the people that deal directly with them, which pretty much implicates any business owner, I would say. And if you can't show that you're accounting on ESG, I can't believe I'm sorry. Like this just sounds like a bit insane. Maybe not a bit, a lot. Then eventually that company won't work with you because you're bringing down their score.

and if it becomes this entirely new system of governance, Sensor. So that's a huge chunk of this, correct? Yes. What's the financial implications to a company of implementing this? Like, is it just like, listen, I just write it down. Sean Newman podcast, my ESG score is zero right now. I'm feeling pretty good. And I get hired.

Maybe there's a huge, maybe I'd become Uber successful off this, Tammy. I don't know. What's the cost of bringing something this in? Are they just going to trust every company to write out their ESG score? And here it is. And this is my emissions. I'm net zero. Right.

So I'll just talk a little bit about cost of compliance and then assurance. Assurance is being able to verify the information that you're providing. So the first, someone was in a meeting with some people from the Canadian Sustainability Standards Board and asked, okay, so have you done a cost benefit analysis? What are the implications for the Canadian economy? What will this cost companies? How will that have a roll on effect throughout the economy and so on? And they said, no, we didn't do that. But you can look at Australia because Australia did an impact analysis and they're

similar. They're implementing something similar. So I dug up the Australian government's impact analysis. And all they looked at, they didn't look at what the knock on effects are. throughout the economy they just looked at how much would it cost a company and they had different sizes of companies but the average was okay so the average company that's publicly listed in australia that has at least a hundred employees with 50 million uh dollars an annual turnover the initial the initial transitional cost of compliance is about 1.1 million dollars that's for

year, then every year after there's ongoing recurring costs of approximately $641,000. And that's, you know, the money to buy the software to manage all of this stuff. It's doing the scope three emissions accounting. It's training the staff. It's also looking at the climate scenario analysis is required by these companies and so on. But that's money that could otherwise go to improving their products, right? Or paying profits to shareholders or hiring more staff or, you know, any of these. That's money lost from the company.

And who does it go to? It goes to consulting firms, software providers, accountants because these things have to be to some extent audited. And so one of the webinars last year where the ISSP was talking about how great their standards are the international accounting people said whoa whoa whoa who's going to be auditing this stuff how are you going to get assurance and they said well you're going to do that and they said but we don't know how we haven't developed a framework of standards to educate or to show to tell auditors what to do and so they've been working on that and and apparently something's coming out this year with

standards for auditors on how to audit all this stuff because a lot of it is subjective. And one of the letters to the UK people said, we don't have enough auditors. There's a staffing shortage. So you're going to bring in these standards. There's not enough trained people. We don't even have know how to do this, but you're going to ask everybody to spend this money and then try to find an auditor to ensure compliance. if you don't get it audited, then you're liable.

So it's... And liable, when you say liable, what do you mean? That you'll get sued. You'll get sued by investors, and there's a lot of activist investors out there. So the litigation risk is insane. Now, if I can just give a little bit of context here for what other jurisdictions are doing, so Australia is looking at implementing the ISSB standards, but they've modified them a little bit.

They've offered what they call safe harbor. So for a lot of these things like transition plans and targets and all that forward-looking things, scenario analysis, scope three missions, which you don't have control over, they're offering what they call a safe harbor, which means that a company has some protection when providing information that's really outside their direct control. Canada doesn't do that.

the United States introduced its climate rule last they introduced a draft in 2022 then it took a long time but they released their final rule in March it immediately has been taken to court they've indefinitely stayed the the climate rule but what they did is they offer extensive safe harbor for companies so anything that's even remotely outside the direct control of a company, they're not liable for. They don't mandate scenario analysis. They don't mandate scope three emissions reporting. They don't mandate industry requirements.

Those are all things that Canada does. And those are all the things that cost the most money. So Canada is mandating all of that and there's no safe harbor. So if a company, let's say, make some kind of prediction, while we think the weather is not going to be so good next year, We think that's going to affect our bottom line. But then it turns out being really good, but the investors are mad because you've made a wrong prediction. They can be held liable for not making the right prediction about stuff.

So, you know, for the larger corporations, this can be an issue, particularly if there's activist investors who want to see your company, you know, taken apart, I suppose. Or, you know, death by 1,000 cuts. You have to, I'm trying to keep pace here, folks. Predicting the weather. What do you mean? So you got to forecast the next year and figure out what the weather is going to be? Oh, yeah, but they call it climate, right? So you do a climate scenario analysis, which looks at what the potential for extreme weather events,

all of these physical risks to your operations, as well as transition risks. So transition risk is you have to predict what kind of regulations your government, where you're operating might undertake that could affect your company. I mean, it's crazy. So you have to do these. The weatherman can't get it right on a week by week basis. How is a company with no background in meteorology going to be like, oh, and by way, next year, it's going to be an extremely cold weather? you know we're going to have a bad one so we're going to estimate all these this i know it's it's stupid so part of the the thing with the climate scenario analysis um is that companies are looking for

these consulting firms like uh deloitte or kpmg and there's other ones that also do them and they run anywhere from 100 000 to 400 000 dollars and you'd have to pay that every year it's not like you can that one scenario analysis and repurpose it for the next year because, you know, if you're doing the short term, how long is short term? And you have to provide this every year. So for short term, you would need a new one. Maybe you could get away with not having a scenario analysis that does medium and long term because you have to do all three. And then the standards say, well, if you can't afford it, you can just use one of the other ones that the IPCC, puts out that's the intergovernmental panel on climate change or the scenario analysis that the

international energy agency has put forward and the thing is nobody's ever actually use those for business decisions ever and now they want to mandate that for all businesses um i know the european union for example has has gone even more crazy where they've created a network a collection of 12 different ESG type things that companies have to follow. And they've rolled that out this year. I think we ought to wait and see what happens in the EU, how the companies handle it and how terrible it is for them before we jump on this bandwagon.

You said there was eight or nine key points. Could you rattle those off for the Canadian listener? What are the eight or nine key points of this? Right. So we've talked about some of them already. So number one is the scope three emissions accounting, the climate scenario analysis, the safe harbor issue, the unequal treatment across the industry guidelines, the use of the World Resources Institute Aqueduct tool, which is just appalling that they want to embed this. That there's, I guess the one of the things we haven't talked about was net emissions is not mandated. only absolute gross emissions. So if your company is using carbon capture, it's unclear if you'd be able to take credit for that. So they have a space where you can talk about carbon offsets

that you've purchased, but they need to be verified and from a government authority and so on. But there's no place there to say, well, actually, our net emissions are X. All they want to know is what your absolute emissions are. Then there's the cost of compliance, which we've talked about. And then I think what is the most important issue is the competitive disadvantage that will be brought to Canadian companies.

And if I can just talk a little bit about that one. So as I mentioned, the Securities Exchange Commission in the United States has done their climate rule and it doesn't do any of the really intense, expensive stuff that Canada is doing. Mexico's not doing anything at all. So here we are part of the US-Canada-Mexico trade agreement, formerly NAFTA. And our trading partners aren't doing anything close. And I've heard it said that we have to do this so that we can maintain access and maybe increase access to the European market. But only 8%, 8% of Canadian export trade is to the European Union. 78% of our export trade is to the United States. And I think our fifth largest export country is

Mexico. So, you know, we've got most of our trade goes to our trading partners in North America. And we're bringing in standards that will put us at a significant competitive disadvantage because it will create this massive cost for the larger companies that will trickle down through to the smaller companies. And what I've heard is that some companies will have said, well, we'll just move south of the border because why would we stay in Canada if we would be bound by all these rules and be liable for it on top of it and be liable for it all right and you know even if the the securities and exchange commission rule gets implemented as I've mentioned they they don't go nearly as far as what Canada is doing which of course puts us at a disadvantage especially with the liability issue

So when you look, you know, when you look into the years to come, let's say this gets implemented. June 10th is when it's open to put in thoughts, right? Correct. To comment on this. So those are the two links you sent me, correct? I believe you've sent me where you can comment. So what I'll do is I'll put that in the show notes. That way if somebody wants to, you know, you're a business owner. You're like, I don't like the sound of this.

You can go comment. If this gets implemented, what's the time frame on it being? implemented. So comments are open until June 10th. Have they given a specific time frame on how long until this starts to be like just common occurrence in publicly traded companies? Right. So that's a really great question. Once the comment period is over, then the CSSB takes into account all the different comments and decide whether or not they're going to make any substantive changes to the standards. I suspect they won't really make any changes. And then they'll release their final determination by the end of this year. Then the Canadian securities administrators,

which all have different provincial entities, so there's the Alberta Securities Commission, the Ontario Securities Commission, and then Saskatchewan has a funny name for theirs. I can't remember what it is right now. Then they have to go through those standards and decide if they like what's there or if they're going to change it. Then they will release. their version of what they would want to include in a rule. And I've heard that would be like first quarter of next year. Then they'll receive comments on that. Then they'll release a final version for incorporation into a rule that will mandate it.

And that would be the end of next year for implementation fiscal year 2026. So we're looking at this being implemented in some form within the next 18 months. And then when you start to look at the tea leaves, let's assume it gets implemented in 18 months because I'm sorry, government, I don't have a whole lot in faith in you that you're not going to implement something like this. What do you see like when you're staring at this, you know, I don't know, is there a best case scenario, worst case scenario, whatever scenario you've got sitting there, you know, when you start to look at this. Because I mean like what's the, you know, 2026, geez, it seems like 2026 is going to be a year because that's certainly when all the different things. in regards to how many gas power, or what is it, is it fossil fuel powered vehicles? Gas powered vehicles. I can't remember how they state it.

It can be sold on lots. And you go, okay, so 2026, it starts. But like, where does this put us by 2030? Like, Tammy, when you're looking at this, where do you see the Canadian economy or Canadian business in general being at if this gets implemented alongside everything else that's coming down climate related? That's a really good question. And I don't like to be a crystal ballgazer,

but you kind of have to in this circumstance because, I mean, if you look at what the ultimate goal is, the ultimate goal is to stop the use of oil and gas, period. That means no plastics, which is why they have this ridiculous plastics registry, and now they want to have a global plastic treaty, and they want to gut the petrochemical industry. So they don't want oil and gas used at all, especially if it comes from Western countries.

So if that's the ultimate goal, what steps are being taken to get there? Well, as long as investors are still making money off of oil and gas companies, they'll keep investing in it. But with these standards, it basically makes it so that they won't be making money off these companies because you have different countries that are mandating these net zero plans and trajectories, like in the UK, it's a law. In Canada, it's a quasi-law. with the Net Zero Accountability Act and some of these other things that they brought forward.

And so companies are left, you know, do we continue existing? Because, I mean, the point is to phase it out gradually so that it's not a sudden crash to the system. But if everybody's doing this, then so much money gets sucked away by compliance that, you know, there's this shift from your bottom line and being able to pay out your investors and that money gets shifted over to accountants and auditors and software companies that are offering all of this tracking stuff. So I see that the economy will take a really big hit, especially if the United States doesn't do anything close because that's who our largest trading partner is. So if our largest trading partner isn't doing it, but we're doing it, what's the, I mean, the math is there.

It's not going to be good. Now, maybe it's possible that Canadian companies are able to become more efficient and they get a lot of investment money because they're committing to the transition and all that kind of thing. But in the end, you still have to compete with products and whatnot that are coming in from other jurisdictions. Now, one of the things I've heard is that Canada might want to do something similar that the European Union is doing with its carbon border adjustment mechanism, which is another a euphemism for tariffs. So, you know, if you're not doing the same level of stuff as we are, we'll put a tax on it so that you're at the same as Canadian companies. Maybe, maybe they'll do that. But in the end, if the United States doesn't do it, I can see a lot of Canadian companies just moving south of the border. You know, I don't know why I'm reminded of safety when you talk about all this stuff.

But like once upon a time in the oil field world, I was in safety. And certainly are there good points to it? Yeah, absolutely. You know, do you want people dying because of XYZ? no but eventually it's kind of this land of the make-belief you know it's just like you know how safe can a website be like when it's safe and it's you know you've haven't had an incident in like seven years and then you have one incident and oh now we got to make sure none of this ever comes in and we got all these courses and we got all these things you got to get rubber stamped and everything else

and what i what i saw was the ability of companies to um get the rubber stamp that's all actually that people wanted was the rubber stamp right you don't oh, you got the stamp? Great. You can work for us. That's all we care about. What's stopping companies from getting, you know, figuratively or maybe literally, I don't know, a rubber stamp saying, oh, yeah, you're net zero.

You're great. Like, what's the stop for people from like, you know, you've already mentioned like the UK. We don't got anybody to even go check this. So what's the stop? You know, Canada, they implement it. And everybody just becomes net zero overnight. And they're like, oh, well, I didn't see that coming. because like when I look at

when I look at this sorry Tammy when I look at this I go like the world doesn't isn't going to stop I don't care what Canadian politicians think or bureaucrats think the world isn't stopping using oil and gas anytime soon like just you know unless we all go to the stone ages

that isn't happening anytime soon so they can keep putting the rules in but the demand for oil and gas is there Western Canada unless like true climate change just happens overnight we go to plus 40 I think in the winter time it's going to be there. What's yeah, I don't know what's going to stop companies from just getting the rubber

stamp moving on with their life? That's a really good point. And I'm so glad you brought that up because that is a potential unintended consequence is that you're going to need people who will go around and inspect and monitor and verify. Right. And so then once if you have a group that is you know, rubber stamping everybody. That's a potential unintended consequence of this. And so then does it become a matter of, well, we want to have all of your information linked online.

And so then we can make sure that what you're reporting can be verified and so on and so forth. So that's a possibility. I think they haven't really thought through all of these potentialities. As yet, they're just really rushing. to put this in place. And because the main goal is to have the pension funds and the big investors shift their investment away from oil and gas so they have an excuse to do it into whatever the new trendy transition investments are,

whether that's batteries or EVs or wind, solar, whatever. It's to shift that money and eventually have the, the oil and gas companies shut down. Then, of course, there's the agriculture, right? Because they don't want you to be eating meat. And so then it's like, how do you, how do you diminish that supply? And so you take out the best producers, which is, you know, Albert and Saskatchewan.

And then it becomes you're still, there's still meat there, just not very much of it. So how that gets dealt with down the road, I'm not sure, with respect to maybe someone rubber stamping that your net zing. or that your emissions profile is much better than expected. But I think the one thing I haven't discussed yet is that the Office of the Superintendent of Financial Institutions, which is the regulator for the banks, they've mandated the climate disclosures for federally regulated financial institutions.

So starting this year, all the banks have to do all this. at first it's their commercial banking they're they're creating a data profile of all of their portfolios and eventually because all of the major banks in canada have signed on to the glasgow financial alliance for net zero where they've pledged to reduce the emissions on their books then they'll start going through and seeing where they should reduce and it's not just it starts out commercial commercial loans and financing. And then it goes down into mortgages, car loans, and any other personal lending. So it starts out with the companies and then it works its way down into individuals.

Then they can cross reference between what you're saying to your bank and what you're saying as a business to investors. And I think one of the things that they that they insist upon is that these will be digital reporting so that it can be easily analyzed with maybe an AI or whatever and cross referenced. And I think maybe that's their wedge to ensure that people are actually reporting what they say and to maybe bypass the idea of the rubber stamp. Maybe. So just so I'm understanding.

understanding this clear the canadian banks like all of them or just you know some of the major ones all anything that's regulated as a as a federally regulated financial institution that's insurers all the major insurers um pension funds and the federally regulated banks so some of the the co-op banks or the credit unions, ATB is separate. They're not covered under that, but there's 400 different financial institutions that are regulated by OSFI.

So they're going to be looking at their commercial businesses that operate under them and start to go, what is our ESG score based on how they do business? Essentially? Like this is the first step of what you've been talking about for the last hour, essentially, the banks and who they have underneath them. So in one instance, they're going to be putting pressure on these institutions. You know, they're not going to love oil and gas companies, essentially is what you're pointing

out, or agriculture for that matter. On the flip side, well, I tell you, ATB starting to look, or I think of like Bow Valley Credit Union and different businesses like that are going to start to look very appetizing for business because they're going to be the places where they can actually probably get welcomed into the door for having a thriving business that isn't attached to ESG. But long term, that's how the majority of the system is going to be ran. And the offshoot, the unintended consequences is that there's going to be people trying to find workarounds of this.

It's just that the entire system is moving towards this ESG. What are you doing with your emissions style reporting? and it's going to bleed through all of Canadian society. And when I get to all of that, well, that ain't going to be great, right? Like, how's that? What are the consequences of that? And then the next step is that the United States isn't doing that.

And so what you're pointing out, I think, is more brain drain coming from Canada. And they just, oh, wait, they just, they're trying to get it so that it costs you more money to leave Canada because they realize if they've done anything possibly, Tammy, of like, I wonder what can happen from all this. Oh, we're not going to do any studies on it. But we know more people are going to want to leave Canada.

So let's increase the taxes of leaving Canada so that they don't leave Canada. And we kind of put them between a rock and a hard place. Am I wrong in my thinking there? No, that sounds about right. And if you think about it, so they're trying to prevent people from leaving. Isn't that what they did in East Germany where you weren't allowed to leave? So they make it financially difficult. So they set up these sort of financial Berlin walls rather than,

a physical wall so technically you could leave you'll just have to leave a lot of your money behind right um so yeah i mean it's it's appalling that we're doing this because it's an interference and intervention in what is supposed to be a free enterprise free market system that's supposedly what canadians believe our country how it operates what it's you know some of its financial principles are But this is so beyond that because it's almost like a form of micromanaging how businesses operate. And it's forcing them to put climate at the center of every business decision rather than being a business. Then efficiency, then finding ways to make money. And provide a return on investment.

So it's rather ironic that it's investors supposedly who are pushing this. But all it does is take away the amount that they will get as a return on their investment. But then there's a really great article written by a law professor at a Fordham University. His name is Sean Griffith. And he was talking about what the implications were of the Securities Exchange Commission Climate Rule. And when he was talking about who wants these standards, he said it was these big asset managers, like Black Rock and State Street and Vanguard or whatever, because they don't care about the return on investment per se

because they get paid by whoever gives them funds to invest. And it's those other funds that receive the return on investment. But that's not actually how BlackRock makes its money. But they want all this data so that they can shift investment around based on stuff. And then they don't have to pay people to dig up this information. and try to get companies to comply because companies like, I don't want to do that. That's expensive. I'm not tracking scope three. But by making the regulators do it, then BlackRock and all these big asset managers, the Canada Pension Plan Investment Fund, now that it's being

forced and every company has to do and every company then takes on that expense rather than these large institutional investors who want it. I highly recommend this article because he goes goes into great detail about what that means and how it distorts what our system. Because I mean, we're very similar to the American financial system in some respects, especially when you look at it from a philosophical perspective that we're supposed to be free enterprise and all this kind of thing. And he really goes into some detail explaining why this is an aberration and should be resisted. And forgive me, what article and where can people find it?

Right. I will send you a link that you can put in the show notes. Sure, sure. Okay. Yeah. Yeah. Well, I don't know how much else I got. This has been an action-packed hour, Tammy.

Before I let you out of here, is there anything else you know, you want to bring up to the listener? So, you know, because we have time, by all means, I'm just sitting here going, I wonder what the text line is going to do when this comes out. And, you know, I assume if you have questions or more thoughts, you know, fired off via text. Because the one thing we can do is we can always have Tammy back. If there's businesses that want to get clarification or anything like that, I do appreciate you giving me some time today. And finally, is there anything else you want to make sure that the listener knows? These kinds of standards, they tend to be constructed by appointed bodies.

of a very narrow subset of people in our society, right? So, for example, the Canadian Sustainability Standards Board is comprised of accountants and sustainability people from major corporations. Now, why is it that this small subset of our economy with very little attempt at conversation with regular Canadians and politicians are putting forward something that is going to absolutely transform our economy? with no discussion amongst the Canadian public. And it's the same thing with the Office of the Superintendent for Financial Institutions,

another appointed body of a certain subset of individuals from within our society who are making these profound decisions without real conversation. This is something that we should be talking about in town halls or whatever and decide whether or not we as a nation wish to transform, our economy in this way. And it has not been done. And I hear from politicians, oh, well, they're an independent arms length body. Yes, okay. But why are they given this power to be setting these standards which will transform our economy? It changes everything. And, you know, granted, Parliament right now is probably not the best place to have this conversation because every party,

except for the conservatives, probably support it. And you can see that, with the Senate bill, the Climate Aligned Finance Act, which is, you know, as a historian, and I've read quite a lot about Nazi Germany. This is something that Nazi Germany would be proud of. And I look at where we're going. And this is so far from what Canadians know and understand our society and economy to be. And it's these appointed bodies doing it. When you say Nazi Germany would be like, I forget the,

term you just used, it just spaced on me. Like, they'd be applauding this. Why do you say that? What is it about this that aligns with Nazi Germany? So if you look at how the banks and financial institutions during 1933 onwards, they restructured how finance was done in order to comply with the directives of the National Socialist Party, which was the Nazi Party. And there's some really great books written about this where it outlines precisely how different things were done about who could sit on a board, who could be part of a financial institution, how these decisions have to be made, where the financing needs to go. And the Climate Aligned Finance Act, which is before the Senate right now, does all of those things where you have to have a climate export on your board. if you've worked for or lobbied for or been associated with an oil and gas company, at any point in the previous seven years, you may not sit on a board.

So you could not be on the board of the Canada Pension Plan Fund or RBC or any financial institution. And it goes on. I mean, it's absolutely horrendous. And these standards are very similar because they're basically in a euphemistic way, telling investors and banks where to put their money, what to finance. And it's not based on whether you're a credit risk. Are you going to be able to pay this back? What's your business plan?

None of that. None of that really matters. All that matters is are you doing this emissions thing that the federal government wants? Because the federal government wants the net zero transition and all of these things are meant to accomplish that. And if it means redoing, restructuring our entire financial system, then that's what they're doing. That is not what a free enterprise, free market economy does, because that's the federal government basically telling banks and investors what to do. Yeah. Oh, man, I tell you what we are going to do. We're going to take a brief pause. We're going to slide over to substack.

I got one final thought before I let Tammy. This is, hmm, there's a lot to true on today. and we're going to make sure that we let the substack audience know about it as well. That way they know that you've been on one if they're not paying attention. And we're going to make sure we go over there. So if you want to come with us, folks, slide over to Substack and we'll take a brief pause.