The versatility of natural gas uses in various sectors of the global economy, the flexibility of delivery of liquefied natural gas (LNG), and the search for lower cost, lower emitting energy sources, have created a significant policy role for natural gas (and LNG), along with other lower emitting sources. To address the climate-related risks and opportunities that affect Cheniere’s business and complement our proven commercial and operational strategies, Cheniere has established its Climate & Sustainability principles. These are based on our corporate vision and mission statements and aim to ensure that a culture of sustainability is part of Cheniere’s foundation to achieve a resilient, sustainable business model in the 21st century, while achieving shareholder value. We intend to do that by applying leading science, disciplined operations, engaging with our partners in the LNG supply chain and transparently reporting our Environmental Social and Governance (ESG) performance. These principles have been reviewed by the Board and adopted by the Company and will guide Cheniere’s sustainability efforts moving forward.
Cheniere recognizes the scientific consensus related to human influence on the climate system and the significant challenge of providing clean and affordable energy. We believe the Paris Accord is a good start related to global action. Cheniere sent a letter to the White House in 2017 stating the company’s support of the agreement. Cheniere sees natural gas as a fundamental energy source in the energy transition to a lower carbon future, along with renewable sources of energy. Continued improvements in methane emissions management and success of carbon capture and Sequestration (CCS) are two important programs that need to be supported by the industry.
1. Science: Cheniere will promote and follow peer-reviewed science to assess our impacts, anchor our engagements, and determine our actions
Cheniere recognizes the scientific consensus on climate change and the significant challenge of providing clean and affordable energy. We believe the Paris Agreement is a good start related to global action. Cheniere sees natural gas as a fundamental energy source in the energy transition to a lower carbon future, along with renewable sources of energy.
Cheniere supports collaborative published peer-reviewed research and employs best science to inform policies and decision-making. The company also aims to use its existing expertise and network to highlight the measurable benefits of U.S. LNG over more carbon-intensive energy sources.
Consistent with our principles, in June 2018, we announced the formation of the Collaboratory to Advance Methane Science (CAMS) to improve the scientific understanding of methane emissions across the entire natural gas value chain. By working with our peers across the value chain on scientific studies, we believe we can collaborate with our supply chain and other oil and gas companies to better assess the science and deliver cost‐effective and sustainable solutions to reduce methane emissions.
2. Operational Excellence: Cheniere will design and operate our facilities to reduce environmental impacts
Our climate and sustainability efforts start at our facilities. We employ environmental prudence, scientific research, and technological advancements to ensure disciplined operations and excellence. Further, we engage proactively with stakeholders, including local communities, as advisors on sound environmental and social practices.
3. Supply Chain: Cheniere will work with our partners to reduce environmental impacts throughout our supply chain
Consistent with our Climate and Sustainability Principles, we initiated efforts to engage our natural gas suppliers on their emissions footprints. We hosted our first Supplier Sustainability Workshop to encourage open dialogue and best practice sharing on methane management, and to initiate engagement with suppliers to assess the emissions profile of our supply chain. We work with suppliers who meet our standards of ethical business conduct and require suppliers to comply with all applicable laws, including labor and Health, Safety and Environmental laws. We conduct risk assessments of suppliers during the prequalification process and provide our expectations in the areas of environmental stewardship, health and safety, and regulatory compliance in our Supplier Code of Conduct. We monitor our suppliers on a range of issues including regulatory compliance and financial stability.
4. Transparency: We will communicate openly and proactively with our stakeholders
Our engagements with our stakeholders must be with respect, transparency and facts. Transparent performance reporting will be the basis of building trust.
The Role of LNG in a Low Carbon Future
Our business is a key component within the global energy transition. That transition is one toward a lower-carbon system that is more responsive and provides greater energy access to millions of people. Our product is replacing higher-emitting fossil fuels, improving air quality, and supporting the transition to a lower-carbon energy economy–all while providing responsive, reliable, and affordable energy.
When used for power generation in natural gas-combined cycle plants, LNG emits virtually no mercury or particulate matter (PM) and can provide significant improvements in nitrogen oxide (up to 82 percent) and sulfur dioxide (up to 99 percent) emissions relative to coal on a life-cycle basis. In addition to reducing emissions from air pollutants, including particulate matter, our global customer base is seeking to reduce carbon emissions and combat challenges related to climate change. In fact, every country and region that our cargoes have been delivered to is a signatory to the Paris Agreement. We see natural gas as a fundamental component of a lower-carbon future. We aim to support our customers and countries in meeting their climate and environmental goals.
Natural gas with its lower-carbon footprint (relative to other fossil fuels) can provide significant emissions reductions. In fact, the IEA estimates that switching to natural gas has already helped limit the rise in global emissions since 2010 and has avoided over 500 million metric tons (Mt) of CO2 emissions between 2010 and 2018. Based on data from a recent study by the by the National Energy Technology Laboratory (NETL), it is estimated that each LNG cargo that leaves our terminals, depending on its destination, could result in a displacement ranging from up to 30,000-50,000 metric tons of greenhouse gas (GHG) emissions generated by coal plant.
According to the IEA, there is a near-term potential for 1.2 gigatons (Gt) of CO2 reductions globally (~4 percent of current energy-related CO2 emissions) by displacement of higher-emitting fuels with natural gas in the power sector, which could provide 8 percent of the reductions needed under the IEA’s Sustainable Development Scenario (SDS). A recent peer-reviewed paper reinforced that increased displacement with natural gas is a key pathway to reducing CO2 emissions and achieving “climate stabilization objectives for the next 50–100 years.” Based on current literature, we conclude that U.S.-delivered LNG has about 36-53 percent lower carbon intensity than coal, when used in the power sector.
In 2018, we began formally integrating oversight of sustainability into our governance structure, establishing Board-level oversight of sustainability and social-responsibility issues. The Governance and Nominating committee evaluates with management the current and emerging environmental, sustainability and social responsibility issues, and opportunities facing the company at least once a year. It also reviews our climate change and sustainability policies and strategies at least annually. Our SVP of PGPA oversees and informs the Board of sustainability, climate, and corporate responsibility risks and issues, and our efforts to manage and address them. We update our Board on these relevant issues, as well as management plans and projects implemented at least annually. The Board also reviews our annual enterprise-wide risk assessment (ERA), which includes climate-related risks. In 2018, we also created a dedicated climate and sustainability team and adopted our climate and sustainability principles, which were reviewed and endorsed by the Board.
Role of management
Our sustainability efforts are managed by executive-level leadership. Cheniere’s Policy, Government, and Public Affairs (PGPA) organization, led by a Senior Vice President (SVP), heads our enterprise-wide climate and sustainability initiatives and maintains oversight of climate-related risks. The SVP of PGPA also provides periodic updates on Climate and Sustainability programs to executive leadership, including the CEO, and the Board.
As we progress in our sustainability journey, we are developing efforts to identify, assess, and manage climate-related risks and integrate these into our overall risk management approach.
Risk Assessment Model
We conduct an ERA to identify short- and medium-term risks within a five-year time horizon. We analyze these risks in terms of their potential financial or reputational impact on the organization. The CRO is responsible for overseeing the ERA process. The SVP of PGPA reviews the climate-related risks identified for our annual ERA and reports them to the CRO. The Group Risk Committee (GRC), which is chaired by the Executive Vice President and Chief Financial Officer (CFO), reviews the ERA and the CRO presents the findings of the assessment to the Board.
Identifying and managing climate-related risks and opportunities
Our Climate and Sustainability Principles were developed to help inform our approach to managing climate-related risks and opportunities. Consistent with our Transparency principle, we manage climate-related reputational risks via engagements with key stakeholders, including investors, banks and financiers, ESG rating agencies, customers, and local communities. To address opportunities related to supply chain emissions improvements, we engage our major natural gas suppliers. To help manage policy-related climate risks, we analyze climate and energy policies in key countries.