According to a recent report published by the National Oceanic and Atmospheric Administration (NOAA), atmospheric methane levels set a record for the second year in a row in 2021. The scientific evidence indicates that carbon dioxide is the most significant driver of human-created climate change, with methane coming in second place. While the presence of carbon dioxide persists in the Earth’s atmosphere for many decades after emissions, the atmospheric residence of methane is shorter (approximately nine years) but 25 times more potent at trapping heat than carbon dioxide. This may have an impact on climate fluctuations in the short term. Although the NOAA analyses are preliminary, the findings are nonetheless alarming. The Intergovernmental Panel on Climate Change (IPCC) suggests that reducing methane emissions should be prioritized to lower global warming.
Methane Matters, How are Companies Responding?
Given the dire consequences of methane emissions, how are companies responding to this call to action and implementing their methane reduction strategies?
We searched all the SEC filings (10-Ks, 10-Qs, Proxy Statements, and Earnings Releases) and collected the methane disclosures for the Russell 3000 companies for 2020 and 2021 using the idaciti ESG Accelerator. The search criteria was broadly set as "methane emissions". In addition, we also collected data for further analyses, such as whether the company disclosed the percentage of methane reduction or current levels of methane emission (achieved or targeted). For example, boilerplate language related to target percentage reductions of the COP26 summit or Global Methane Pledge was excluded in the final data collection. The entire process to search, structure, and retrieve the extracted data (and all related metadata for traceback to the exact locations in the source documents) took seven minutes.
And all of this was done by the machine.
Reduce Research Efforts with the Assistance of NLP
The initial results indicate that approximately 6% of companies provided a discussion on their methane emissions strategies during this two-year period. Of these companies, about 29% disclosed either the percentage reduction in methane emissions or the current level of methane emissions as a percentage of overall GHG emissions. Using Natural Language Processing (NLP), we processed the text to determine the count of verbs, nouns, noun verbs, and adjectives. Not surprisingly, ‘reduced’ or ‘reducing’ ranked as the most popular verb in relation to methane disclosures, suggesting that when companies discuss methane emissions, they are likely to discuss it in the context of how they have reduced or intend to reduce it.
While these findings are preliminary in nature, we were curious to quickly determine how companies are currently responding to the climate crisis by prioritizing their focus on methane emissions. Using traditional research methodologies (manually searching all SEC Filings for 3000 companies) to identify the methane disclosures might have taken days. Upon finding the relevant disclosures, copying and pasting the text into a spreadsheet for further analyses would add to this time. Not to mention manually collecting any related percentage reduction in methane emissions. We completed the above analyses in about three hours (end-to-end). And the only reason why it took three hours to complete the analyses is that we wanted to spend the extra time carefully analyzing the boilerplate language for exclusion from the final analyses. For the ESG expert or analyst who already knows the boilerplate language patterns, the time spent to collect the structured data and prepare it for downstream analyses would be reduced further. At the extreme, ESG experts/analysts who already know the language patterns and are currently using manual or semi-manual methods to collect this data could further reduce this process to under ten minutes.
Monitor New Filings and Disclosures, 24/7
Given the severity of the climate crisis, emissions data must be readily available to analysts and stakeholders. To properly respond to the crisis before it is too late, researchers must have access to the tools that facilitate quick and efficient data structuring and research. Using the power of the idaciti ESG Accelerator, ESG experts can leverage all of their domain knowledge to draw essential conclusions in minutes. More importantly, they can continue monitoring machine-tagged results that update in real-time as new filings and disclosures become available.
idaciti ESG Accelerator Data Sheet