Sempra Energy (SRE)

Company website 2020 Financial Report Stock Analysis 2021 ESG Report:

289000

Miles

of transmission and distribution lines

Million

Customers served

1000

Terawatt-Hours

of electricity sold in 2019

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The Path to Drawdown: Electrical Utilities

Electric utilities play a key role in the path to a world of net-zero emissions. They provide the connective tissue between key Drawdown solutions: renewable energy generation and energy storage. Through long-term power purchase agreements (PPAs), utilities enable renewable energy developers to secure buyers for their power and unlock project finance. Utility companies also often control electrical grids, putting them in the position to prioritize (or de-prioritize) the extent to which the grid is outfitted for the intermittency of solar and wind power generation. They're also the key players in green-lighting the development of large-scale energy storage.

There are dozens of investor-owned utilities traded on the New York stock exchange (such as Duke, NextEra, Dominion, Xcel, PG&E, etc.), and many of them are purchasing or developing renewable power capacities to provide clean electricity to customers across large regions. We use a stringent criteria to determine which utilities are significantly contributing to the low-carbon energy transition.

About

Sempra Energy (stock ticker: SRE) is a holding company with energy infrastructure investments in North America. Their businesses invest in, develop and operate energy infrastructure and provide electric and gas services to customers through regulated public utilities. Sempra is headquartered in San Diego, California.

SRE's Role in Drawdown

Sempra has five reportable segments, two of which are regulated public utilities.

Their SDG&E business is a regulated public utility that provides electric and gas services to ~3.5 million customers in Souther California. Their SolCalGas is also a regulated public utility that owns and operates natural gas distribution, transmission and storage systems that supplies natural gas to a population of ~22 million in Southern and central California.

Their Sempra Texas Utilities business is comprised of their equity method investments in a couple of holding companies, and their Sempra Mexico segment includes the operating companies of their subsidiary, IEnova, as well as certain holding companies and risk management activities. Lastly, their Sempra LNG business develops, builds, operates and invests in natural gas liquefaction export facilities, including natural gas pipelines and infrastructure.

In all, Sempra passes the Climate Index criteria because they produce 52% of their energy from renewables and 48% from fossil fuels. It has no coal power generation.

SRE: What We Like

We're impressed by Sempra's thorough sustainability disclosure. Their sustainability report includes data on scope 1, 2 and 3 emissions - something that very few companies manage to do.

On top of their disclosures, Sempra has also set net-zero goals (p. 22) for the years 2030 and 2050.Some notable targets include:

<::marker> Reducing their California utility and Mexico non-liquified natural gas GHG emissions intensity 20% compared to their 2020 baseline
<::marker> Operate their liquified natural gas infrastructure at a GHG emissions intensity 20% less than their 2020 baseline
<::marker> Aiming to reduce scope 3 emissions by 2030 through a variety of stratefies
<::marker> Aiming to achieve net-zero scope 1, 2 and 3 emissions by 2050

Also commendable is the fact that Sempra explicitly expects (p. 4) their suppliers to track environmental metrics, reduce greenhouse gas emissions, restore land, minimize energy and water use, reduce waste, and reuse and recycle materials. Such a detailed list of expectations for suppliers is rare, and it's key to making Sempra's entire value chain more green.

What We Want to See Improve

Related Green Energy Stocks in the Climate Index

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Allocated	Company	Description
3.32%	Exelon Corp. (EXC)	Exelon is one of the largest US electric utility and operates nuclear, wind, solar, hydro plants. They’re a key player in decarbonizing the power sector
2.61%	Sempra Energy (SRE)	Sempra Energy develops energy infrastructure and provides electricity and gas. Green utilities are the bedrock for developing more renewable energy
1.53%	Companhia Energética de Minas Gerais (CIG)	CIG is one of the largest power utilities in Brazil that generates its electricity from renewable sources. They’re a model of how utilities should go green
1.48%	PG&E (PCG)	PG&E is a public utility that offers electricity and natural gas to customers and growing their clean energy capacity. Green utilities are key to Drawdown
1.30%	Avangrid, Inc. (AGR)	Avangrid generates most of its electricity through solar, onshore wind, geothermal, hydroelectric and biomass - an exemplar of green utilities
0.71%	Algonquin Power & Utilities Corp. (AQN)	Algonquin Power & Utilities operates renewable and clean energy assets throughout North America. These are key sources of energy in a decarbonized world
0.19%	Enel Chile S.A. (ENIC)	Enel generates electricity from hydroelectric, solar, wind, and geothermal. They’re helping expand clean energy capacity
0.10%	Montauk Renewables, Inc. (MNTK)	Montauk has facilities that generate renewable natural gas, a sustainable fuel. Electric utilities like Montauk are key to expanding clean energy capacity