By Caroline Fouvet
As the oil and gas sector is today the global largest source of methane, a potent greenhouse gas (GHG), it has a crucial role to play in the implementation of the Paris Agreement. Achieving the 1.5°C objective will necessarily involve a drastic reduction in the sector’s current emissions from extraction, transportation and processing activities.
It is in this context that global investors published last month a guide to highlight which actions are required from the oil and gas sector to address climate change risks. Investor Expectations for Oil and Gas Companies: Transition to a Lower Carbon Future mainly focuses on how companies’ business strategies consider climate change-induced risks and enable their transition to a sustainable low carbon energy system.
The five areas that are reviewed, namely governance, strategy, implementation, transparency and disclosure together with public policy, bring out investors’ main concerns. Does management ensure adequate oversight of climate-related risks? Does the company engage with public policy makers to support development of cost-effective policy measures to mitigate climate-related risks and low carbon investments?
It is on these issues that the Institutional Investors Group on Climate Change (IIGCC) aims to shed light and intends to help the oil and gas sector adapt its business model to climate change and comply with international regulations. Asset owners and fund managers are concerned with the sector’s consideration of global warming’s impact and policy rules as trillion of dollars are at stake. Investors hence want the guarantee that companies are well prepared both to tackle the effects of climate change as well as to abide by the international requirements set in this respect.
The IIGCC’s guide reflects the international community’s endeavours to make of the Paris Agreement’s provisions a reality at the global level. It also highlights how the private sector has as a vital role to play as policy makers, and that large-scale actions are to be expected from businesses too.