Updated guide – Investor Expectations of Oil and Gas companies 2016
To ensure oil and gas majors do far more to address the climate change challenge, global investors from Europe, North America, Asia and Australasia have published an updated second edition of their guide setting out the challenges facing the sector and investor expectations for how oil and gas companies must act to adapt their business strategies to a 2°C climate change pathway.
About the guide
Investor Expectations for Oil and Gas Companies: Transition to a Lower Carbon Future updates a previous guide (Investor Expectations – Oil and Gas Company Strategy) first published in December 2014 that has formed the basis of effective investor engagement over the past two years with the boards and management of oil and gas companies. The new guide is intended to support further constructive engagement with the sector following the Paris Climate Agreement. It therefore focuses on how companies in this sector are governing and managing the transition risks and opportunities associated with a climate trajectory of no more than 2°C of global warming and are developing the business strategy required to adapt through the transition to a sustainable low carbon energy system.
The guide groups investor expectations in five areas of concern:
- Governance – are board and management processes well enough defined to ensure adequate oversight of climate-related risk and effective planning for a transition consistent with 2°C and efforts to pursue 1.5°C?
- Strategy – is the management of climate-related risks and opportunities integrated into business strategy well enough to ensure business models will be robust, responsive and resilient in the face of a range of energy transition scenarios.
- Implementation – is scenario analysis and ‘stress testing’ well enough embedded into key business planning processes and investment decisions?
- Transparency & disclosure – does the company disclose its operational emissions in the annual report and/or on the corporate website. How good is the company’s view of, and response to, the material climate related risks and opportunities outlined in the guide?
- Public policy – does the company engage with public policy makers and other stakeholders to support development of cost-effective policy measures to mitigate climate-related risks and low carbon investments? Is there broad oversight and transparency regards the company’s public position, lobbying activity and political spending on climate-related regulatory issues (including carbon/methane emissions, energy and transport)?
The guide was developed by the Institutional Investors Group on Climate Change with support from other investor networks in North America (Ceres’ INCR), Asia (AIGCC) and Australasia (IGCC) in the Global Investor Coalition, an umbrella for more than 250 institutional investors representing assets worth over USD24 tn. It is one of several produced to support investor engagement with key sectors to curb carbon asset and climate risk including mining, utilities and automotive companies. It is intended to be used in tandem with Institutional Investors’ Expectations of Corporate Climate Risk Management.
Investor practices programme
Request for Proposals: Methodologies for assessing Paris Alignment for private equity
Request for Proposals: Climate Transition Paper
Request for Proposals: Investor Expectations on Corporate use of Nature Based Solutions