Oil and gas industry lags behind utilities in climate goals

The Transition Pathway Initiative (TPI) has released its Management Quality and Carbon Performance of Energy Companies report for September 2019. The report analyses the climate awareness and practical action of 135 companies involved in coal mining, electricity and oil and gas production. It has placed these companies on a scale ranging from Management Quality Level 0 (companies who are unaware or do not acknowledge climate change as a business issue) to Level 4 (companies who engage in strategic climate change assessment).

The report has found that close to 60 per cent of energy companies are rated at Level 3 (companies who integrate climate change into operational decisions) or Level 4, though on average, the energy sector is just over halfway between Levels 2 and 3. Reaching Level 3 requires greenhouse gas emission disclosures and emission targets, which means that on average the sector is beginning to implement these changes.

Electricity utilities companies perform the best, according to the analysis, while oil and gas producers lag behind, remaining closer to the average. Coal mining is the lowest performing sector in the TPI's database, though the companies' ratings range from Level 0 to Level 4. Those that have higher ratings tend to be more diversified businesses, not solely focused on coal. Out of 109 companies in the electricity and oil and gas sectors, only 28 per cent are aligned with Paris Agreement benchmarks according to the TPI. Further, only 12 per cent are predicted to engage in practices consistent with temperature rises below 2°C. In contrast, almost half of companies in the electricity utilities sector are already aligned with Paris Agreement targets for 2030. Out of the oil and gas companies analysed by the TPI, only Shell and Repsol are reported to be reducing carbon emissions in line with Paris Agreement benchmarks.

Though the largest companies have shown the most progress, the report concludes that too few companies have improved over the past year, and that smaller and mid sized companies tend to have lower Management Quality ratings.

Adam Matthews, Co-Chair of the TPI has stated: “Despite a climate emergency being declared across multiple countries, this new research shows the energy sector is inching rather than accelerating towards a low-carbon future. It is not quick enough. In particular, too many fossil fuel companies are dragging their feet both on governance and actual carbon performance.” Investors in these industries have expressed concern following the report, with BNP Paribas Asset Management calling the pace of sustainable development in the energy industry “a major source of investment risk.”

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