A coalition of investors representing $10.4 trillion (€8.8 trillion) in assets under management has given the oil and gas industry a net zero standard laying out the minimum expectation for its transition plans.
Led by the Institutional Investors Group on Climate Change (IIGC) and informed by the Transition Pathway Initiative, over 20 global investors engaged with leading oil and gas companies, including BP, Shell, and Total, to set down what is expected of them to align with net zero.
Following a series of high level dialogues between the investors and energy companies, IIGC published on Wednesday its ‘Net Zero Standard for Oil and Gas’.
The idea behind it is to create a level playing field in corporate reporting and to meet investor expectations for “credible and comparable” company net zero transition plans in the oil and gas sector.
IIGC stated that the standard stresses the need for comprehensive absolute and intensity emissions reduction targets, which cover all material emissions. It also highlights the need for an alignment of capital expenditure and production plans with a net zero target.
In what was called a major step, the standard will be piloted by a core group of leading oil and gas companies including BP, Repsol, Shell, and Total.
The oil and gas giants will trial implementation of the standard in preparation for wider adoption across the sector.
The investor coalition includes the likes of Aviva Investors, Federated Hermes, and the Church of England Pensions Board.
Adam Matthews, chair of the investor-company process to develop the standard and chief responsible investment officer, Church of England Pensions Board, said: “In order for investors to play their role, we need to be able to meaningfully compare different company strategies whilst recognising that there is no one size fits all approach. Assessing the credibility and adequacy of company transition plans is a technically complex task.”
Bruce Duguid, head of stewardship, EOS, at Federated Hermes, added: “The oil & gas sector is vital to the transition to net-zero, with many possible Paris-aligned strategies.
“We strongly support piloting of the oil and gas standard to help the industry to clearly understand investor expectations across a range of strategies and the various types of targets and performance metrics to successfully demonstrate Paris-alignment.”
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