Reuters | Sep 18, 2019 00:38
By Simon Jessop and Matthew Green
LONDON (Reuters) - Investors managing $15 trillion (£12 trillion) in assets turned up the heat on oil and gas sector on Wednesday ahead of a United Nations summit in New York aimed at accelerating efforts to fight climate change.
Energy companies are on the front line of the global transition to a low-carbon economy, with investors potentially on the hook for hefty losses if the companies do not overhaul their business models in time.
In its most detailed analysis of the energy sector, the Transition Pathway Initiative (TPI) said 31 out of 109 energy firms were aligned with commitments governments have so far made under the 2015 Paris Agreement to curb greenhouse gas emissions.
However, of the 50 oil and gas companies assessed, just two - Royal Dutch Shell Plc (L:RDSa) and BP Plc (L:BP) - were aligned with existing national emissions targets. The remaining 29 companies on track to meet such commitments were all electric utilities.
"We, as a major institutional investor, are concerned that transition risk - the large and growing gap between government targets and company ambitions - is a major source of investment risk," said Helena Viñes Fiestas, global head of stewardship and policy at BNP Paribas (PA:BNPP) Asset Management.
United Nations Secretary-General Antonio Guterres wants governments to make more ambitious pledges to cut emissions at the U.N. summit on Monday, which he convened to boost the Paris Agreement ahead of a crucial implementation phase next year.
Current pledges by governments to cut emissions are nowhere near enough to meet the Paris target of keeping the rise in average global temperatures to well below two degrees Celsius, with a goal of limiting warming to 1.5 degrees Celsius.
That means that some companies' targets can bring them in line with existing national plans under the Paris Agreement, but remain far from adequate to avert the worst of the natural disasters and economic damage forecast for a warming world.
TPI, which includes major pension funds and asset owners, said none of the oil and gas companies it assessed are doing enough to align their businesses with the changes needed to meet the Paris temperature targets.
The findings echoed a report published this month by financial think-tank Carbon Tracker, which found that big oil companies had approved $50 billion of projects since last year that will not be viable if governments implement the Paris deal.
By contrast, TPI found that nearly half of the utility companies are aligned with national commitments already made under the Paris Agreement, and more than 20% are on target to meet a temperature rise of below 2 degrees Celsius, the TPI said.
That is partly because some utilities have been quicker to pivot their business models toward renewable energy than oil and gas companies.
"There is no doubt that oil and gas companies are in a difficult position in navigating the transition to a low carbon economy," Euan Stirling, global head of stewardship and ESG investing at Aberdeen Standard Investments.
"That makes it all the more important that we have at least some sector constituents who are starting to respond to the climate crisis by repositioning their businesses from the top down in the same way that many power generators have."
The TPI is one of several investor initiatives launched in recent years aimed at helping boost the quality and effectiveness of investor engagement with companies on climate. Among its other 45 signatories are firms including Legal & General Investment Management and U.S. pension scheme CaLPERs.
"We believe that investors should use their voice to hold top management of investee companies accountable for incorporating climate-related issues in their corporate strategy," Carola van Lamoen, head of active ownership at Dutch asset manager Robeco.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.