Oil Companies Get Lost in Big Oil’s Carbon Accounting Maze

Oil Companies Get Lost in Big Oil’s Carbon Accounting Maze

Oil companies report their attempt to reduce carbon emissions, making it challenging to assess the risk of holding their shares. Also, the world is drifting away from fossil fuels, according to senior fund managers.

Investors poured money into so-called sustainable funds, which take into account companies’ environmental, social, legal, and other standards. Besides, funds are under pressure from their consumers and authorities to make those standards tough.

Fund managers are also applying natural, social, and governance criteria in traditional investments. This is to help them judge how companies will fare over the long-term.

Low-carbon energy makes some companies’ profits shrink faster than others. The government prioritizes low-carbon energy to conform to the U.N.-backed Paris agreement. Its intention is to reduce discharge to “net zero” by the end of the century.

Contrarily, oil and gas companies are among the biggest dividend payers. Also, major funds are reluctant to divest from them, arguing that by staying in, they are in a better position to pressure firms to improve.

Nick Stansbury, an investment strategist at British Insurer Legal and General’s Investment Unit, says investors do not have the data they need. Also, he added that disclosure is not necessary so they can change the numbers. They can start understanding and pricing the risk.

Methane is one of the further projects. There are many voluntary actions and frameworks to unify carbon accounting and target setting.

Built by non-governmental organizations and industrial groups in the 1990s, The Greenhouse Gas Protocol is one set of standards.


Oil Companies Ways to Paris

Oil companies can report their progress in line with the standards through non-profit CDP. Norway’s Equinor is first in its list of 24 oil major companies.

Financial Stability Board created a Task Force on Climate-related Financial Disclosure. Also, industry bodies, in-house models at oil firms and banks, and third-party verifiers and consultants.

London-based Chief Executive Bob Dudley says there are a thousand ways to Paris referring to the 2015 accord. It plans to keep global warming well below 2 degrees.

Furthermore, BP Finance Chief Brian Gilvary says he would accept more firmness within the sector to present what oil companies are doing about emissions. Also, an industry body, the Oil and Gas Climate Initiative (OGCI), was discussing carbon accounting.

ESG verifier companies are studying ESG Metrics’ ways of measuring. Also, some firms would advise an oil company on how they can improve their score.

UBS, with $831 billion of invested assets, has $2 billion in its Climate Aware passive equity strategy. It is, in part, based on a company’s emissions reporting.

Francis Condon, executive director for sustainable investing, says in that strategy they lean towards companies that are better performing on a range of climate metrics. Also, keep away from companies that do not perform so well in this respect. 

Also, he added they don’t want to accused of greenwashing. Besides, UBS regularly encouraged companies to prepare for the climate transition.

According to the Global Sustainable Investment Review, using a broad measure, global sustainable investment reached $30.1 trillion at the end of 2018. This equates to a quarter and half of all assets under management due to varying estimates of that figure.