Despite headline-grabbing climate announcements by a number of European oil and gas companies this year, no major fossil fuel energy company has set an emissions target in line with limiting climate change to 2°C, say $22 trillion-backed Transition Pathway Initiative (TPI).
- None of the 59 largest, publicly listed, oil and gas or coal mining companies assessed on Carbon Performance are yet on track to align their emissions with a 2°C climate pathway by 2050. Although three oil and gas companies are approaching a 2°C pathway (Shell, Total & Eni), further measures are needed to align with this benchmark.
- Just seven companies (12%) have set emissions targets in line with the pledges made by national governments as part of the Paris Agreement in 2015: Glencore, Anglo American, Shell, Repsol, Total, Eni and Equinor (all European).
- Five oil and gas companies and two coal companies are on track to align with the emissions pledges made by countries as part of the Paris Agreement. However, these ‘Paris Pledges’ still leave the world on track for 3.2°C of warming according to UNEP. Three oil and gas companies are getting closer to a 2°C climate pathway by 2050 although need additional measures to bring them into line with that benchmark.
- In contrast, many companies in the electric utilities sector are aligned. Of the 66 assessed utilities companies, 39 (59%) are aligned with the Paris pledges, while 22 (33%) are aligned with the most ambitious ‘below 2°C’ benchmark.
Moreover, those pledges are widely regarded as insufficient to avert dangerous climate change (leaving the world on track for 3.2°C of warming according to UNEP).
Climate Governance Shows Little Improvement
TPI also assessed companies’ Management Quality (MQ) or governance of climate risks. MQ is measured on a scale from Level 0 (Unaware) to Level 4 (Strategic Assessment), with the average score for energy companies coming in at 2.7 – just 0.1 higher than last year’s result.
The research showed that 94% of energy companies now have a policy commitment to act on climate change, but fewer take the more advanced management quality steps. For example, just 9% of companies ensure consistency between their climate change policies and the positions taken by lobbying groups of which they are a member. Twenty companies have improved their score since last year. For example, CMS Energy and Dominion Energy have moved up by having their operational GHG emissions verified for the first time. However, 13 companies have moved down a level. For example, Eneos, Neste and Suncor Energy moved down as a result of no longer disclosing their involvement in trade associations that are active in climate lobbying.
Adam Matthews, TPI Co-Chair:
“Investors have witnessed a flurry of significant climate announcements by fossil fuel majors this year, so it is striking this independent research still shows those commitments do not yet align with limiting climate change to 2°C. There has been some movement, with seven European companies now aligned with the Paris pledges, and Shell, Total and Eni getting close to meeting the 2°C benchmark. But US fossil fuel giants have yet to take meaningful action to reduce their emissions and the gap with their European peers is stark.”
Professor Simon Dietz explained the divergence between sectors:
“The electricity sector is heavily regulated with regards to its emissions in some regions such as the EU and this likely explains some of the results we see. More broadly, the technologies needed for decarbonising electricity production are already there and often competitive on cost with fossil fuels, so the core business model is not under threat. For oil and gas companies, the route to Paris alignment is much more of a challenge to their basic reason for being. Some companies have started grappling with this challenge, but none have met it yet.”
Bill Hartnett, Stewardship Director, ESG Investment, Aberdeen Standard Investments:
“TPI’s latest report on global energy companies shows some encouraging signs of progress, particularly with more electric utilities and European oil and gas companies making ‘net zero’ commitments to align their strategies with the goals of the Paris Agreement. The key challenge is to turn these net zero pledges into actions and reflect ambitions in investment plans. The report shows that the great majority of companies in these critical transition sectors are far from being ‘Paris aligned’ and that the coal sector is particularly challenged. High management quality scores are not always linked to adequate climate ambitions. This TPI research provides us with an important investment and stewardship tool to develop strategies to address these risks on behalf of our clients”.
Carola van Lamoen, Head of Robeco’s Sustainable Investing Center of Expertise:
“The decarbonization of the energy power is critical in achieving the ambition of limiting global warming to well-below 2°C. We are encouraged by TPI’s finding that a growing number of companies are aligned with a low carbon scenario. Over the past year we have seen momentum particularly in the oil and gas industry, partly driven by investor engagement. Still, with only 37% of energy companies aligned with at least the Paris Pledges, and 18% aligned with the most ambitious Below 2°C benchmark in 2050, there clearly remains a long way to go. Robeco is committed to continuing our engagement efforts to drive corporate climate action.”
