Group of Dutch investors urges oil and gas companies to take climate action

Group of Dutch investors urges oil and gas companies to take climate action

Grondstoffen ESG
olie (02) grondstoffen

Today a group of institutional investors issues a joint statement urging oil and gas companies to take climate action. The group consists of Achmea Investment Management, ACTIAM, Aegon, Van Lanschot Kempen, MN Services (for PMT), NN Investment Partners and PGGM Investments, with combined assets under management of EUR 1.48 trillion.

In their statement they list three objectives and eight corresponding actions they expect oil & gas companies to meet before 2024. These objectives and actions are in line with the CA100+ Net Zero Company Benchmark, the Transition Pathway Initiative (TPI) framework, International Energy Agency (IEA) and the IIGCC Net Zero Standard for Oil and Gas, all of which receive broad support from oil & gas companies and investors.

Furthermore, they call on fellow investors to use their voting rights to accelerate the pace of the transition in all carbon intensive companies.

The full text of the investor statement can be found below.

The world is now over two years into the critical decade in the fight against climate change. We (Achmea Investment Management, ACTIAM, Aegon, Van Lanschot Kempen, MN Services (for PMT), NN Investment Partners, and PGGM Investments) are a group of Dutch institutional investors with a combined assets under management of EUR 1.48 trillion. We support the objectives of the investor collaboration network of the Institutional Investors Group on Climate Change (IIGCC) and the Climate Action 100+ (CA100+) engagement initiative.

We want to underscore our unequivocal commitment to the Paris Agreement and limiting global warming to 1.5°C and expect all companies and investors worldwide to do the same. Although Paris-alignment is important for all companies, we believe the oil and gas sector in particular plays an essential role in the transition and we therefore urge oil and gas companies and their investors to be at the forefront of the transition. Avoiding climate disaster and meeting the Paris Agreement goals is essential in safeguarding the long-term value of the capital that we manage on behalf of our clients.

Since 2019, CA100+ and the IIGCC have, respectively, developed the Net Zero Company Benchmark and the Net Zero Standard for Oil and Gas. With this statement we want to highlight the importance that oil and gas companies meet all goals in both guidelines. However, taking into the current state of urgency, we expect oil and gas companies to achieve the following three objectives before 2024.

1. Set short and medium-term carbon intensity and absolute reduction targets aligned with 1.5°C warming, which include scopes 1-3.

2. Develop a decarbonization strategy that support these targets.

3. Demonstrate how planned capital allocation supports the decarbonization strategy.

Finally, we call on our fellow investors to use their voting rights to accelerate the pace of the transition in all carbon intensive companies. We believe doing so is an essential part of investors’ stewardship duties and commitment to the Paris Agreement 1.5°C warming scenario. We can drive change if we are able to reach a common understanding on how to use our votes to encourage Paris alignment. Thus, we call on institutional investors to:

1. Take a critical approach to evaluating a company’s climate transition plan and ensure voting
guidelines are aligned.

2. Only vote in favor of a company’s climate transition plan if it is aligned with the Paris Agreement, which should at least address the three aforementioned objectives.

3. Vote in favor of shareholder resolutions that encourage progress towards the Paris Agreement 1.5°C warming scenario.

4. Consider using escalation actions if objectives are not met, such as voting against the re-election of directors or voting against remuneration schemes that do not link executive pay to performance on climate targets.

We call on all parties with whom this approach resonates to endorse this statement and get in contact with MN and PGGM. We will convene all like-minded investors to discuss how to advance the energy transition in the summer of 2022.

Appendix

Below are the underlying indicators for the three aforementioned objectives and are used to measure the companies’ Paris Alignment. All our expectations are in line with the CA100+ Net Zero Company Benchmark, the Transition Pathway Initiative (TPI) framework, International Energy Agency (IEA) and the IIGCC Net Zero Standard for Oil and Gas, all of which receive broad support from investors and companies.

Short and medium-term reduction targets in line with a 1.5°C warming scenario

1. Implementation of short-term (up to 2025) GHG reduction targets aligned with the goal of limiting global warming to 1.5°C (Benchmark indicator 4.3). According to Transition Pathway Initiative (TPI), which scores the CA100+ Benchmark, this implies a carbon intensity of at most, and preferably week below, 52 grams per CO2e/MJ by 2025.

2. Implementation of medium-term (2026-2035) GHG reduction targets aligned with the goal of limiting global warming to 1.5°C (Benchmark indicator 3.3). According to TPI, this implies a carbon intensity of at most, and preferably week below, 41 grams per CO2e/MJ by 2030.

3. Disclosure of the expected impact of its medium and long-term targets on absolute emissions (Standard indicator 34).

4. Disclosure of the total expected contribution (in MtCO2e) of netting off measures to medium- and long-term targets, which should only be used for residual emissions (Standard indicator 83).

Decarbonization strategy in line with a 1.5°C warming scenario

5. Implementation of a decarbonisation strategy to meet its long and medium-term GHG reduction targets (Benchmark indicator 5.1). This includes that:

a. The company identifies the set of actions it intends to take to achieve its GHG reduction targets over the targeted time frame. These measures clearly refer to the main sources of its GHG emissions, including scope 3 emissions where applicable.

b. The company quantifies key elements of this strategy with respect to the major sources of its emissions, including scope 3 emissions where applicable.

6. Public commitment that the company will stop approving new oil and gas fields for development in alignment with a 1.5°C pathway before 2024 (IEA NZ 2050, 2021).

Capital allocation alignment with a 1.5°C warming scenario

7. Explicit commitment to align future capital expenditure with the Paris Agreement’s objective of limiting global warming to 1.5°C (Benchmark indicator 6.1b).

8. Disclose total capital expenditure in fossil fuel activities, upstream oil and gas activities and oil and gas (greenfield) exploration in the last financial year and a forward-looking budget (minimum three years ahead) (Standard indicator 109, 110, 111, 115).

9. Disclose “green” energy capital expenditure in the last financial year and a forward-looking budget (minimum three years ahead) where “green” is defined by the appropriate taxonomy (Standard indicator 122).

10. Set out the material assumptions underpinning the capital expenditure, e.g. projected levels of demand, oil and gas prices, carbon tax, and depletion rates of existing production (Standard indicator 108).