My wife and I are in the market for a new car. At the top of our wish list: fuel efficiency and reliable performance. The car we buy should do as well on roads as they promise in the showroom and hold up for years. Lemons beware.
A similar expectation of performance motivated a group of institutional investors, including New York City’s $160-billion Pension Funds, to weigh in on the need for comprehensive new regulations of industrial methane pollution from oil and gas facilities.
Methane emissions, they warned in a recent letter to the Environmental Protection Agency, are “threatening infrastructure and economic harm that are bad for the economy and bad for investors.”
With a total of $300 billion in assets under management, these investors have reason to care. Following the 2008 financial crisis and amid a building crescendo of climate consciousness, virtually all are under increasing pressure to invest responsibly.
Because methane jeopardizes the reliable climate performance of natural gas, it threatens the responsibility and risk profile of underlying investments in oil and gas companies. The growing focus on methane, often rooted in data-driven concerns about high emission rates, is more than a nudge for investors – it’s a wake-up call.
Investors want natural gas to deliver
Between the often-touted economic appeal of natural gas, and the fact that it burns much cleaner than coal, this fuel is getting a second look in the energy showroom. But what these thoughtful investors see is that unless methane emissions are reduced, natural gas could turn into a lemon in our warming world.
Moreover, as a Goldman Sachs analysis uncovered recently, America’s ability to unleash investment and add 1 million new jobs in energy-intensive downstream manufacturing partially depends on addressing methane head-on to improve market confidence in the fuel.
New York City Comptroller Scott Stringer and the other co-signers of the letter to EPA are now calling for new and robust, national regulations that will allow natural gas to fulfill its promise – not a request we typically get from Wall Street.
Voluntary approaches insufficient
As Stringer and the other investors noted, just because industry can cut emissions doesn’t mean they will do it as fast or effectively as we need them to. While some companies today are leaders in this regard, expecting all oil and gas operators to do the right thing voluntarily would be like expecting all motorists to drive safely without speed limits. Wishful thinking, in other words.
What these investors want, and Environmental Defense Fund agrees, is a high bar that applies uniform standards across industry. These standards should use proven strategies and enable cost-effective implementation.
Delivering this kind of regulatory certainty will help companies operate responsibly and investors invest confidently, while providing cleaner air and a more stable climate in our lifetimes. It comes at a time when money managers, Millennials, American workers, environmentalists, and many others are calling ever-more-loudly for common sense actions that strengthen the environment as well as our economy.