Report published: October 2016
Oil and gas industry investors face increasing financial, reputational and regulatory risks from widespread methane emissions. An Investor's Guide to Methane: Engaging with Oil and Gas Companies to Manage a Rising Risk [PDF], by EDF and the Principles for Responsible Investment (PRI), is a first-of-its kind guide to help investors manage methane risk through company engagement.
Methane — the primary component of natural gas and a climate pollutant 84 times more powerful than carbon dioxide over a 20-year period — is responsible for a quarter of global warming happening today.
The oil and gas sector is the largest industrial source of methane emissions, costing an estimated $30 billion in lost product each year. Concerned investors requested an investor's guide resource following EDF's breakthrough Rising Risk report, which found that as of early 2016, none of the 65 leading upstream and midstream oil and gas companies operating in the United States disclosed methane reduction targets, and less than a third disclosed baseline emissions information via accessible, investor-facing data sources. 2018’s Disclosure Divide report revisited those companies, and found that investor engagement moved the needle, improving the quality of methane reporting, and providing investors more data they need to factor methane management into portfolio selection, and encouraging continuous improvement from operators.This guide is designed to be a tool to support such constructive dialogue, holding companies accountable for managing methane and driving results.
This guide can help investors manage methane risks and keep more saleable product in the pipeline.Sean Wright, Lead author and senior manager
With the Investor's Guide [PDF], EDF and PRI provide constructive tools for investors to engage with oil and gas companies on methane reporting and mitigation, to engage with senior management in constructive dialogue, and to identify concrete actions to improve methane performance.
This guide provides investors with an extremely valuable tool to understand these risks.Jonas Kron, Senior Vice President, Trillium Asset Management
This guide provides practical advice on what investors should expect from companies regarding operational practices and disclosure, and has been adopted as the guiding document for the PRI engagement group. While the guide is aimed at public equity investors, the document can also be useful for investors in private companies, energy lenders such as investment banks and insurance companies, who may be looking to benchmark methane performance as they implement ESG and risk-management policies. Likewise, this guide can also be a reference for oil and gas companies to benchmark their operations and identify best practices.
Performance Assessment Tool
Through the guide, EDF and PRI have introduced a new Performance Assessment Tool [PDF] to rank company methane management performance.