Oil and Gas Methane Emissions Pose Risks to Investors (EU)

New Engagement Guide Offers Benchmarking Framework for Enhanced Methane Risk Management

October 20, 2016
US: Amy Morse, (202) 572-3395, amorse@edf.org
UK & Europe: Joy Frascinella, +44 (0) 20-3714-3143, joy.frascinella@unpri.org

Washington, D.C. and London, October 20, 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, released today by Environmental Defense Fund (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 the warming happening today. The oil and gas sector is the largest industrial source of methane emissions globally, costing an estimated $30 billion in lost product each year. While some companies are beginning to engage more deeply, an EDF report 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.

This April, global investors backed by $3.6 trillion in assets, highlighted methane emissions as a growing investment risk and supported the United States and Canada adopting methane emission reduction targets of up to 45% by 2025. Investor support from Europe, the largest natural gas importer, totaled $2.1 trillion dollars.

“Investors were stunned by the widespread underreporting of methane emissions management uncovered in EDF’s ground-breaking Rising Risk report, and asked for a practical guide to engage oil and gas companies. This guide can help investors manage methane risks and keep more saleable product in the pipeline - a win-win for investors, companies, and communities,” said lead author Sean Wright, senior manager at EDF.

“The business case for methane risk mitigation is well-defined. With growing global action to slow climate change and new regulatory approaches, companies are increasingly exposed to financial, regulatory and reputational risks on methane. Companies cannot turn a blind-eye to disclosure and reduction targets,” said Gemma James, manager of environmental issues at PRI.

“Many oil and gas companies have been rebalancing their portfolios toward gas, and industry projections continue to stress rising gas demand into the coming decades. However, significant efforts in reducing methane emissions are required if gas were to have a beneficial role in replacing coal and lowering the carbon intensity of the power generation mix in the medium-term,” said Matthias Beer, Associate Director of Governance and Sustainable Investment at BMO Global Asset Management.

Political and market momentum to address climate change is increasing. As countries look for pathways to fulfill their international greenhouse gas reduction commitments stemming from the historic Paris climate accord in December 2015, reducing methane emissions is a quick and cost-effective lever to reduce the rate of warming now.

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Environmental Defense Fund (edf.org), a leading international nonprofit organization, creates transformational solutions to the most serious environmental problems. EDF links science, economics, law and innovative private-sector partnerships. Connect with us on EDF Voices, Twitter and Facebook.

The Principles for Responsible Investment (PRI) is a United Nations-supported investor initiative with an international network of signatories that works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.