REPORT: As Oil Majors Take on Climate Goals, Data Shows Billions Worth of Their Polluting Assets are Being Sold Off to Less Stringent Operators

Analysis of 3,000 deals over five years shows how flaring and emissions commitments disappear when tens of thousands of wells are passed to new owners

May 10, 2022
Michelle Collins,

(Austin, TX) A new report published today by Environmental Defense Fund tracks tens of thousands of oil and gas wells and other facilities as they were shifted from publicly traded companies to private ones, and from operators that have climate commitments to those without, documenting dramatic emissions increases that have followed.

“These transactions can make it look as though sellers have cut emissions, when in fact pollution is simply being shifted to companies with lower standards,” said Andrew Baxter, director of energy transition at EDF. “Regardless of the sellers’ intent, the result is that millions of tons of emissions effectively disappear from the public eye, likely forever. And as these wells and other assets age under diminished oversight, the environmental challenges only get worse.”

Such deals are growing in both number and scale, reaching $192 billion in 2021 alone. Using industry and financial data on 3,000 major transactions over the past five years, EDF analysts identified hundreds of cases in which upstream assets owned by top-tier global producers that have made public commitments to cut methane emissions, stop flaring and improve transparency were sold off to new, often obscure operators with no such obligations.

Concern is shared by a growing number of investors and other stakeholders about losing the ability to assess company risk or hold operators accountable for emissions commitments. The report also suggests there might be implications for financiers themselves, noting that since 2017, five of the six largest U.S. banks – all of which are members of the Net Zero Banking Alliance – advised on upstream deals totaling $566 billion.

“Climate risk is business risk. Ensuring proper environmental stewardship of assets is critical to the oil and gas industry retaining its social license to operate in the face of an energy transition to a decarbonized economy,” Chris James, executive chairman of Engine No.1, the investment fund that placed three directors on the board of Exxon Mobil with the goal of pushing the company to reduce its emissions. “Mergers and acquisitions will forever remain a core part of the industry, and a strong focus on environmental performance, irrespective of owner, is something all parties should embrace.”

The authors used M&A data from Refinitiv to track upstream oil and gas transactions from January 2017 to December 2021, working with oil and gas analytics firms Capterio and ESG Dynamics to track changes in climate performance following a sampling of the transactions. Measuring against key climate metrics, EDF analysts found:

  • 298 deals worth $144.9 billion have transferred assets from companies with flaring commitments to those without.
  • 211 deals totaling $115.6 billion have shifted assets away from companies with methane emissions goals to companies lacking targets.
  • 155 deals worth $86.4 billion have moved assets away from companies publicly aligned with net-zero emissions goals.
  • 150 deals totaling $76.8 billion have shifted assets from members of the industry’s Oil & Gas Methane Partnership to non-members.

The report says that oil and gas companies, private buyers, investors, and banks should be encouraged to incorporate climate safeguards in the terms of these deals to ensure continued stewardship following M&A transactions.

“Oil and gas companies can’t sell their way out of climate responsibility. Shareholders need companies to substantially reduce emissions in a real way,” said EDF’s Baxter. “Business-as-usual is pushing us toward catastrophe. A net zero economy requires net zero M&A with safeguards enforced by banks, companies, and investors. A successful energy demands new models of oil and gas dealmaking that take environmental impact into account.”

What other investors say about the new analysis:

"What the markets need to understand as part of these transactions is whether the new owners are establishing the governance needed for climate stewardship consistent with a net zero future. GFANZ supports efforts to finance emissions reductions across the economy, not just transfer emissions through divestment alone. This report provides insight into this challenge with innovative ideas to help solve them.”

-- Mary Schapiro, vice chair at Glasgow Financial Alliance for Net Zero

“The analysis suggests that oil and gas M&A is resulting in increased emissions that delay the energy transition. Institutional investors committed to achieving net zero in their portfolios (and in the real world) will want to scrutinize these findings closely. Encouraging good stewardship and closing this loophole may ultimately require enhanced disclosures from buying, selling and financing parties.”

-- Dan Gardiner, transition plan specialist at Institutional Investors Group on Climate Change.

“Climate-aligned energy companies have a responsibility to make sure that when they sell assets, their environmental commitments continue to be honored by the new owners. Adequate and consistent disclosure will be the key to ensuring that assets’ emissions are being managed after a sale.”

-- Patrick O’Connell, SVP & director of fixed income responsible investing research, AllianceBernstein

“With asset sales being a key strategic component in the road to net zero for public oil and gas companies, investors would benefit from a greater level of disclosure around the application of responsible divestment standards in the selling process. While we note the inherent challenges in the decarbonization efforts of this sector, we strongly believe the introduction of such standards is essential to ensure the potential negative impact on climate change is appropriately managed and accounted for.”

-- Dror Elkayam, CFA, ESG analyst, Legal & General Investment Management

“As oil and gas companies jettison assets to meet stakeholder expectations, there is danger of increased climate impacts and risks overall, because the buyers generally operate with lower climate ambition and less oversight. Asset sellers must ensure that climate commitments follow the assets and continue to be enforced. It is critical that the industry, financial institutions, and civil society come together to craft and implement meaningful solutions now.”

-- Andrew Logan, senior director, oil and gas, Ceres

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One of the world’s leading international nonprofit organizations, Environmental Defense Fund ( creates transformational solutions to the most serious environmental problems. To do so, EDF links science, economics, law, and innovative private-sector partnerships. With more than 3 million members and offices in the United States, China, Mexico, Indonesia and the European Union, EDF’s scientists, economists, attorneys and policy experts are working in 28 countries to turn our solutions into action. Connect with us on Twitter @EnvDefenseFund