Methane: Rising risk for oil & gas sector, investors
Improved emissions disclosure crucial for risk management, public trust
A first-of-its-kind report by Environmental Defense Fund shows that leading oil and gas companies are putting themselves and their investors at financial and reputational risk by failing to adequately disclose meaningful information on emissions of methane.
The report, Rising Risk: Improving Methane Risk Disclosure in the Oil and Gas Sector, examines the state of corporate voluntary disclosure of methane, a key climate risk factor for the oil and gas sector.
This analysis comes at a time of increased scrutiny from both investors and regulators on when and how fossil fuel companies are reporting on greenhouse gases and climate risks. Shareholders filed 83 resolutions on carbon accounting and risk management disclosure in 2015 – and filed 15 proxies focused on how companies are disclosing and managing methane emissions over the last two years.
- Surveying the top 40 production and top 25 midstream oil and gas companies operating in the United States, the authors found that zero companies disclose targets to reduce methane emissions.
- Further, less than a third of surveyed companies disclose information on methane emissions via accessible, investor-facing data sources, such as CDP questionnaires, or corporate sustainability/CSR reports or 10-K filings.
- In addition, where companies did report on their emissions, the information was generally low in quality and lacked rigorous and standardized metrics, making comparisons among operators difficult.
This lack of transparency around methane creates a blind spot of risk for companies and investors alike. A 2015 study by the Rhodium Group found that the sector loses $30 billion globally each year from leaked or vented methane at oil and gas facilities. Every ton of escaping methane> – a key component of natural gas and a greenhouse gas 84 times more potent than carbon dioxide – represents not only a loss of sellable product, but also a reduction in natural gas’ climate benefits as a fuel source.
Improved methane disclosure is one important piece of the climate change risk management puzzle.Jack Ehnes CEO, California State Teachers’ Retirement System (CalSTRS)
Investors need rigorous, accurate and comparable information to assess company performance. Companies that measure and disclose their emissions will be better positioned to manage risk, respond to forthcoming rules at the state or federal level, improve public trust and increase operational efficiency.
Rising Risk offers practical, forward-looking recommendations to improve methane disclosure, centered around four key methane metrics designed to fit into existing formats and platforms that companies already use to report other environmental performance data. Leading companies should disclose current emissions in dollar terms and as a percentage of production or throughput, share their leak detection actions, and set quantitative emissions reduction goals to reduce environmental impact and economic losses.
The rapid growth of fracking in the U.S. means we need better, comparable and relevant metrics on methane emissions to empower companies and investors to better manage the related risks.Curtis Ravenel Bloomberg LP Global Head of Sustainable Business & Finance
Adoption of these metrics can bring a level of standardization and quantitative rigor to methane emissions reporting. By incorporating these measures of performance, operators and disclosure platforms will provide both themselves and investors with much-needed meaningful information to properly assess risk from methane and to compare performance from company-to-company.
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