Following the Paris Agreement of limiting global warming to well below 2°C, The Institutional Investors Group on Climate Change (IIGCC) has published an updated edition of their guide setting out investor expectations for how oil and gas companies must act to adapt their business strategies to the new climate change pathway.
Long-term investors want to ensure that oil and gas majors do more to address the climate change challenge
ollowing the Paris Agreement of limiting global warming to well below 2°C, The Institutional Investors Group on Climate Change (IIGCC) has published an updated edition of their guide setting out investor expectations for how oil and gas companies must act to adapt their business strategies to the new climate change pathway.
The oil and gas sector represents trillions of dollars in market capitalisation. Therefore, long-term investors want to ensure that oil and gas majors do more to address the climate change challenge. With the updated guide, the global investor community is setting clear expectations for oil and gas companies on discipline and actions required to limit global warming.
New strategies are required
The guide is particular focused on how companies in this sector are governing and managing the transition risks and opportunities associated with a climate trajectory of no more than 2°C of global warming and are developing the business strategy required to adapt through the transition to a sustainable low carbon energy system. See the fact box below for an introduction to the five areas of concern.
5 focal areas
The updated guide groups investor expectations in five areas of concern:
- Governance – are board and management processes well enough defined to ensure effective planning for a transition consistent with 2°C and efforts to pursue 1.5°C?
- Strategy – is the management of climate-related risks and opportunities integrated into business strategy well enough to ensure business models will be resilient in the face of a range of energy transition scenarios?
- Implementation – is scenario analysis and ‘stress testing’ well enough embedded into key business planning processes and investment decisions?
- Transparency & disclosure – does the company disclose its operational emissions in the annual report and/or on the corporate website? How good is the company’s view of, and response to, the material climate related risks and opportunities outlined in the guide?
- Public policy – does the company engage with public policy makers and other stakeholders to support development of cost-effective policy measures to mitigate climate-related risks and low carbon investments?
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