2016 was a year of fundamental disruption for the oil and gas industry. From the entry into force of the Paris Climate Agreement, to rapidly plummeting solar energy prices, to China’s massive renewable energy push, the world is moving towards a post-oil global economy and our work on carbon asset risk is helping to drive that change.
Last year, Ceres Investor Network members continued working with European investors in the Institutional Investors Group on Climate Change to advance shareholder proposals at nine fossil fuel companies, urging them to assess and disclose the resilience of their portfolios in a future where global temperatures are held to no more than two-degrees of warming.
Resolutions with Occidental Petroleum, Chevron and ExxonMobil received the broadest mainstream shareholder support ever for U.S. climate risk resolutions. Wall Street icons such as Northern Trust, State Street, HSBC, Charles Schwab, TIAA and MFS were among the supporters. Perhaps most importantly, this increased support sent a clear message that investors view climate risk as a material financial risk.
That message resonated throughout the financial markets, as the industry-led Task Force on Climate-related Financial Disclosures (TCFD) showed that investors have demonstrably brought the concept of “two-degree” scenario analysis into the financial mainstream by incorporating it into its much-anticipated draft recommendations for disclosure on climate-related risks and opportunities. Led by Michael Bloomberg, the task force was created at the request of G20 nations through the Financial Stability Board. Its endorsement of two-degree scenario analysis as a cornerstone of effective climate disclosures was a victory in 2016 for Ceres Investor Network members and the Global Investor Coalition on Climate Change.
Globally, nine companies have committed to conducting scenario analyses in 2016 — and the analysis seems to be prompting changes to capital and strategic plans. Since conducting 2 degree scenario analysis, ConocoPhillips has abandoned investment in deepwater projects and divested $13 billion in oil sands while Total and Statoil have shifted significant resources out of oil sands and towards renewable energy. Shell and BP have also taken major steps forward on assessing portfolio resilience as a result of continued engagement with the Aiming for A investor coalition, which includes Ceres Investor Network members and the Institutional Investors Group on Climate Change.
Though the political winds have shifted dramatically in 2017, market forces have not. Markets are driving an energy transition that the the oil and gas industry cannot escape, and a combination of factors—including investor pressure—make it inevitable, irreversible and economically irresistible.