Some of the most influential investors said today they are encouraged by key oil and gas majors’ decisions to break with their trade associations and support strong methane standards, sending a clear message to the American Petroleum Institute (API) regarding the long-term value of preserving and enhancing regulations to limit methane emissions across the sector.
In the span of just a few days, four of the world’s largest oil and gas companies — Shell, Equinor, ExxonMobil and BP — broke ranks with the API by calling on the federal government to directly regulate methane emissions.
“The decision by these four oil and gas majors to advocate for strong methane standards is a significant step and we hope that the API will follow suit and change its stance,” said Brian Rice, Portfolio Manager at the California State Teachers' Retirement System (CalSTRS).
While some companies are already taking action to monitor and reduce their emissions with cost effective practices as a matter of compliance and good business practice in the field, investors view nationwide methane regulation as essential in connection with ongoing reliance on natural gas in a decarbonizing world. Regulation is particularly necessary given the fragmented nature of the industry, with over 610 different companies accounting for 50 percent of US oil and gas production in 2017.
“As an investor, it is important to us that the companies in our portfolio take a strong stance on the policies that impact their industries,” said Adam Matthews, Director of Ethics & Engagement at the Church of England Pensions Board. “We applaud the companies who have broken from the API on methane emissions regulation. We would encourage other companies that have so far remained silent to similarly demonstrate their commitment to addressing this important issue.”
Rolling back regulation, as proposed by the federal government, will lead to excessive methane emissions that needlessly increase the climate impacts of natural gas and call into question the role it can play in the transition to a low-carbon future. Comprehensive and common-sense national standards are needed to mitigate this industry-wide risk, and constructive engagement from industry on how to set the standards is critical.
Despite this, trade associations like the API and IPAA have continued their years-long effort to repeal methane standards, potentially now placing it at odds with some of its largest members. The trade organization is also at odds with some of the industry’s largest investors, including those representing $1.9 trillion in assets who recently wrote to companies urging them to support EPA’s regulatory efforts on methane.
“This is a remarkable moment for the oil and gas sector,” said Andrew Logan, senior director of oil and gas at the sustainability nonprofit organization Ceres. “For major corporations in the sector to break with their trade organization and advocate for strong methane regulations clearly shows that these companies and their investors understand the value of preserving strong standards.”
Methane, the primary component of natural gas, is over 80 times more powerful in causing global warming than carbon dioxide over a 20-year time period. The oil and gas sector is the largest industrial source of methane emissions, with global methane emissions costing the sector an estimated $30 billion in lost product each year. Correspondingly, the sector could reduce global fugitive methane emissions by 75 percent using proven technologies, with nearly 50 percent of such emissions reduced at no net cost.
For more actionable guidance for the oil and gas sector on methane, explore Setting the Bar: Implementing the TCFD Recommendations for the Oil and Gas Industry, a joint report from Ceres, Environmental Defense Fund (EDF) , and Principles for Responsible Investment (PRI).
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About Ceres:
Ceres is a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy.