Petroleum Africa
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Monday, September 23, 2019
The Transition Pathway Initiative (TPI) recently released its latest assessment of companies in the energy sector, with its Management Quality and Carbon Performance of Energy Companies Report. The report is comprised of 135 companies involved in coal mining, electricity, and oil and gas production. This years’ assessment covers 135 companies, compared to 105 last year, and for the first time TPI has included a comprehensive assessment of the Carbon Performance of oil and gas producers.
TPI is a global initiative led by asset owners and supported by asset managers. The initiative is aimed at investors and free to use, it assesses companies’ preparedness for the transition to a low-carbon economy, supporting efforts to address climate change. Launched January 2017, TPI has over 50 investors globally who have pledged their support. These investors represent roughly $15 trillion in combined assets under management and advice. TPI is used in a variety of ways by these investors including to inform their investment research, in engagement with companies, and in tracking managers’ holdings.
The 135 companies covered by the assessment are graded by levels, with Level 0 being companies who are unaware of or not acknowledging climate change as a business issue. The highest level is Level 4 which is reserved for companies who set long-term quantitative targets for reducing Greenhouse Gas (GHG) emissions. Surprisingly enough, only 1 of the 52 oil and gas companies assessed by TPI was at Level 0 and there were 12 at Level 4.
The majority of oil and gas companies assessed fell in the Level 2 and Level 3 range, 18 and 14 respectively. Level 2 companies are building capacity and have set GHG reduction targets, while Level 3 firms are integrating GHG reductions into their operational decision making. Generally Level 3 has nominated a board member/committee with explicit responsibility for oversight of the climate change policy.
Of the companies assessed, geographically, EU companies held the most Level 4 spots with ENI, Equinor, OMV, Repsol, Royal Dutch Shell, and Total all securing spots based on their continuing carbon management efforts. US independents ConocoPhillips and Occidental Petroleum garnered a Level 4 as did Australia’s Woodside, Japan’s JXTG, and Canada’s Suncor Energy.
According to TPI, the average Management Quality score of oil and gas producers has risen from 2.4 in 2018 to 2.7 this year. It went on to say that this progress was echoed in trend data for the 46 companies that TPI also assessed in 2017/18. While 27 companies have stayed on the same level (including six companies that had already reached Level 4 in 2018), 14 companies have moved up at least one level. On the other hand, five companies have moved down at least one level. Six companies have moved up from Level 2 to Level 3 by setting emissions reduction targets for the first time. Four companies have moved up from Level 3 to 4 and the main factors in this improvement have been apportioning board responsibility and supporting domestic and international climate mitigation the TPI report said.
One company, Occidental Petroleum, leaped over Level 3, moving from last years’ Level 2 to a Level 4 ranking in 2019.
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