The Task Force on Climate-related Financial Disclosures (TCFD) set up by the Financial Stability Board will be publishing its final recommendations on Monday (29th June).
This follows a consultation on its initial report which was published in December which the TCFD said had generated 320 responses from respondents in 30 countries. The TCFD said it had reviewed and analysed the feedback received and worked to address key issues that were raised for its final report.
This publication follows new research, by Carbon Tracker produced collaboratively with the Principles for Responsible Investment (PRI) and institutional investors, which revealed that five of the world’s six largest listed oil companies risk wasting more than 30% of possible spending on upstream projects that are high-cost and surplus to supply needs if there is a global move to limit global warming to 2°C. The report notes that the TCFD has highlighted 2°C scenario tests as a key way to improve and standardise company reporting of exposure to the energy transition.
Carbon Tracker said this is the first report to rank the oil and gas industry company by company and identify where shareholders’ money could be most exposed to the low-carbon transition, and it finds that $2.3 trillion of projects — roughly a third of business-as-usual investment to 2025 – is inconsistent with international objectives to limit climate change to a maximum of 2⁰C and rapid advances in clean technologies reducing demand.
The authors said that big energy companies are under growing pressure from investors to disclose how they are responding to climate change and the transition to a low-carbon economy. The report is designed to equip investors with the authoritative information they need to challenge companies on their investment strategy and approach to climate risk.
The report analysed the upstream investment plans of 68 of the largest publicly traded oil companies plus the state-owned Saudi Aramco up to 2025 and reveals wide variations between companies. The research found that Exxon is more exposed to the energy transition than any other oil and gas major with 40% to 50% of capital expenditure allocated to uneconomic projects. Shell, Chevron, Total and Eni all have around average exposure, risking 30% to 40% of spending. BP has less, with 20% to 30% at risk, the research found.
James Leaton, Director Carbon Tracker’s research, said: “There are clear signs that oil demand could peak in the early 2020s – so companies need to start taking project options that would come onstream then off the table, and be transparent about how they are aligning with a low carbon future. Sticking with the growth at all costs scenario just doesn’t add up for shareholder value when the policy and technology momentum is heading in the opposite direction.”
As the report notes investors are prepared to show that they want companies to take action in response to climate change. Last month 62% of ExxonMobil shareholders supported a shareholder resolution and voted for the company to report annually on how technological advances and 2⁰C global climate change policies will affect its business and investment plans. This result followed a similar shareholder majority vote at Occidental Petroleum asking the company to assess the impact of climate change on its business.
Last Updated: 23 June 2017