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ESG roundup: Methane emissions, GES-oekom, Allianz

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  • ESG roundup: Methane emissions, GES-oekom, Allianz

GLOBAL - The European Institutional Investors Group on Climate Change (IIGCC), the North American Investor Network on Climate Risk (INCR) and the Australia/New Zealand Investor Group on Climate Change (IGCC) have called on companies and governments to minimise methane emissions from rapidly growing unconventional oil and gas production made possible by hydraulic fracturing.

As shareholders in oil and gas companies, investors are concerned with the regulatory and reputational risks associated with 'fugitive' methane and the significant concerns methane emissions raise.

Stephanie Pfeifer, executive director at the IIGCC, said: "Methane is more than 20 times more potent than carbon dioxide as a greenhouse gas and has much greater short-term warming potential."

She said investors concerned with the negative economic impacts of methane leakage and its contribution to climate change would be taking a range of measures to promote methane emissions reductions.

"These include engaging directly with companies to understand their approach to methane control, discussing effective regulatory measures with policymakers and working with industry to develop a framework to enable the monitoring of companies' progress on methane control," she said.

"With the technology that would substantially eliminate most methane emissions available, progress on this issue is eminently achievable."

From 2010 to 2020, oil and gas methane emissions are projected to increase by 35%.

To enable investors to evaluate companies' progress in tackling methane leakage, the three investor groups - which represent more than 200 members with total assets of more than $20trn (€15.9trn) - have announced that they are working with industry and experts, in coordination with the Carbon Disclosure Project, to develop an investor framework for disclosure to evaluate company progress on reducing methane emissions.

Investors are calling for companies to disclose their methane emissions and control plans under this framework and implement best-practice control technologies that have been proven to eliminate most methane emissions.

Consultation on the draft disclosure framework is currently underway, with a final version due for publication in October 2012.

In other news, two of Europe's environmental, social and governance (ESG) service providers - GES and oekom research - have formed a strategic partnership to meet an increasing demand for responsible investment services in the German-speaking markets and the Nordic region.

The partnership will enable clients of oekom research to apply GES's global engagement services to its existing supply of ESG research, which will be accessible through an adapted client interface.

At the same time, GES will be able to serve its clients supported by the services offered by oekom research and its ratings of companies and countries.

Lastly, a new study by Allianz Global Investors suggests that the need for action prompted by climate change and the crises surrounding energy supply security is likely to trigger changes in virtually every area of the economy, which could lead to a new long-term cycle of prosperity, or sixth Kondratieff cycle.

According to Dennis Nacken, senior capital market analyst and author of the study 'The "green" Kondratieff - or why crises can be a good thing', this growth will differ from everything that has gone before.

The shift to renewable energies, in particular, demonstrates that growth would be much less consuming and much more regenerating.

He says: "Under the new conditions imposed by globalisation, demographic development, climate change, scarce resources and greater awareness of, and responsibility towards, the environment on the part of consumers, growth will probably be generated from a new mix of economics and ecology.

"[But] this change will only gain pace once environmental consumption becomes a cost factor. This means, the environment must get a price tag."

The first steps in this direction are already being taken, according to Nacken.

He points out that the number of countries that have added the expansion of renewable energies or similar policies to their political agendas has more than doubled, from 55 to 119, between 2005 and 2011, and that more than half of those countries are emerging markets.

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