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Oil and gas industry heeding (some) investor demands on climate risks

The oil and gas industry is responding to demands from investors about their climate change management and disclosure, although investors still have concerns and should step up their engagement, a director of Hermes’ stewardship and engagement arm has said.

Tim Goodman, director, Hermes Equity Ownership Services, made the comments in connection with a report on the impact of climate-focused investor engagement with 10 large oil and gas companies in North America and Europe. The report was published by the four investor networks in the Global Investor Coalition on Climate Change along with climate research provider CDP.

According to those behind the report, investor engagement has had a discernible impact on board and executive decision-making with respect to disclosure and management of climate change risks – but there are still laggards and shortcomings that investors want addressed.

One target for investors this proxy season, as it was last year, is ExxonMobil. A shareholder proposal co-filed by The Church Commissioners for England called on the company to carry out and disclose an analysis of how its portfolio would fare in a world where global warming is kept to a maximum of 2°C.

Hermes’ Goodman said investors were using the 2017 proxy season to try to have their concerns addressed, but emphasised that they needed to become more ambitious about the direction of their stewardship strategies.

“We need to apply significantly more pressure using all the tools available, from private dialogue about portfolio resilience and 2°C transition planning, through to more public comment on our expectations for the oil and gas industry,” he said.

Shareholder resolutions requesting more company reporting in line with recommendations of the Financial Stability Board’s Task Force on Climate-related Disclosures (TCFD) could in selected cases strengthen these efforts, he added.

Investors should step up engagement with oil and gas companies beyond the North American and European majors, according to Goodman.

“We must also acknowledge that the oil and gas industry is responding to demand and we need to ensure that we have similar dialogue with other sectors as well about how they are responding to the recommendations of the TCFD,” he said.

Earlier this month, Hermes and Wespath Investment Management withdrew a climate change-related shareholder resolution for Chevron’s 2017 AGM, which will take place on on 31 May, saying that its filing had prompted the company to publish a report on how it is managing climate change risks. Although the report didn’t fully meet the proposal’s requests, Hermes and Wespath said the company should be given time to improve its disclosure. 

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