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Chief Responsible Investment Officer (CRIO) Church of England Pensions Board, Chair Transition Pathway Initiative:
Major Transition Pathway Initiative (TPI) report into the #Energy Sector (#Oil&Gas, #Mining, Electric Utilities) just released assessing for the first time alignment to the 1.5°C pathway. Key headlines are that:
– 1 in 10 companies aligned with a path to 1.5°C in 2050 out of 140 of largest energy companies assessed by TPI.
– Majority (57%) fail to align with any of TPI’s temperature benchmarks including one reflecting new National Pledges benchmark.
– 34% of energy companies do align with a ‘Below 2°C’ path and for the first time three oil & gas firms (TotalEnergies, Occidental Petroleum Company, Eni) align with the 1.5°C.
– Oil majors such as Saudi Aramco, BP and Exxon Mobil are not aligned with the Paris Agreement goals. See the image below to understand the challenge that lies ahead…and the need to reshape demand.
It is though clear that the transition is underway within the energy sector and some companies, as shown by this latest TPI research, are moving out of first gear and accelerating their transition plans.
Concerningly, for investors there remains significant distance between net zero rhetoric and net zero reality in the case of most fossil fuel majors. Electric utilities are the fastest changing sector with a significant degree of companies setting credible targets aligning to net zero.
Part of the complexity of the transition is there are varied strategic options for companies seeking to achieve net zero. Investors have had to intervene with the support of insights from TPI to set a Net Zero Standard on disclosure in the oil and gas sector and are working to do the same in the mining sector. These Standards will be reflected in future TPI energy assessments. Ultimately, as the image below shows investors need to engage the demand side with the same level of intensity that we do with the fossil fuel sector. If we reshape demand we reshape the energy providers.