Friday, April 17, 2015

Oil Majors Face New Pressure to Disclose Climate Risk to Investors

Investors holding $2 trillion in assets ask regulators to require transparency a day after 98% of BP shareholders demand similar information.

The conical oil drilling unit Kulluk sits grounded off the coast of Alaska. Investor fears about carbon assets becoming uneconomic, or stranded, are being exacerbated by companies’ pursuit of carbon-intensive projects such as Arctic drilling and Canadian oil sands projects. (Credit: U.S. Coast Guard handout photo taken January 3, 2012) Click to Enlarge.
A $2 trillion group of investors will ask regulators on Friday to force oil and gas companies to provide more disclosures about climate-related risks to their businesses.

The request, backed by 62 institutional investors from the U.S. and Europe, is included in an April 17 letter to Mary Jo White, head of the Securities and Exchange Commission.  The comptrollers for New York State and New York City submitted a similar letter to the commission.  The letters are the latest sign of the growing concern from shareholders and others about how fossil fuel companies would fare in a world that’s shifting to low-carbon energy sources.

"We are concerned that oil and gas companies are not disclosing sufficient information about several converging factors that, together, will profoundly affect the economics of the industry," the investors wrote.

The group cited worries that carbon assets could become uneconomic—or stranded—if climate-related trends permanently undercut prices and demand for fossil fuels.  Those fears are exacerbated by “excessive capital spending on high-cost, carbon intensive projects such as Arctic drilling, ultra deepwater drilling and Canadian oil sands projects," the investors wrote. 

"We have found an absence of disclosure in SEC filings regarding these material risks," said the investor group, which was organized by the sustainability group Ceres.

On Thursday, shareholders of oil giant BP reinforced the importance of such disclosures by overwhelmingly approving a measure that requires the company to provide more robust yearly climate change-related information, including data about the viability of BP projects in a low-carbon economy.

The disclosures are designed to allow investors "to judge whether BP is positioning itself to be a sustainable player in the energy system," said Edward Mason, head of responsible investment at the Church Commissioners, the Church of England.  The church was part of a broad coalition backing the BP resolution.

The BP measure was approved by more than 98 percent of the shares voted, surpassing the 75 percent benchmark for making the resolution binding under British law.  Beginning next year, BP must disclose efforts to cut carbon emissions; whether company projects will be viable in a low-carbon economy; the company's investment in low-carbon energy technology; executive incentives tied to the low-carbon transition; and BP’s lobbying on climate-related public policy.

Read more at Oil Majors Face New Pressure to Disclose Climate Risk to Investors

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