The Institutional Investors Group on Climate Change (IIGCC) has released an assessment framework for investors on how to measure if transition plans from oil and gas companies align with net zero targets or with a 1.5°C limit on global warming.
The Net Zero Standard for Oil and Gas is designed to help investors navigate companies' transition plans that have "increasing differences", the IIGCC said. The framework will "inform investors' corporate engagement priorities and escalation strategies and help them to better understand the transition risk in their portfolios", it said.
The IIGCC, after consultations with industry, used metrics in line with indicators used in the Climate Action 100+ company benchmark-disclosure framework. It ran a pilot study to assess five European oil and gas companies and will make initial public assessments of "the largest European and North American oil and gas companies" in late 2023, the group said.
The 90 metrics include whether a company has set a net zero target by 2050 or sooner, as well as detail around greenhouse gas (GHG) reduction measurements and targets, and the timeframes these are linked to. The framework tackles whether companies have a clear definition of "green" fuels, goals to cut flaring and methane, and climate-related financial disclosures.
The IIGCC supports investors to align their portfolios with the Paris climate agreement. It has more than 400 members with €60 trillion ($66 trillion) of assets under advice or management.
There is no global common standard for transition plans — which set out how a company or organisation plans to decarbonise — leading to concern from some quarters over how much GHG reduction they will generate in real terms.
"Criteria and benchmarks for these net-zero commitments have varying levels of rigour and loopholes wide enough to drive a diesel truck through," UN secretary general Antonio Guterres said at last year's UN Cop 27 climate summit. A UN-appointed group set out guidelines at Cop 27 to "bring integrity" to net zero pledges. The UK's Transition Plan Taskforce published draft disclosure frameworks, also at Cop 27, that will ultimately inform UK regulation and are intended to act as the "gold standard for private sector climate transition plans."
