Tuesday 29th September – OFI AM announced its exit from the oil sector in 2050, as well as first measures to exclude companies active in the shale oil and gas, tar sands, Arctic, and deep-water drilling sectors. Reclaim Finance welcomes their general approach but condemns the complete disconnect between the adopted measures and the “state of emergency” OFI describes in its press release. Upon analyzing the announcement, it seems that the measures will not impact oil and gas majors and that the only companies that will be excluded from the asset manager’s investment portfolio will be ones that were never included in the first place.
Lucie Pinson, founder and CEO of Reclaim Finance comments:
“OFI Asset Management has the merit of being the first French player to recognize the need to exit from the oil sector by 2050 and from the riskiest and most polluting hydrocarbons earlier. But the announced measures are far from sufficient and do not meet the urgency of preventing the development of new projects, including gas projects. The announced strategic steps will not allow OFI to achieve the reductions in greenhouse gas emissions required to limit global warming to 1.5°C”.
The general approach of initially excluding energies that concentrate ESG, climate and financial risks, while preparing for future exclusion of the oil sector, is to be welcomed.
- However, OFI Asset Management repeats the errors of the International Energy Agency’s (IEA) Sustainable Development Scenario (SDS) , which it says it takes into account. Thus, it seems to forget that containing global warming to 1.5°C implies an exit from gas and oil simultaneously.
- In addition, its commitment to gradually reduce its positions in conventional oil companies from 2040 could have a very relative impact given the shift of the oil majors to the gas sector.
Regarding its position on drilling in the Arctic or deep waters, there is a total discrepancy between OFI’s announcement, which acknowledges “a state of emergency and a necessary mobilization of all to preserve the future of the planet and of mankind”, and the lack of ambition in their announced measures.
- As Arctic ice melting reaches record levels [2], OFI Asset Management is enabling the drilling of new oil and gas projects in the Arctic and deep waters until 2030. Not only are these projects, like any new hydrocarbon extraction project, incompatible with the available carbon budget, but they threaten to further accelerate the warming of the Arctic zone and disrupt extremely sensitive areas that are rich in biodiversity.
- Only starting 2030 will OFI Asset Management begin to exclude companies that initiate new projects. From 2040 onwards, OFI says it will exclude other companies involved in these areas; but it does not give any details regarding the rate of exclusion and the date by which its exposure would be reduced to zero.
The commitment to fully exit the shale oil and gas and tar sands sectors by 2030 appears to be the only truly substantial measure announced by OFI Asset Management. However, it must be stressed that OFI Asset Management is careful not to specify how it defines these sectors, and whether its commitment covers the entire value chain – from extraction to transportation, as well as the diversified companies involved – or only those companies specialized in the extraction of tar sands and shale oil and gas.
- Financial research conducted by the firm Profundo for Reclaim Finance shows that OFI Asset Management held, at the end of March 2020, $67 million in investments in the 100 largest producers of shale gas and oil [3]. But, 90% of its investments went to only two companies: Repsol and most prominently, Total.
- OFI AM announced that it would exclude players making more than 10% of their turnover in the extraction of oil, shale gas and tar sands from now on; a threshold which will be lowered to 5% in 2025 with a view to a total exit in 2030 at the latest.
- The oil and gas majors involved in these sectors generate a share of their revenues that is below the thresholds retained by OFI AM, and the very short duration of exploitation of shale gas and oil wells allows them to benefit from this honey pot for a long time before risking exclusion from OFI AM’s investment portfolios in 2030. Total has recently acquired many new wells in the US shale basins [4].
Media interviews:
Lucie Pinson, Reclaim Finance, lucie@reclaimfinance.org, +33 679543715