Copublished with Oil Change International, Center for International Environmental Law, Stand.Earth and Urgewald.
US non-profit Ceres has produced a paper aimed at explaining actions that oil and gas exploration and production companies (E&Ps) should take to reduce their emissions. It is supposed to provide useful information on climate alignment to the sector’s investors and bankers. The paper suffers from alarming weaknesses which threaten to reverse progress on setting standards for net-zero finance. Most glaringly, it does not insist that E&Ps reduce their overall emissions or align their activities with credible 1.5°C pathways. Ceres is an advisor to the Glasgow Financial Alliance on Net Zero (GFANZ) and plays a leading role in the governance of two of the GFANZ investor alliances. It should use its influence within GFANZ to advance the phase out of finance for fossil fuels. Financial institutions should not use this paper to guide their decisions on engagement with E&Ps.
The Ceres document, “Key Elements for a Net Zero Transition at Oil and Gas Exploration and Production Companies,” is a “suite of common yet strategically flexible actions that can facilitate emissions reductions for E&Ps and may ultimately influence investment decisions.” It is the result of a series of roundtables facilitated by Ceres with E&Ps, banks, and investment managers (1).
The names of the entities involved in the roundtables have not been revealed but both ConocoPhillips and major fracking company Pioneer Natural Resources disclose on their websites that they were involved with the initiative. ConocoPhillips is the developer of the highly controversial Willow oil-drilling project in the Alaskan Arctic and is listed in the Global Oil and Gas Exit List as the world’s 14th largest developer of new oil and gas fields. Given the involvement of these companies in this secretive process it is not surprising that the paper’s recommendations are biased toward favoring business as usual for E&Ps.
GFANZ advisors have responsibility to push for 1.5°C
Ceres’ mission is to advance sustainability issues within finance. It plays a leading role in the governance of two of the GFANZ sectoral alliances, the Net Zero Asset Manager initiative (NZAM) and the Paris Aligned Investment Initiative (PAII). It is also an advisor to GFANZ’s workstreams on mobilizing private capital and financial institution transition plans.
Ceres therefore has a responsibility to push for the protocols and guidelines of the GFANZ alliances to be adequate to the task of meeting GFANZ’s goal of helping to limit warming to 1.5°C (3). This would require Ceres to push for these protocols and guidelines to align with what the IPCC and standard-setting and policy bodies like the UN’s Race to Zero Campaign (to which all the GFANZ sectoral alliances belong), the UN High-Level Expert Group on net zero (HLEG), and the International Energy Agency (IEA) indicate is necessary to keep 1.5°C alive. Yet the actions for E&Ps laid out in the Key Elements paper are weaker in various key respects than those recommended by GFANZ and its sectoral alliances, as well as by the Race to Zero Campaign and HLEG.
The Key Elements’ recommendations are in no way adequate to ensure that E&Ps contribute their share to the “steep and immediate” reductions in energy-related CO2 emissions without which the IEA says there “is no credible pathway to 1.5°C (3).” The Key Elements paper fails to acknowledge the IEA’s finding that the carbon budget leaves no room for new oil and gas production in a 1.5-aligned world (4), a finding backed up by the IPCC and acknowledged by the Race to Zero, and HLEG (5).
A broad failure to push for credible emission reductions
Among the paper’s key weaknesses are:
- A failure to require comprehensive net-zero transition plans based on credible 1.5°C scenarios
- A failure to require Scope 3 targets
- A failure to require absolute targets
- A failure to specify years and percentage reductions for interim (pre-2050) targets
- Unambitious and unclear methane targets
- A lack of any restrictions on offsets
- A naïve position on E&P involvement in government lobbying
The recommendations of the Race to Zero, HLEG and even GFANZ are stronger than the Key Elements on all or most of these areas.
Through GFANZ and other climate initiatives, investors, banks and insurers have committed to doing their part to accelerate action on climate. Unfortunately this Ceres paper risks eradicating whatever progress has been made in establishing norms for net-zero finance by acting as a conduit for the self-interested concerns of the oil and gas industry into GFANZ-related processes. This is of particular concern for NZAM, for which Ceres is now the lead convening group.
The members of GFANZ and any other financial institutions committed to addressing climate change should not use this paper to guide their decisions on engagement with E&Ps. They should instead use the recommendations of HLEG, which have been informed by the work of the Race to Zero, IEA, IPCC and others, as the primary set of principles for guiding their decisions on E&Ps and other fossil fuel companies.
Read a detailed critique of the Ceres document published by Reclaim Finance, Oil Change International, Center for International Environmental Law, Stand.Earth and Urgewald.
