Investors warned of transatlantic split on ESG for oil majors


Investors are being warned of geographic divergence in corporate governance and climate risk mitigation as a new report reveals European oil majors are outperforming their US counterparts in the transition to a low carbon economy.

The split is expected to become exacerbated under president-elect Donald Trump, who wants to remove the US from the Paris Agreement and plans to revive the US coal industry.

The In the Pipeline report, by investor advocacy group CDP, found European oil companies were ahead of their US counterparts for the shift to gas, investments in low-carbon technologies and on climate governance and strategy.

The report, which analysed a $1.2trn group of oil and gas companies, ranked Europe’s Statoil, Eni and Total top for environmental governance factors, while Suncor, ExxonMobil and Chevron, all based in North America, ranked at the bottom.

ExxonMobil is currently under investigation for failing investors on climate risk disclosure.

Legal & General Investment Management’s head of sustainability and responsible investment strategy Meryam Omi says the firm will be using the findings to inform its engagement strategy with the oil and gas sector.

“It is vital that the O&G sector aligns itself to the global goal of transitioning to a low carbon economy. There is an inevitable divergence in their commitments and transparency.”

Lauren Compere, managing director and director of shareholder engagement at Boston Common Asset Management, says the finding that Europeans are “leaving the US behind” is significant.

“It’s a divide likely to be exacerbated by the incoming President Trump. And an important reminder that investors need high-quality, thorough climate disclosure from companies to make sound long term investment decisions.”

Next month, Bank of England governor Mark Carney will release findings from the Taskforce on Climate related Financial Disclosure, which is set to add to calls for more disclosure on climate risk from oil and gas companies.