The growing awareness of climate change and the need to respond, the increase in shareholder resolutions on environmental policies, the recent IPCC report, and the extreme weather events occurring around the globe, have placed companies under close scrutiny to report on how they are meeting their environmental, social and governance responsibilities.
The oil and gas industry’s social licence to operate has come under threat as the sector’s environmental credentials are examined and the industry needs to demonstrate how it will support the transition to net-zero by 2050 and beyond.
As a result of this increasing focus on the environment and sustainability, financial institutions are increasingly aware of the impact a business has on people and the planet, and the Oil and Gas Authority (OGA) is working with industry and the investor community to promote the importance of ESG and influence best practice.
Investors can benefit from investing in businesses that report well on ESG, as clear reporting provides both resilience to, and oversight of, the changes which may be required in the event of stricter disclosure practices being enforced by governments.
Many G20 nations have already stated they will make climate-related disclosures mandatory, in line with the framework and recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD), and leaders at the UK-hosted June G7 summit said they too “supported moving towards mandatory climate-related financial disclosures”. The UK has announced that TCFD-aligned reporting will be mandatory across the economy by 2025, and has published a set of “Sustainability Disclosure Requirements” which will be put in place as part of its role in providing green finance leadership.
During its regular investor and industry engagement, the OGA queries approaches to platform electrification, carbon storage and internal carbon prices, as well as seeking to understand the views of lending banks. ESG will continue to be a core consideration in its engagement.
During such engagement, it was apparent that common reporting standards were needed, so we set up an ESG Taskforce comprised of representatives from industry and the investor community.
The Taskforce focused on the ‘E’ of ESG and looked at key environmental metrics to improve comparability of environmental performance and to ensure that our industry continues to be supported by the investment community.
The Taskforce recommended a set of qualitative and quantitative climate-related metrics which we expect industry to report against, over the course of Q1 2022. Medium to longer term recommendations, such as linking senior management KPIs to emissions targets, will be rolled out thereafter. Following successful communication of, and response to, the recommendations, the Taskforce will reconvene, review work so far on environmental disclosure and consider where next to focus its efforts, such as evaluation of the industry’s performance on the often-overlooked social aspect of ESG.
Read the latest issue of the OGV Energy magazine HERE.