Shell, Total Are Anomaly, Allowing Investors to Track Carbon

Royal Dutch Shell Plc and Total SA are the only companies among the 10 biggest oil and gas producers in the world which disclose how their carbon emissions will decline over time, according to the first analysis of its kind by managers overseeing more than $9 trillion of funds.

The Anglo-Dutch and French majors are the only companies among Big Oil to have set long-term plans to significantly reduce their carbon intensity — or the level of emissions per unit of energy produced. They are also the only two companies to disclose emissions from their sold products, the biggest portion of their impact on the climate.

That’s according to a new report by the Transition Pathway Initiative, a global program to cut climate risks, which is supported by managers including CalPERS and BNP Paribas Asset Management.

“TPI research raises very important questions about how investors such as ourselves view oil & gas companies,” said Alvaro Ruiz-Navajas, portfolio manager at BNP Paribas Asset Management. He added that it “ultimately affects our overall allocation” as the funds manager determines whether it is successfully managing climate risks.

BP Plc, ConocoPhillips and Eni SpA have targets but only for emissions generated in the production process, the study found. The remaining five companies still don’t have quantified targets and one of them, Reliance Petroleum Ltd., doesn’t disclose operational emissions at all.

Total, BP, Conoco and Reliance didn’t immediately respond to requests for comment. A Shell spokeswoman pointed to an energy transition report from April that showed how the company could withstand declining oil demand.

The findings of the report will be used by investors deciding where to allocate their capital. They may adjust their holdings as they attempt to avoid being left with shares which might drop in value as the world seeks to adhere to the 2015 Paris climate deal, which aims to keep temperatures from rising more than 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial levels.

Investors managing some $30 trillion of assets are increasingly prodding the world’s biggest polluters to come up with stronger green strategies.

Insufficient Ambitions

Carbon intensity pathways for the top-ten oil and gas companies:

Source: Transition Pathway Initiative

The study shows that, while Shell and Total’s plans would eventually comply with existing targets under the Paris agreement, they aren’t ambitious enough to meet the emissions-reduction trajectory implied by it.

The results “really distinguish Shell and Total from their peers,” said Adam Matthews, co-chair of the initiative and director of ethics and engagement at Church of England Pensions Board. Still, all of the companies and lawmakers need to do much more because regulation of the sector isn’t yet in line with Paris, he said by phone.

Funds managers will “use this information in different ways,” Matthews said. The Church of England Pensions Board has 650 million pounds ($855 million) in passive funds and is already examining how to reallocate some of that money in the next year to favor companies reacting appropriately to the Paris deal, he said.

“TPI gives us a tool that helps us cut through all the material out there to understand which companies are basically positioning themselves to manage the transition to a low-carbon economy and therefore reduce our risk,” Matthews said.

Shell successfully fought a shareholder resolution this year that it set even more ambitious emissions targets, after an activist investor warned its business plan may not be in line with the Paris agreement.

CEO Ben van Beurden strenuously disagreed that was the case and cited a plan to cut its net carbon footprint in half by 2050, including reducing emissions from its customers. BP’s CEO Bob Dudley has also fought off calls to set more specific targets, arguing they are material for class-action lawyers.