As ESG goes mainstream, methane disclosure divide looms large on investor agenda

The demand for corporate transparency is here to stay. Just last year, 390 investors representing more than $22 trillion assets signed a letter in support of the Task Force on Climate-Related Financial Disclosures, advocating for a unified set of recommendations for corporate climate disclosure. So as financial markets increasingly recognize Environmental, Social, and Governance (ESG) risks, and increasingly embrace ESG strategies, oil and gas companies failing to report on environmental risks, like methane emissions, will be at a disadvantage.

Yet despite the reputational and financial risks posed by methane emissions in the oil and gas sector, over 40 percent of oil and gas companies analyzed in a new EDF report fail to report even basic information on methane management. The report finds that the quality and quantity of methane risk management reporting has increased amongst nearly 60 percent of companies analyzed. But the overall improvement has not been enough.

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Methane management is risk management

When I worked on the trading floor at Goldman Sachs, one of the major services we provided our corporate clients was risk management. Sitting on the commodity desk, we bought and sold financial products that allowed the world’s biggest consumers and producers to manage their exposure to the often fluctuating price of natural resources like aluminum, crude oil, and natural gas. Companies take action to manage this price risk in order to provide long-term stability for the company and its investors.

Now as a member of the EDF+Business team, I focus on a different kind of risk: climate risk. And just like financial risk, it needs to be managed for the long-term benefit of all stakeholders involved.

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