Methane shareholder resolutions could yield big change, says investor

Oil and gas investor pressure is building, with 20 climate shareholder resolutions up for review at annual meetings held by publicly-traded energy companies this month. While the climate filings cover a range of issues, improved methane management is in the mix.

Last year was a breakout year for methane investor activism. ExxonMobil’s XTO Energy subsidiary business announced a reduction plan in response to a 2017 methane disclosure resolution, with onlookers expecting more change to follow this year from others. Meanwhile, a growing global network representing 36 investors and $4.2 trillion in managed assets continue to call on companies for methane reductions.

In the second-part of our interview series with Jamie Bonham, Manager of Corporate Engagement at NEI, we talk about how influential Environment, Social and Governance (ESG) shareholder resolutions, such as methane, have been in the past. We also discuss what prompts investors to file resolutions, and the potential impact on companies.

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3 ways sustainable finance can accelerate the Fourth Wave of environmentalism

Close your eyes and think about innovation. How many of you thought about a widget – a robot, a self-driving vehicle, a sensor? I’m guessing almost all of you. How many of you thought about regulations, contracts and financing? Maybe a few at most. This is the exercise that former Secretary of Energy, Ernest Moniz, and David Cash, former Massachusetts Department of Environmental Protection Commissioner, prompted at the launch of the WBUR Environmental Reporting Initiative.

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Environmental innovation is thriving in corporate America, despite the leadership vacuum in DC

Last week hundreds of representatives from global companies and leading NGOs met in Bentonville, AR for Walmart’s annual Sustainability Milestone Summit. The theme of the meeting was Project Gigaton, the most ambitious and collaborative effort ever to reduce a billion tons of emissions from the global supply chain over the next 15 years. At the meeting Walmart announced 20 million metric tons of greenhouse gas emissions reductions from suppliers, and noted that 400 suppliers with operations in more than 30 countries have now joined Project Gigaton by setting ambitious climate targets.  

One powerful theme that emerged from the meeting was the importance of technology. Project Gigaton is inspiring targets that raise our ambition, but increasingly technology is how we will deliver on these commitments and measure progress.

A new EDF survey of more than 500 executives confirms that game changing technology innovations are empowering private sector leaders to improve business and environmental performance – and to accelerate sustainability efforts across global supply chains.

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Investors: Methane targets wanted

With upcoming annual meetings full of shareholder resolutions calling on companies to set greenhouse gas (GHG) reduction targets, EDF released "Taking Aim", a new paper explaining why methane targets are the next frontier for the oil and gas industry and establishing five keys for strong targets. The paper explains how companies that set targets are more likely to be successful when it comes to securing methane emission reductions. Setting targets also demonstrates to investors that corporate decision makers understand methane risk management is critical to competing in an ever-cleaner energy market.

With the Task Force for Climate-Related Financial Disclosure (TCFD) framework also highlighting the importance of targets, “Taking Aim” provides some initial guidelines that can help frame what an ambitious, leading target looks like for oil and gas industry methane.

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Environmental innovation will transform business as usual

As the Trump administration rolls back environmental protections that could harm human health for decades, it’s increasingly up to businesses to lead the way, charting the course to a future that includes both a thriving economy and a thriving planet.

Leading the way requires first setting ambitious, public targets like the over 340 companies taking science-based climate action and 90 that have approved science-based targets; collaborating with partners across the value chain for maximum scale and impact – Walmart’s Project Gigaton, a collaborative effort to reduce 1 billion tons for emissions, is a powerful example; and, supporting smart climate and energy policy

BSR’s new sustainability framework closely echoes these leadership approaches and recommends that companies create resilient business strategies that align with sustainability goals. GreenBiz’s 2018 State of Green Business report further supports these and other requirements for sustainability leadership, adding that businesses need to improve reporting on climate risk, impact, and progress towards goals. The We Mean Business coalition adds further calls to action for companies: join the low carbon technology partnerships initiative, grow the market for sustainable fuels and electric vehicles, and take proactive steps to end deforestation by 2020.

Yet currently missing from all of this corporate sustainability leadership guidance is a call for companies to accelerate environmental innovation and deployment of next generation technology – sensors, AI, data analytics and visualization, and digital collaboration – to solve our most pressing environmental challenges.

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Smoke alarms for methane benefit public health, the environment and business

The oil and gas industry has planted its sights on playing a competitive role in the energy mix of the future. However, oil and gas extraction, transport and use create serious environmental and safety risks when leaked, releasing 8-10 million metric tons of methane into the atmosphere each year in the US alone.

Fortunately, addressing this problem also offers a tremendous opportunity: a 45% reduction by 2025 would have the same benefit as shutting down one-third of world’s coal fired power plants. That’s why EDF set out on a groundbreaking global technology challenge to incentivize new solutions to fix this problem.

The super emitter problem

Methane is invisible and odorless, making leaks hard to detect. EDF-led studies have shown that methane pollution is widespread, pouring out from “super emitters” – the large, enigmatic sources responsible for a big portion of industry’s methane pollution. These super-emitting sources are nearly impossible to predict and can happen anywhere, anytime as a result of malfunctioning equipment that goes unattended or mistakes in the field.

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Leading methane commitment from Exxon’s U.S. driller: Why it matters

The degree to which the oil and gas industry can be trusted to play a constructive role in a low carbon future depends in no small measure on whether and how it reduces climate pollution today. That’s why company insiders, investors, and policy makers should take careful note of the sensible and innovative commitments announced by XTO Energy, the ExxonMobil subsidiary that leads the United States in natural gas production.

The industry’s many outside stakeholders both in the U.S. and around the world are increasingly calling for emission reductions and greater commitment to cleaner production. Companies that heed those calls, and advance new technologies, will be much better positioned to answer society's demands for responsibility. Read more

Shell becomes latest oil and gas company to test smart methane sensors

This week, the oil and gas giant Shell took a positive step toward addressing methane emissions. The company announced a new technology trial at a wellsite in Alberta, Canada, where it is piloting a specially designed laser to continuously monitor emissions of methane, a powerful pollutant known to leak from oil and gas equipment.

The move by Shell is a glimpse into the future and demonstrates growing market interest in smart, sensor-based methane detection technology. Shell’s project joins a similar field test already underway in Texas, operated by the Norwegian producer Statoil, and a California utility pilot run by Pacific Gas and Electric Company.

Each of these deployments is promising, but the ultimate test will be broad-scale adoption of innovations that generate actual methane reductions.

For industry, there is an incentive to move ahead. An estimated $30 billion of natural gas (which is largely methane) is wasted every year due to leaks and flaring from oil and gas operations worldwide. In addition, roughly 25 percent of global warming is driven by methane. Oil and gas methane emissions also contain chemicals that adversely affect public health.

For these reasons, methane is a problem that has caught the attention of regulators, investors and consumers alike. Advancing new technologies to enable the oil and gas industry to tackle this challenge more efficiently is key, even as companies use established tools to manage emissions now.

Collaborations Spark Methane Innovation

When you bring the right people to the table, innovative solutions will follow. Behind the Shell, Statoil and PG&E demonstration projects is a collaborative initiative, the Methane Detectors Challenge, begun by the Environmental Defense Fund four years ago. The project united eight oil and gas companies, R&D experts and technology innovators in an effort to accelerate the development of next-generation methane detectors.

The formation of this project was motivated by a key insight: new technology to manage emissions needs to be created and deployed faster than ever. The Methane Detectors Challenge offers a unique resource to innovators – access to real facilities and collaboration with potential customers – which is essential to help entrepreneurs understand the market, demonstrate demand, and ultimately achieve economies of scale.

Both the Statoil and Shell pilots are using a solar-powered laser, created by Colorado-based Quanta3. The technology uses the Internet to provide real-time data analytics to wellsite managers via mobile devices or web portals.

Continuous Visibility, Faster Response

The oil and gas industry has a lot to gain from smart methane sensors that can prevent the loss of valuable product and reduce pollution.

Imagine a future where continuous leak detection systems allow operators to digitally monitor methane emissions occurring across thousands of sites. It’s a game-changer on the horizon. The burgeoning field of continuous methane monitoring offers a range of possibilities – including technologies capable of identifying emission spikes in real-time, allowing operators to cut mitigation time from months to days. Over time, smart sensors on wells may even help predict and prevent leaks and malfunctions before they occur.

Smart Methane Sensors Triggering New Market

The methane-sensing laser deployed by Shell and Statoil is one of many technologies in the emerging methane mitigation industry. In North America alone, more than 130 companies provide low-cost methane management technologies and services to oil and gas customers – a number likely to expand as innovators innovate, pollution requirements tighten, and producers increasingly appreciate the urgency of dealing with methane to maintain their social license to operate.

Smart automation technologies are already being used across the oil and gas industry to improve operating and field efficiencies. Continuous methane detection technology is the next logical step, which has the potential to provide significant economic, environmental and societal benefits.

The Shell pilot is a milestone to celebrate and we recognize the company for its early leadership. Now, we need governments and industry to show the determination needed to meet the methane challenge head-on. Sustained leadership is a prerequisite. But the keys to solving this problem are smart policies that incentivize ongoing innovation, and clear methane reduction goals—supported by technologies like continuous monitoring.

This post was also published on EDF's Energy Exchange blog. Image source: Shell/Ian Jackson


Aileen Nowlan is a Manager at EDF + Business. Follow her on Twitter for more news on EDF's work on innovation and energy.

Global investor touts methane opportunity with oil & gas industry

Institutional investors worldwide are increasingly encouraging oil and gas companies to improve and disclose their management strategies to minimize methane risk.

Methane – an invisible, odorless gas and main ingredient in natural gas – is routinely emitted by the global oil and gas industry, posing a reputational and economic threat to portfolios.

Natural gas is widely marketed as a low-carbon fuel because it burns roughly 50 percent cleaner than coal. But this ignores a major problem: methane. Natural gas is almost pure methane, a powerful pollutant that speeds up Earth’s warming when it escapes into the atmosphere.

Last month marked a significant milestone in investor action on the methane issue. The Principles for Responsible Investment (PRI) launched a new initiative representing 36 investors and U.S. $4.2 trillion in assets that will engage with the oil and gas industry across five different continents to improve its methane management and disclosure practices. The PRI initiative complements existing methane engagement efforts focused on the U.S. led by the Interfaith Center on Corporate Responsibility and CERES.

EDF Senior Manager Sean Wright recently sat down with Sylvia van Waveren, a Senior Engagement Specialist with Robeco Institutional Asset Management, a Dutch-based investment firm managing over $160 billion, to discuss the matter and understand why some investors are keen to affect the status quo on methane.

Wright: Why is methane a focus of your engagements? What do you see as the risks of unmanaged methane emissions? 

Sylvia van Waveren, Senior Engagement Specialist, Robeco Institutional Asset Management

van Waveren: Methane is one of the most important drivers of engagement with the oil and gas industry. We invest in oil and gas companies worldwide. A year ago, we started engaging them, specifically on climate change – and within that the methane issue is included.

In the past, methane was viewed as a U.S. shale gas issue, but more recently it has become important in Europe as we learned that methane is a powerful greenhouse gas. So in that sense, we learned a lot from the U.S. discussions and we still do.

I would like to stress that we see the methane issue more as a business opportunity than a risk. What we often say to companies is that methane is a potential revenue source. It would be a waste if companies do not use it. 

Wright: The scope of PRI’s initiative is global, with investors from 3 different continents as far away as Australia and New Zealand, and a plan to engage with companies from the Latin America, Europe, North America and Asia-Pac. What does this level of global collaboration convey about methane emissions? 

van Waveren: I am happy and it is good to see that others have taken up the seriousness of this issue, as well.  Methane is no longer a U.S. only problem. The issue is being raised and discussed in all kinds of geographies.

I’m a firm believer in collective engagements. They can be a powerful force when the issue is not contained within borders. That is the case with greenhouse gases. So yes, I’m happy to see the PRI initiative taking off and I am an active believer in getting this solved and bringing attention to this subject.  

Wright: In your conversations thus far with companies about methane, what resonates best when making the business case for improving methane management and disclosure?

van Waveren: When we talk about motivation at the company level, I have to be honest, it’s still early days. The European companies are talking in general terms and just now conceptualizing methane policies. If we’re lucky, they have calculated how much methane is part of their greenhouse gas emissions. And if we’re more fortunate, they are producing regional and segregated figures from carbon, but it’s really very meager how motivated the companies are and what triggers them most.

I really feel we should emphasize more with companies to get them motivated and to really look at the seriousness of methane. One issue that is particularly bothersome is that many companies do not know how to calculate, estimate and set targets to reduce methane. It is still a mystery to many of them. That’s why we come in with engagements. We need to keep them sharp on this issue and ask them for their actions, calculations and plans. 

Wright: Who are other important allies that have a role in solving this problem, and why?

van Waveren: We always would like to have an ally in the government. For example, carbon pricing or carbon fixations are all topics that we look for from the government. But in practice, that doesn’t work. Governments sometimes need more time. So we do not always wait for the government. When companies say they will wait for government, we say, “You should take a proactive approach.”

We rely very much on our knowledge that we get from within the sector. We review data analyses and make intermediate reports of scoring. We find best practice solutions and we hold companies accountable. There are also times when we name names. So in that sense, that is how engagement works. The data providers and other organizations with good knowledge and good content on methane – and EDF is certainly one of them – are very instrumental to get the knowledge that we need.

Wright: Can you give me an example of a widespread financial risk facing an industry in the past that was proactively improved by investors leading the charge – similar to this initiative?

van Waveren: More than 20 years ago, we had a greenhouse gas issue – acid rain. Investors helped solve that problem. Because of this, I’m hopeful that investors can also play a positive role in reducing methane.

I would also say the issue of Arctic drilling. Not so long ago, this was top of mind when we talked to our portfolio companies. A lot of companies have now withdrawn from Arctic drilling, especially from offshore Arctic drilling. I think investors were quite successful in sending a clear signal to the industry in a collective way that we didn’t see Arctic drilling as a good process. Maybe profitable – if at all – to the companies, but certainly not for the environment.

Wright: Thank you, Sylvia. We really appreciate your time and your thoughtful answers showing how investors can be part of the solution on methane.

Careful what you wish for: Trump’s environmental attacks will harm industry

In the same week Apple raised $1 billion through green bonds to invest in clean energy, and Amazon put solar panels on a million square foot processing facility, the Trump administration – at the urging of the worst elements in the oil and gas industry –proposed a two-year delay of sensible rules that would limit emissions of methane and other air pollutants. While a federal court since struck down a previous 90-day delay as unlawful, the two-year delay is still subject to public comment, and many expect the administration’s attacks on methane safeguards to continue through other means.

Natural gas, which is mostly methane, has been put forward as a cleaner alternative to other fossil fuels and as an energy resource that can play a key role in the transition to a lower-carbon future. But now more than ever, that proposition is now called into serious question.

How will natural gas compete in a changing world?

Every year, oil and gas operations around the country emit some 8-10 million metric tons of methane into the air. Methane is a highly potent greenhouse gas, responsible for about a quarter of the climate warming we’re experiencing today – and those emissions come mingled with a host of other smog-forming and carcinogenic pollutants.

There are cost-effective, proven ways to reduce these emissions, and leading companies are already implementing them. The problem is, many companies refuse to address the problem on their own. And now they’re looking to the Trump administration for a free pass to pollute.

When trade associations like the American Petroleum Institute attack cost-effective policies that protect public health and the climate, it sends a signal that the natural gas industry will do everything it can to maximize short-term profits – even at the risk of damaging the reputation of the industry in the eyes of the public and jeopardizing its ability to operate over the long term.

The question is: In an increasingly carbon constrained world, what is the natural gas industry’s plan for the future?

We’re not arguing that gas is at risk of going away tomorrow. The United States leads the world in natural gas production, as new technologies and processes have unlocked massive, cheap reserves. But make no mistake, the transition to cleaner energy in the U.S. and across the globe is irreversible and accelerating. In this context, fighting reasonable and necessary emissions rules only magnifies risk for the natural gas industry and its investors. It’s a head-in-the-sand approach that ignores the realities of what consumers, communities and markets demand.

Capital markets shifting to cleaner companies and forms of energy

The Trump administration’s recent moves come at a time when environmental concerns informing investment decisions are reaching record highs. For example, investors with $10 trillion in assets under management have committed to the Montreal Carbon Pledge to reduce the carbon footprint of their portfolios, with an eye towards portfolio de-carbonization in the long run.

As part of the shift to assets in lower emitting companies and industries, investors are demanding better carbon and methane disclosure as well as proactive environmental management. The recent watershed Exxon vote, in which 62% of investors (including industry titans like BlackRock and Vanguard) demanded better climate risk disclosure from Exxon management, showed that carbon risk considerations have hit the mainstream.

Increasingly, investors see methane simply as a form of carbon risk in need of management, not neglect. And methane waste can be cost-effectively managed – as proven in states like Colorado where production has continued apace even as strict methane rules have come on the books.

On top of investors’ efforts to shift portfolios towards cleaner companies, the divestment movement also continues to grow, driven by a range of environmental risks of owning fossil fuel stocks. Just recently mainstream investor CalSTRS divested from coal. Going forward, increasing numbers of investors will look carefully at the environmental record of oil and natural gas companies in determining their comfort level in continuing to invest.

Some companies lead but no substitute for commonsense rules

Companies like Southwestern Energy, Noble, Shell and others have led on methane emissions by setting methane targets, supporting state-based regulations, and working with the Oil and Gas Methane Partnership to disclose methane emissions. Their efforts certainly deserve recognition, and are supported by some investors who factor strong methane management into investment decision.

Still, voluntary actions by the few are no substitute for rules and oversight that require responsible operations by the thousands of oil and gas companies operating in the United States. Some of these companies simply lack a commitment to sustainability and to operating over the long-term, and will not rein in emissions unless they are required to do so by law.

Methane safeguards serve the long-term interests of industry and investors

As the scientific reality of climate change and consumer demand steer the world toward a cleaner energy future, will attacks on environmental protections inflict lasting damage on the oil and gas industry? Only time will tell. It’s likely, however, that if the loudest industry voices continue to oppose rules that could guide it toward a cleaner future, the industry as a whole will suffer.  Unfortunately, that will include the more forward-leaning companies, which will be dragged down by their intransigent peers. This outcome will become all the more likely thanks to the Trump administration’s erosion of environmental safeguards that are fundamental to responsible development.

It’s time for oil and gas operators and mainstream investors with a long-term view to take a look at what rules and regulations are needed to rein in methane emissions in their industry. And they also need decide if they want to align themselves with an administration whose policies may be unwittingly handicapping the very industry it attempts to serve.