Methane is climate finance’s untapped opportunity

Climate finance has become an important force in the global energy transition. According to the International Energy Agency, global energy investment was expected to reach $3.3 trillion in 2025, with about $2.2 trillion flowing to clean energy technologies, including renewables, nuclear, storage, efficiency, electrification and low-emissions fuels.

That progress matters. It has helped build burgeoning markets, lower technology costs and prove that capital can accelerate decarbonization, from renewable deployment to vehicle electrification. But one of the fastest, cheapest and most immediate climate opportunities remains underfunded: reducing methane emissions from oil and gas operations.

Why methane belongs in climate finance

Methane is the main component of natural gas. When it leaks from wells, pipelines, compressors and processing equipment, or when it is vented or inefficiently flared, it becomes a powerful driver of near-term warming. It is also wasted energy. Every ton released into the atmosphere is fuel that cannot heat homes, generate electricity, support industry or strengthen energy security.

That combination makes methane abatement an unusually strong climate-finance opportunity. The technologies are proven. The reductions are measurable. The benefits are immediate. And in many cases, the economics are compelling.

The IEA estimates that around 70% of methane emissions from fossil fuels, nearly 85 million metric tons, can be abated with existing technology. In oil and gas specifically, three-quarters of methane emissions can be cut with tools available today. More than 35 million metric tons of fossil-fuel methane could be avoided at no net cost, based on average 2025 energy prices, because the cost of abatement is lower than the value of captured gas that can be sold or used.

The energy-security case is equally strong. Cutting methane from oil and gas operations globally could deliver nearly 100 billion cubic meters of gas to markets each year, and eliminating non-emergency flaring could unlock another 100 billion cubic meters. More gas than flowed through the Strait of Hormuz in 2025.

Why capital is still missing the opportunity

So why is capital not flowing at the scale the opportunity deserves?

Inside oil and gas companies, even profitable projects may remain unfunded because methane reduction benefits are less easily quantified, and they must compete internally against higher-return upstream oil and gas investments. As a result, many mitigation projects do not receive the attention required to move them to a stage where they might receive financing from capital providers willing to accept lower returns.

Part of the answer is also perception. For many climate-focused investors, financing anything connected to oil and gas feels incompatible with climate goals. Evolving EU sustainable finance rules have also made it increasingly difficult to invest in many oil and gas issuers, even when the financing is dedicated to measurable decarbonization activities. That concern is understandable. The world must expand clean energy and rapidly reduce dependence on fossil fuels. Yet we are still producing and using large amounts of oil and gas, and it only makes sense to fund reductions wherever we can find them, even as we ramp up renewable energy.

For methane, the challenge is not a lack of need, opportunity or technology, but a lack of visibility and financial pathways that consistently direct capital toward methane reduction projects.

What finance can do now

That is beginning to change. The Methane Finance Working Group was created to help close this gap by developing practical guidance for financing methane abatement through labeled bonds, loans, eligible projects and performance indicators. Its work reflects a simple premise: if methane abatement delivers measurable climate benefits, operational improvements and stronger energy security, capital markets should have efficient ways to finance it.

Investors, lenders and insurers can build on this foundation by integrating methane and flaring performance into credit decisions, bond structures, loan terms and underwriting standards, as many have done already.^{[1] [2] [3]} Climate-focused funds can treat methane abatement as a core focus rather than an afterthought. Development banks and public finance institutions can help reduce risk, structure transactions and crowd in private capital. Climate-focused funds can treat verified methane abatement as a serious transition investment.

Climate finance has already shown that capital can reshape markets. Methane abatement gives it another chance to do so, and the opportunity is ripe for investment. Not by replacing clean-energy investment, but by complementing it with one of the most immediate climate wins available: lower climate emissions and less wasted gas.

Methane abatement will not solve climate change on its own. But few investments offer this combination of speed, cost and impact, with the added benefit of strengthening energy security at a time when every unit of energy counts.

[1] https://am.landg.com/asset/4af3fa/globalassets/lgim/_document-library/responsible-investing/oil-and-gas-climate-impact-pledge-sector-guides.pdf

[2] https://www.calstrs.com/calstrs-focuses-on-methane-emissions-reduction-companies-workforce-disclosures-in-2024-proxy-season

[3] https://about.chubb.com/content/dam/chubb-sites/chubb/about-chubb/citizenship/environment/pdf/chubb-corporate-climate-underwriting-criteria-for-high-emitting-industries.pdf