Investors managing $15 trillion in assets turned up the heat on the oil and gas sector on Wednesday ahead of a United Nations summit in New York aimed at accelerating efforts to fight climate change.
Energy companies are on the front line of the global transition to a low-carbon economy, with investors potentially on the hook for hefty losses if the companies do not overhaul their business models in time, Reuters reported.
In its most detailed analysis of the energy sector, the Transition Pathway Initiative (TPI) said 31 out of 109 energy firms were aligned with commitments governments have so far made under the 2015 Paris Agreement to curb greenhouse gas emissions.
However, of the 50 oil and gas companies assessed, just two- Royal Dutch Shell Plc and Repsol- were aligned with existing national emissions targets. The remaining 29 companies on track to meet such commitments were all electric utilities.
“We, as a major institutional investor, are concerned that transition risk - the large and growing gap between government targets and company ambitions - is a major source of investment risk,” said Helena Vines Fiestas, global head of stewardship and policy at BNP Paribas Asset Management.
United Nations Secretary-General Antonio Guterres wants governments to make more ambitious pledges to cut emissions at the U.N. summit on Monday, which he convened to boost the Paris Agreement ahead of a crucial implementation phase next year.
Current pledges by governments to cut emissions are nowhere near enough to meet the Paris target of keeping the rise in average global temperatures to well below two degrees Celsius, with a goal of limiting warming to 1.5 degrees Celsius.
