A large UN-convened group of investors advised against investments in new oil and gas infrastructure on Wednesday.
The Net-Zero Asset Owner Alliance (NZAOA) group has 85 institutional-investors and controls $11 trillion in assets under management. The group seeks to encourage the transition of the global economy away from fossil fuels.
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According to Günther Thallinger, NZAOA chair and Allianz SE Board Member: “The world must achieve a net-zero economy by 2050, with a maximum 1.5°C of temperature rise. […] How energy is provided and consumed must therefore dramatically change. This includes the need to phase out non-renewable sources like oil and gas in many, if not most, of its current uses.”
NZAOA has released guidance with expectations for companies, members and the industry following the announcement.
The body calls for “science-based emissions targets” to be used in the oil and gas industry, while acknowledging that demand for oil and gas still exists. NZAOA requests that oil companies put transition plans in place to commit to the IPCC’s goal of keeping global warming below 1.5⁰C when compared with pre-industrial levels.
NZAOA proposes that the oil and gas industry pursue “zero-carbon” alternatives in the place of new oil and gas fields.
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By GlobalDataThe targets not only cover a company’s direct emissions but also those related to its own energy use and the consumption of the fuel it is producing, known as Scope 2 and Scope 3 emissions.
Exceptional circumstances
According to NZAOA, some investors may continue to invest in new oil and gas infrastructure in “exceptional circumstances”.
These circumstances are defined as circumstances where “alternatives for affordable and reliable alternatives are not yet viable or where government-issued regional/national 1.5°C pathways and/other regional specificities may influence portfolio decisions”. Long-term investments are advised against.
NZAOA’s position on new oil and gas has however been met with criticism from climate-focused non-profits.
Research and campaign organisation Reclaim Finance described the news as “a giant leap backwards” for its failure to “directly acknowledge that there is no room in feasible 1.5°C scenarios for investments in new oil and gas projects”.
Christiana Figueres, advisor to NZAOA and founding partner of Global Optimism, told Reuters: “This position should have gone further in explicitly setting expectations for companies that are as clear as the expectations for investors… no investment in new oil and gas fields or other carbon-intensive infrastructure”.
