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The Actuary The magazine of the Institute & Faculty of Actuaries

Oil companies silent on climate risk

Oil majors have shown a lack of disclosure to investors on the impact that electric vehicles and renewable energy could have on their businesses, according to InfluenceMap’s The Oil Majors and Climate Risk report.

Transition to low-carbon economy ©Shutterstock
Transition to low-carbon economy ©Shutterstock

Companies including BP, Shell and Total are either silent or vague on the impact renewable energy could have on oil demands, leaving their investors in the dark.

The report’s findings suggest that this lack of disclosure could be an industry-wide issue, and come just as the Paris climate change agreement comes into force.

ClientEarth senior corporate lawyer, Alice Garton, said: “Shareholders are right to query information from management that they consider unrepresentative of the real risks facing the company.

“Where the information disclosed about the potential impact of climate risk to the business is false, misleading or incomplete, and this affects the share price, investors can sue.”

The InfluenceMap study scores the 10 largest European and North American oil and gas majors on four climate issues being driven by significant regulatory pressures and includes an analysis of financial disclosures.

Exxon, Occidental and Chevron score the worst in the analysis, owing to a mixture of lack of disclosure, low-ambition strategy and negative lobbying against ambitious climate policy.

European companies BP, Shell and Total are close behind in the scoring because of their lobbying and poor disclosure of electric vehicle penetration impact. 

Legal and General Investment Management head of sustainability and responsible investment management, Meryam Omi, said: “We believe oil and gas majors can play a positive and leading role in the transition to a low-carbon economy, but for that, we need to be able to collectively work on the challenges of meeting the global climate target.

The report shows that oil companies could be dramatically overstating future demand for petroleum products in road transport, which accounts for at least 35% of their present gross revenue.

The Oil and Gas Climate Initiative, made up of CEOs from 10 oil and gas companies who collaborate to reduce greenhouse gas emissions, have pledged to invest in low-carbon technology.

However, many members have lobbied against efforts to implement science-based, carbon pricing-enabling legislation.

Omi added: “Firms have to be more transparent on their long-term energy assumptions and capital expenditure sensitivities to new technologies that can impact their future business models.”