Dutch investors renew focus on Net Zero accounting expectations for O&G sector

The group – comprising PGGM, NN Investment Partners and MN, among others – plans to convene investors to discuss the green transition in summer 2022.

Three of the largest Dutch investors – PGGM, NN Investment Partners and MN – have joined a local €1.5 trillion investor alliance calling on oil and gas companies to disclose their future assumptions of oil and gas demand, prices, carbon tax and other climate-relevant metrics; in addition to adopting Net Zero plans.

The push for improving transparency over how the companies consider climate risks within the accounting process has been a longstanding priority for ESG-minded investors, albeit with limited success. According to the climate change shareholder body IIGCC, which launched its expectations for ‘Paris-aligned accounts’ in 2020, “financial statements that leave out material climate impacts misinform executives and shareholders, and thus result in misdirected capital”.

The IIGCC initiative itself was built on a 2019 climate-focused briefing and investor engagement programme led by the UK’s Sarasin & Partners targeting accounting firms and board-level audit committees.

However, there were no members of the Dutch alliance – which also includes Achmea Investment Management, Actiam, Aegon Asset Management and Van Lanschot Kempen –  among the 38 investors that had initially supported the IIGCC initiative.

The expectations for Paris-aligned accounts were later incorporated into IIGCC’s 2021 Net Zero Standard for Oil and Gas – a sector-specific disclosure framework that has now been endorsed by the alliance, according to today’s statement.

The standard also requires reporting companies to disclose total capital expenditure, or capex, in fossil fuel activities, upstream oil and gas activities and oil and gas exploration in the last financial year, and a forward-looking budget for at least the next three years.

As a priority, the alliance has called on O&G companies to set Scope 1-3 short and medium-term carbon intensity and absolute reduction targets aligned with 1.5°C, adopt a decarbonisation plan supporting the targets and “demonstrate” how the plans are aligned with future capex.

The alliance has set a 2024 deadline for all three objectives.

The alliance has also called on other investors to leverage proxy voting to aid the green transition by only voting in favour of Paris-aligned company transition plans, supporting other resolutions that encourage progress on the green transition, and to consider escalating actions for laggard companies by voting against director re-elections and remuneration packages that do not consider climate targets.

Like-minded investors are encouraged to get in touch with either MN or PGGM, ahead of a planned investor discussion on supporting the energy transition in the summer of 2022.

Responsible Investor had contacted ABP, Netherland’s largest pension fund and an ESG heavyweight, to ask whether there are plans to join the alliance, but had not received a response by press time.