Oil and gas giants challenged by investor coalition on Just Transition strategy

Exxon Mobil, Saudi Aramco, BP, Gazprom, Repsol, Royal Dutch Shell, Santos and TotalEnergies amongst recipients of Tuesday's letter.

Newton Investment Management, Ninety-One and the World Benchmarking Alliance (WBA) have put 100 oil and gas companies on notice to take the crucial first steps needed to ensure a just transition, Responsible Investor can exclusively reveal.

A letter – seen by RI – was sent on Tuesday to firms including Exxon Mobil, Saudi Aramco, BP, Gazprom, Repsol, Royal Dutch Shell, Santos, and TotalEnergies.

The companies targeted were analysed in the WBA’s Just Transition Assessment, published in November. Researchers found that the majority of the firms were failing to take the necessary steps to ensure that workers and communities are not left behind in plans to shift from extracting fossil fuels to new business models.

“Time is running out to tackle the climate crisis. Planning for a transition that is just for the people and communities affected is not only the right thing to do – it’s the best way of getting to where we need to go. And it must start now,” the letter states.

It adds: “Done well, this necessary transformation can be a chance to fix many economic injustices that already exist. Done poorly, and the ultimate success of the transition hangs in the air, risking loss of public support, and taking longer than we can afford.”

The letter marks the first action by the investors as members of the newly launched multi-stakeholder Collective Impact Coalition (CIC). The initiative was facilitated by the WBA with the aim of tackling the systemic failure of oil and gas companies to identify, prepare for and mitigate the social impacts of their low-carbon strategies.

The coalition – which also includes the PRI, Ceres, and the Grantham Research Institute –
plans to engage with the target companies to promote the publication of effective just transition planning, informed by social dialogue and stakeholder engagement, throughout 2022 ahead of the publication of WBA’s 2023 Oil and Gas Benchmark.

The CIC will also act as the accountability mechanism to monitor performance in this area in the coming years.

In the event that engaged firms do not respond and/or make just transition plans, the CIC “will make sure we try every effort in getting that response by following up in various ways, with our multi-stakeholder alliance”, a representative said. “It’s more likely that we will get a ‘non-response’ by those companies that are not ready to participate in the conversation and the actions to that, so it’s for the CIC engagement group to consider on a case by case basis.”

Asked whether the CIC would recommend escalation at non-compliant firms, possibly through the use of shareholder resolutions, the representative said it was “not out of the question” but noted that the group “will need to map this out as a collective strategy based on responses to the letter”.

In response to Tuesday’s news, a spokesperson from Exxon Mobil told RI: “We plan to play a leading role in the energy transition and are investing in technologies that can help reduce emissions from vital sectors of the economy. Experts agree that carbon capture and storage, hydrogen and biofuels will be critical to reducing greenhouse gas emissions associated with industrial manufacturing, heavy transportation and power generation.”

At the time of publication, none of the other named energy firms had responded to RI’s request for comment.

The need to ensure a just transition has been rising up the investor agenda. Most recently, RI reported that Amundi, Aviva France, AXA, Caisse des Dépôts and Rothschild & Co Asset Management Europe were among a group of investors that will work with Sustainalytics to construct engagement strategies on the topic.

To hear more about this and other sustainable finance topics join industry leaders at the RI Europe 2022 conference, taking place in person in London on 14-15 June.