ExxonMobil and Chevon are the worst performing oil and gas companies on carbon-related metrics, according to a CDP report.
In the pipeline finds European companies are investing more in low-carbon technologies and shifting towards gas, while US companies lag behind.
European companies also face more pressure from strict emissions rules, while US companies will likely see fewer restrictions on fossil fuel production following the election of Donald Trump, who has promised to “cancel” the Paris climate agreement and undo virtually all of the Obama administration’s regulations on fossil fuel production.
In addition to the two US-based companies, Exxon and Chevron, Canadian-based Suncor ranks in the bottom three of the CDP benchmark.
Saudi Aramco, Rosneft and PetroChina did not respond to CDP’s 2016 climate change questionnaire and are therefore not included in this report.
Statoil, Eni and Total, on the other hand, are best performing companies on carbon-related metrics compared to their oil and gas industry peers.
The oil and gas industry, and the use of its products, account for about half of global CO2 emissions.
The CDP report ranked oil and gas companies on their fossil fuel asset mix, capital flexibility, climate strategy emissions and resource management, and exposure to water stress issues.
It found oil and gas majors face key short and long term decisions to secure their future business models, including improving capital discipline, rebalancing portfolios in the coming years and considering wider diversification or managed decline over the next decades.
Oil and gas executive remuneration packages are currently heavily weighted to reward company performance on hydrocarbon production levels and reserve replacement indicators. The report says only five companies currently have detailed climate-linked performance metrics.
Operational efficiency remains an issue in the industry with the 11 companies in the study losing on average 6 percent of their natural gas production, and the associated revenue, through flaring and methane venting and leakages.
Rules and regulations affecting downstream demand — such as vehicle emissions limits and carbon pricing — will also affect the oil and gas industry, the report says.
Additionally, 40 percent of onshore oil and gas upstream production is currently located in areas of medium or high water stress, yet company disclosure remains behind other sectors facing similar risks, CDP says.
A different CDP report published last week found that only 29 percent of energy companies requested to disclose water risk provided information to their investors via CDP this year. ExxonMobil, Chevron and Shell are the three largest energy companies that, since 2012, have failed to respond to investor requests for disclosure.
During last year’s COP21 climate talks in Paris the Financial Stability Board established the Taskforce on Climate related Financial Disclosure, which aims to improve climate-related disclosures from listed companies around the world.
Next month the taskforce is slated to release their first set of corporate climate disclosure recommendations. This is expected to increase investor calls for oil and gas company disclosure.
“There are reasons to be optimistic, oil and gas majors have the balance sheets to transition to much lower carbon business models and play a key role in implementing the goals of the Paris Agreement,” said Paul Simpson, CEO of CDP.
