Stop investing in new fossil fuel infrastructure, NZAOA tells investors
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
The UN-convened Net-Zero Asset Owner Alliance has produced new guidance for oil and gas investments, telling its members that no new fields should be financed, built, developed, or planned.
The group of 85 institutional investors looking after $11tn (£8.9tn) of assets said in its new guidance published on Wednesday that its members “shall align with credible 1.5°C net zero scenarios” when investing in new unabated oil and gas infrastructure.
“This cannot be achieved if there are new upstream infrastructure investments in new oil and gas fields,” it added.
The Alliance said it recognises that some net-zero committed investors already have policies to cease financing of all oil and gas infrastructure. It noted that some might choose to continue to invest in new oil and gas infrastructure “in exceptional circumstances”, meaning alternatives for affordable and reliable alternatives are not yet viable or government-issued 1.5°C pathways might influence portfolio decisions.
However, “in all cases, the Alliance strongly advises against investment in long-lived assets that are likely to be stranded in a 1.5°C -aligned transition”, it stated.
Large banks have recently come into focus over oil and gas exploration financing. While HSBC said in December that it would no longer finance such projects, institutional investors including Nest, LGPS Central and Brunel Pension Partnership called on Barclays and four other large banks to stop funding new oil and gas exploration by the end of this year.
NZAOA wants investors to engage directly with firms, aligning science-based portfolio allocation and stewardship decisions with individual climate ambitions. It says they should also support policy and regulatory efforts that address climate change.
Mainly, however, it says investors should engage with asset managers: “For asset owners in particular, the Alliance emphasises the need for engagement with the asset manager community so that climate action is recognised as supporting the best interests of managers’ clients.”
Board member of insurer Allianz SE Günther Thallinger, who chairs NZAOA, said for the world to achieve net zero by 2050, temperatures must not rise more than 1.5°C.
“This is necessary to avoid the most extreme effects of climate change. 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,” Thallinger added.
The position paper names more than 20 expectations for investors, companies and policymakers, including:
- Members are expected to develop and align individual oil and gas policies with this position and cover portfolio allocation, stewardship programmes, and policy engagement.
- Oil and gas producers and their customers are expected to set science-based, absolute- and intensity-oriented emissions targets covering Scope 1, 2, and 3 GHG emissions that are aligned with 1.5°C no or limited overshoot scenarios.
- The Alliance calls for increased policy ambition to rapidly reduce oil and gas demand and increase the supply and availability of renewable alternatives.
