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Dec 18, 2014

Investor coalition targets fossil fuel companies

Shareholders from Asia, Europe and North America publish list of five ‘expectations’ for oil and gas companies

A coalition of climate-focused investor groups in Europe, North America and Asia has published a list of ‘expectations’ for fossil fuel companies.

The guidelines are designed to prepare investors and producers for carbon asset risks, increase transparency in the industry and increase communication between investors and directors, the group says.

The coalition, which includes the Institutional Investors Group on Climate Change, the Asia Investor Group on Climate Change and the Investor Network on Climate Risk, is recommending that companies adopt five points, including defining governance of climate risks and energy transition dynamics and publicly communicating their view of climate change risks as well as any underlying assumptions that support it.

The investors are further asking companies to regularly stress test key business processes and investment decisions for climate in an effort to develop ‘robust and resilient’ business models, defined as those that can stand up to various scenarios of climate risk and provide transparency into and oversight of the company’s lobbying activities and political spending in relation to climate change issues.

‘We need to know how fossil fuel companies ‒ and particularly the boards that are accountable for overseeing these companies ‒ see the future of demand, how that view aligns with the carbon reductions being agreed to by governments around the world, and to what extent there may be stranded assets due to either a commitment by governments or a shift in demand,’ says Anne Simpson, director of global governance for CalPERS, in a press release issued by the coalition.

The coalition has outlined a series of questions it recommends investors ask the board of companies they invest in, including querying whether the company has a comprehensive outlook on energy that is reflected in its strategy, and asking which processes the board has in place to ensure it diligently assesses climate change risk.