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May 14, 2021

Investor coalition calls for tougher methane regulation for oil and gas industry

Voluntary action by companies is not enough, notes statement signed by 147 firms

A large coalition of investors has called on the US administration to strengthen methane regulation and warned that a lack of action could hit the value of oil and gas companies. 

The group of 147 firms, co-ordinated by Ceres and the Interfaith Center on Corporate Responsibility (ICCR), welcomes action being taken by the US government but urges further measures to help meet the climate goals of the Paris Agreement. 

Tackling methane emissions is viewed as key for the US to meet its climate goals. Methane has more than 80 times the warming power of carbon dioxide during its first 20 years in the atmosphere. 

Last month, the US Senate voted to reinstate methane regulations that had been rolled back by the Trump administration. US President Joe Biden has pledged to cut greenhouse gas emissions in half by 2030, from 2005 levels. 

‘As prudent fiduciaries, we believe virtually eliminating methane emissions as part of a low-carbon transition can support the financial goals of both companies and investors,’ say the signatories, which include Allianz Global Investors, CalSTRS and Legal & General Investment Management (LGIM).

‘By taking action on methane emissions, government can achieve valuable greenhouse gas reductions while helping American industry become cleaner and more competitive.’

The investors say the administration should develop ‘ambitious policies’, such as tackling emissions from inactive wells – thought to be a major source of leaks – and reducing the use of venting and flaring in the oil and gas industry.

They note that companies have taken voluntary action to lower methane emissions but say regulations are needed given the magnitude of the challenge. 

‘We favor strong methane regulations, which are widely supported across the market,’ says Alexander Burr, ESG policy lead at LGIM, in a blog post published by the ICCR.

‘Given technological advances, they should be low cost to introduce and offer potentially significant benefits for society. By contrast, continuing to have a weak regulatory framework risks both the industry’s social license and shareholder value, in our view.’

Action to curb methane emissions is a ‘cost-effective step’ to meet the Paris climate goals, according to a report from the UN released this month. The use of existing solutions could achieve a drop of 30 percent in emissions by 2030, write the authors.