A blog by BloombergNEF and Bloomberg Intelligence
European oil companies, including Total, Galp, Equinor, BP and Royal Dutch Shell lead a group of the 39 most publicly-traded oil and gas companies in preparedness for a low-carbon world, according to Bloomberg’s Climate Transition Scores. These companies have ranked highly due to ambitious climate targets and deep transition-related investments in an industry heavily exposed to transition risks in the face of widespread climate action. For example, these five oil majors own some 11GW, or 78%, of the renewable energy assets held by the 39 scored companies.
The Climate Transition Scores are a new offering from Bloomberg, providing users with accessible insights into a company’s climate preparedness to support their decision-making processes. Available to all Bloomberg Terminal users, these scores illustrate the challenges oil and gas companies face in positioning themselves for a net-zero world.
The Climate Transition Scores represent the average of two underlying scores, proprietary to Bloomberg’s two research teams:
- Carbon Transition Scores, produced by Bloomberg Intelligence (BI), look at where a company is today, is planning to be and should be with respect to carbon performance.
- Business Model Transition Scores, from BloombergNEF (BNEF), cover a company’s current business model and actions taken to adapt to a low-carbon future.
Results from the composite Bloomberg Climate Transition Scores, and from each of these underlying scores, are shown in Figure 1.
Patricia Torres, global head of sustainable finance solutions at Bloomberg, commented: “The transition to a low-carbon economy in the oil and gas sector is a complex undertaking, requiring considerable change and a shift away from fossil fuels-based business models. The Bloomberg Climate Transition scores, combined with Bloomberg’s research, provide insight into how prepared companies are for a net-zero world and are a supplement to Bloomberg’s broader environmental and social scores.”
1. BNEF Business Model Transition Scores
A report published today, The BNEF Transition Scores: Leaders and Laggards, finds that, with aggressive transition activities and a relatively resilient fossil fuel business, Shell tops the list in terms of business model score. However, BNEF research shows that all these companies still invest most of their capex in fossil fuels.
Jonas Rooze, head of sustainability research at BloombergNEF, said: “When it comes to deploying low-carbon technologies, these companies do a lot of marketing, but their disclosure is limited and patchy, making comparison impossible. What makes these scores unique is that the bottom-up BNEF datasets shine a light on what these companies are actually doing – or not doing – to develop new low-carbon business models.”
2. BI Carbon Transition Scores
A Bloomberg Intelligence report, Inaction and Ambition: Two Sides of Oil & Gas CO2 Transition, also published today, shows that only 12 out of the 39 companies have established net-zero targets for operational emissions, and five include Scope 3 emissions in their net-zero pledges. Only seven companies, including Eni, Total, Equinor and Occidental, have set targets putting them in line by 2030 with the International Energy Agency’s (IEA) Sustainable Development Scenario (SDS). Based on the BI findings, these seven companies could surpass the 44% reduction in operational emissions intensity by 2030 the IEA suggests in its SDS.
“As investor pressure, regulatory action and shifts in demand push oil and gas companies to reduce their greenhouse gas emissions, two distinct camps have emerged. One third of the 39 oil and gas majors that we analyzed have yet to set targets to reduce their Scope 1 and 2 emissions. And more than half don’t even report their Scope 3 greenhouse gas emissions – 85% of the total footprint for the average company. For the other group, transition strategies are increasingly ambitious, with leaders aiming for net zero,” stated Eric Kane, head of ESG research, Americas, at Bloomberg Intelligence. “BI’s Carbon Transition Scores make carbon reduction strategies comparable, translating them into carbon forecasts, and then allowing users to assess future carbon intensity against a temperature-aligned benchmark.”
How the scores are composed
The BNEF Business Model Transition Score compares 39 major oil and gas companies on their business model preparedness for a low-carbon world. Considering factors such as deployment of new technologies, fossil fuel expansion, current business model, climate disclosure and progressive governance, the BNEF score is based on business model risk exposure and business model adaptation as the main pillars.
Bloomberg Intelligence’s Carbon Transition Score includes the current carbon performance pillar (assessing current emissions) and the carbon forecast pillar (assessing future emissions). These together show each company’s current carbon intensity, recent reduction, future carbon intensity, future reduction, and comparison to the IEA 2 degrees Celsius benchmark.
The scores compare transition progress and potential for each target company within a universe of peers. For this reason, scores are relative; a good score describes performance within the peer group – and not that the company is entirely well positioned for transition. The oil and gas industry remains far from transition-ready.
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