NZAOA outlines new guidance for oil and gas investments

Written by Adam Cadle

29/03/2023

The Net-Zero Asset Owner Alliance (NZAOA) has today outlined new guidance for members regarding their approach to the oil and gas sector, calling on consumers and suppliers of oil and gas to set Scope 1, 2, and 3 greenhouse gas emission reduction targets while aligning their operations activities, including capital expenditure, with established 1.5°C pathways.

This Position on the Oil and Gas Sector underscores the Alliance’s recognition that unabated climate change poses significant economic and investment risks. "Members are committed to mitigating these systemic risks on behalf of their clients and beneficiaries and, as such, should consider how economies can transition away from dependency on activities that contribute to climate change, including the combustion of oil and gas," the NZAOA stated.

On private asset investment in new unabated oil and gas infrastructure, the NZAOA said investors, including Alliance members, shall align with credible 1.5°C net-zero scenarios. This cannot be achieved if there are new upstream insfrastructure investments in new oil and gas fields, it argued.

"Alliance members are expected to adopt policies that align with these positions on infrastructure investments, or show how existing policies already align. The Alliance does recognise that some net-zero committed investors have already put in place policies to cease financing of all oil and gas infrastructure. Others may choose to continue to invest in new oil and gas infrastructure in exceptional circumstances, where alternatives for affordable and reliable alternatives are not yet viable or where government-issued regional/national 1.5°C pathways and/other regional specificities may influence portfolio decisions. 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."

Other specific guidelines for investors listed in the paper focus on direct stewardship for action—aligning science-based portfolio allocation and stewardship decisions with individual climate ambitions—as well as indirect options like supporting policy and regulatory efforts that address climate change. 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.

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