June 27, 2024
As a long-term investor, BCI believes in engagement and advocacy over divestment in high-emitting sectors such as oil and gas. We prefer to address long-term and persistent ESG risks like climate change through constructive dialogue with company management and boards, as well as regulators and standard setters. This includes encouraging companies to adopt targets aligned to the Paris Agreement and improve climate-related disclosure and performance.
Aligned to our Climate Action Plan, BCI has increased our focus on methane emissions and use of strategic escalation where we see limited progress following engagement.
Increasing our Focus on Methane Disclosure
Methane has a far greater warming potential than carbon dioxide, contributing 28 times more on a 100-year timescale and 84 times more on a 20-year timescale, and the portion of emissions attributable to human activities is responsible for at least a quarter of today’s global warming. According to the International Energy Agency, addressing methane is one of the fastest, most cost-effective means of limiting global warming in the near term. This means companies are also facing heightened regulatory risk and pressure from consumers to act.
While natural gas is positioned to play a role in the energy transition over the short to medium term in certain jurisdictions, the accuracy of methane reporting remains a source of uncertainty and potential risk. Despite voluntary disclosures, methane is recognized to be significantly underreported because of insufficient detection and overly simplistic accounting assumptions. To make informed investment decisions and manage risk within the portfolio, long-term investors need companies to align to leading methodologies for methane disclosure and seek third-party verification through reasonable assurance.
Calling for Alignment with the Oil & Gas Methane Partnership 2.0
We encourage companies to align with the Oil & Gas Methane Partnership 2.0 (OGMP) – the flagship oil and gas reporting and mitigation program of the United Nations Environment Programme and the highest standard in methane measurement, reporting, and target setting. Its comprehensive framework allows investors to track and compare progress and performance across companies, and strengthens the effectiveness of abatement activities. This is particularly important as scrutiny on methane will increase as new technologies evolve such as satellites capable of detecting methane. Furthermore, enhanced measurement and management aids operational safety and efficiency such as monetizing a waste product that could otherwise add value to the oil and gas value chain.
The OGMP’s membership includes 130 companies with assets in more than 70 countries, representing nearly 40 per cent of the world’s oil and gas production, over 80 per cent of liquified natural gas flows, and nearly 25 per cent of global natural gas transmission and distribution pipelines. While the initiative has grown significantly in recent years to include many major U.S. oil and gas companies and global national oil companies, there is currently only one Canadian member company, emphasizing the need for further engagement.
“Commitment to and implementation of OGMP provides investors with assurance that portfolio companies are responsibly managing and urgently mitigating their methane emissions towards near-zero levels.”
– Anne-Marie Gagnon, Director, ESG at BCI.
To enhance our efforts, BCI recently joined a collaborative engagement led by Nordea Asset Management to urge more oil and gas and utilities companies to join the OGMP and reduce methane emissions to near-zero levels. In 2023, nine of its focus companies joined the OGMP and the collaborative engagement received the Environmental Finance Award for Pollution Reduction Initiative of The Year (Global).
Case Study: TC Energy
BCI has been engaging individually with TC Energy, a Canadian energy infrastructure and pipeline company, on strengthening its methane disclosure.
After almost two years, we escalated our engagement by filing a shareholder proposal seeking reasonable assurance on TC Energy’s climate-related emissions metrics, including methane in its natural gas business unit, ahead of the company’s 2024 annual shareholder meeting. We also requested that TC Energy adopt the OGMP’s methodology for measurement and reporting as a basis for reasonable assurance on the methane metrics.
In response to our engagement and filing, TC Energy committed to publish a roadmap to reasonable assurance and reassess its membership in the OGMP by July 2025. Based on this progress, we agreed to withdraw the proposal prior to the annual meeting. BCI will continue our engagement with the company as it delivers on these commitments.
Contributing to a Stronger Regulatory and Policy Environment
As a global investor, BCI actively responds to public policy consultations and advocates for ambitious action to address oil and gas methane emissions at the regulatory level. For example:
- In 2021, BCI joined major global investors in signing an investor statement calling for stronger regulations and enforcement for methane emissions in the U.S.
- In 2023 and 2024 respectively, we responded to regulatory consultations on methane held by the U.S. Environmental Protection Agency and Environment and Climate Change Canada (ECCC).
Overall, BCI supports the proposed regulations and ECCC’s efforts to adopt cost-effective rules for its methane reduction target of at least 75 per cent by 2030. We also support extending the regulations for the exploration and production sub-industry to storage, processing, transportation and transmission facilities in Canada’s onshore oil and gas sector.
