European oil & gas major’s 2030 energy mix to lag behind 1.5C

Energy production of European and US fossil energy majors will remain dominated by oil and gas in 2030 despite high growth rates for clean energy production in the overall economy, a new report by Accela Research shows.

PGGM commissioned the report with fellow Dutch Investors Achmea Investment Management, APG Asset Management, MN and Pensioenfonds Rail & Openbaar Vervoer, with total assets under management above EUR 1 trillion.

The research compares emissions reduction performance and capital expenditure for BP, Eni, Equinor, Shell and TotalEnergies. Although the European Majors are leading the rest of the industry, the report shows that company strategies need to become more ambitious to align with the pace of transition necessary for limiting global warming to 1.5C.

For example, European majors have set high growth targets for bioenergy for 2030 but strategies for renewable energy generation are mixed. Given that all researched companies besides BP are expected to increase oil and gas production between 2022 and 2030, Accela estimates that, on average, company portfolios will remain 82% in oil and gas production, compared to 18% in low-carbon alternatives by 2030.

Andres van der Linden, sr. advisor Responsible Investment at PGGM, said: ,,The report shows that even among progressive European majors, there is a divergence between target setting and performance. For example, even though Eni has the highest emissions reduction targets, it has plans to increase its oil and gas production the most - more than 17% - between now and 2030. Companies need to provide investors with more details on how they plan to increase their low-carbon segments in the near term and where they intend to find long-term value in a 1.5C-aligned pathway.”

On behalf of Pensioenfonds Zorg en Welzijn (PFZW), PGGM started a two-year oil and gas engagement program in 2022. Over the last year and a half, PFZW divested 192 oil and gas companies that did not show a sufficient willingness to transition towards an energy company aligned with the goals of the Paris Climate Agreement. The 94 oil and gas companies left in PFZW’s portfolio have until the end of 2023 to draw up a verifiable energy transition strategy in line with a Paris-aligned 1.5C pathway. The companies that fail to do so will be divested.

PGGM will use the report’s findings to inform its engagement efforts with the researched companies. Moreover, it will inform our voting decisions. For example, we will vote in favor of the Follow This resolutions at Shell and BP, asking the companies to set Paris-aligned 2030 scope 3 emission reduction targets. Moreover, we co-filed a similar resolution at TotalEnergies with a consortium of 17 investors and Follow This. PGGM’s voting intentions and rationales for other resolutions will be published throughout the AGM season on our public website.

Although the research we sponsored provides recommendations for oil and gas companies, we recognise that the responsibility of the energy transition does not rest solely on their shoulders. There is little chance of success without the concerted efforts of fossil fuel-consuming companies, policymakers and governments and the financial sector. Therefore, we call on all stakeholders to take responsibility and collaborate to fight climate change.

The Accela Research report ‘European Majors’ 2023 AGMs: Progress towards Low Carbon’ can be downloaded here.

About PGGM Investment Management
PGGM Investment Management is part of the Dutch not-for-profit pension fund service provider PGGM. It fulfils a social mandate: the sustainable investment of the pension capital of around three million participants of PFZW, the pension scheme for the Dutch health and welfare sector. On 31 March 2023, PGGM IM managed EUR 227 billion in public and private markets globally. With the capital entrusted to PGGM IM, it aims to not only generate good and stable financial returns but also to make a positive impact on society, focusing particularly on the themes of climate and health.

More information about PGGM IM: https://www.pggm.nl/media/ftfdyv5j/integrated-report-pggm-vermogensbeheer-b-v-2021.pdf