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* Oil, gas sector has no unified carbon accounting standard
* Firms have no comparable emissions reduction targets
* Are oil groups responsible for emissions from fuel use?
* Oil majors' carbon emissions: https://tmsnrt.rs/2l6A9v0
By Shadia Nasralla and Ron Bousso
LONDON, Oct 9 (Reuters) - Wide variations in the way oil
companies report their efforts to reduce carbon emissions make
it difficult to assess the risk of holding their shares as the
world shifts away from fossil fuels, senior fund managers say.
Investors have poured money into so-called sustainable
funds, which take into account companies' environmental, social,
legal and other standards, and funds are under pressure from
their customers and authorities to make those standards robust.
Fund managers are also applying environmental, social and
governance (ESG) criteria more widely in traditional investments
to help them judge how companies will fare over the long term.
There is a growing realisation that some companies' profits
will shrink faster than others as governments prioritise
low-carbon energy to meet the U.N.-backed Paris agreement's goal
of cutting emissions to "net zero" by the end of the century.
But oil and gas companies are among the biggest dividend
payers, and major funds are reluctant to divest from them,
arguing that by staying in they are in a better position to
pressure companies to improve.
"Do investors have the data that we need? No, I don't think
we have the data that we need at all," said Nick Stansbury,
investment strategist at British insurer Legal & General's
investment management unit, Britain's biggest asset manager with
around $1.3 trillion under management.
"Disclosure is not necessarily so we can seek to change the
numbers, but so we can start understanding and pricing the
risks," Stansbury said.
"A THOUSAND WAYS TO PARIS"
There are many voluntary initiatives and frameworks to unify
carbon accounting and target setting; some overlap but none have
been universally adopted. Further projects exist for other
greenhouse gases such as methane.
The Greenhouse Gas Protocol is one such set of standards,
established by non-governmental organisations and industrial
groups in the 1990s.
Companies can report their progress in line with these
standards through non-profit CDP, formerly known as the Carbon
Disclosure Project, which then ranks them. Norway's Equinor
comes first in its list of 24 oil major companies, but not all
of them report in every year.
There is also the Task Force on Climate related Financial
Disclosures (TCFD), created by the G20's Financial Stability
Board, as well as industry bodies, in-house models at oil firms
and banks and third-party verifiers and consultants.
"There are a thousand ways to Paris," London-based BP's
Chief Executive Bob Dudley said at a Chatham House event
earlier this year referring to the 2015 accord aiming to keep
global warming well below 2 degrees.
BP Finance Chief Brian Gilvary told Reuters BP would welcome
more consistency within the sector to show what oil companies
are doing about emissions and that an industry body, the Oil and
Gas Climate Initiative (OGCI), was discussing carbon accounting.
A plethora of third party ESG verifier companies were
emerging with varying ways of measuring ESG metrics, he said,
adding that some such firms would say to an oil company, "We
believe your score is this, and, by the way, if you spend
$50,000 we'll show you how you can improve that score."
UBS, with $831 billion of invested assets, has $2 billion in
its Climate Aware passive equity strategy, which is in part
based on a company's emissions reporting.
In that strategy "we tilt towards companies that are better
performing on a range of climate metrics and away from companies
that do not perform so well in this respect," Francis Condon,
executive director for sustainable investing, said.
"We don't want to be accused of greenwashing or falling for
it," he said, adding that UBS regularly encouraged companies to
prepare for the climate transition.
Using a broad measure, global sustainable investment reached
$30.1 trillion across the world's five major markets at the end
of 2018, according to the Global Sustainable Investment Review.
This equates to between a quarter and half of all assets under
management, due to varying estimates of that figure.
Condon said most investors were still more focused on
returns than wider sustainability criteria but were becoming
concerned that companies may expose them to possible future
climate-related financial losses.
"There is a very limited appetite for giving up performance
for higher ESG. The question is more: is management taking on
risks it can't manage?"
To try to answer that question, the world's biggest
financial service providers are investing in companies which
provide ESG-related data.
This year alone, Moody's bought Vigeo Eiris and Four Twenty
Seven, MSCI bought Carbon Delta and the London Stock Exchange
bought Beyond Ratings. S&P acquired Trucost in 2016.
Independent climate risk advisors Engaged Tracking say they
attracted two-thirds of their clients in the past year. All six
companies provide data, assessments and consulting on the
climate exposure of companies or bonds.
HOW TO COUNT
A central issue, discussed at European oil majors'
shareholder meetings this year, is how they deal with the
emissions caused by the products they sell, such as gasoline or
kerosene, which are known as Scope 3 emissions.
Such emissions are typically around six times larger than
the combined emissions from oil companies' direct operations and
power supply, also known as Scope 1 and 2 emissions, according
to Reuters calculations.
Even if a company publishes Scope 3 data, there are 15
different categories based on the Greenhouse Gas Protocol. These
include use of sold products such as fuel alongside secondary
factors such as business travel or employee commuting.
Constantine Pretenteris at Engaged Tracking said some
companies achieved a high score for comprehensiveness by
disclosing data for most of the Scope 3 categories, but left out
the key ones, such as emissions from use of their fuel.
"We would love to see a general standard which makes
comparisons easy," Sven Reinke of Moody's said. "It doesn't
fully exist these days."
RELATIVE OR ABSOLUTE
The majority of climate-related targets are based on
intensity measures, which means absolute emissions can rise with
growing production, even if the headline intensity metric falls.
Total recorded Scope 3 emissions from the world's top public
oil companies are still rising, largely due to rising oil and
gas output, according to Reuters calculations based on data
carried on Refinitiv's Eikon platform and company websites.
They showed combined Scope 3 emissions recorded by BP, Royal
Dutch Shell, Exxon Mobil, ConocoPhillips'
, Chevron, Eni, Total, Equinor
and Repsol rose around 1.6% over 2018, after
a 1% similar rise the previous year.
Individual figures vary according to the metrics a company
chooses to include. Conoco said its Scope 3 emissions had fallen
5%, while the other companies' individual recorded Scope 3
emissions either rose or stayed roughly the same.
Asked for comment, BP and Chevron pointed to absolute
targets related to their own operations. Total pointed to
progress it had made towards lowering emissions intensity per
unit produced. Shell and Repsol referred to their short-term
intensity-based targets and Equinor said it could not take
responsibility for emissions it does not control.
U.S. firm Exxon did not reply to a request for comment. Eni
had no immediate comment.
Top oil companies have boosted investment in renewable
energy and low-carbon technology in recent years, particularly
in Europe, but much bigger sums are still going into developing
oil and gas.
"We cannot change the patterns of consumption around the
world - we cannot make people fly less. We can reduce the carbon
intensity of the products we sell," Shell Chief Executive Ben
van Beurden said in June.
Mark Lewis from BNP Paribas and a member of TCFD, said
overall cuts were what would count in the end. Repsol is
currently the only major oil company to have set absolute
reduction targets for all its output.
"The Paris Agreement is all about a carbon budget and that’s
an absolute number. It’s not an intensity number," Lewis said.
"The atmosphere works in terms of absolutes not intensity."
In the meantime, some investors are avoiding oil companies
which others say should be supported for going further than many
of their peers.
London-based investment management firm Sarasin & Partners
said in June it was selling down its stake in Shell because its
spending plans were out of synch with international climate
targets.
Asked for comment, Shell pointed to comments from
representatives of the pension funds of the Church of England
and Britain's government Environment agency, which praised the
company's transparency and said others should follow its lead.
($1 = 0.8028 pounds)
(Editing by Philippa Fletcher)
