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Net-Zero Asset Owner Alliance Publishes Position on Oil & Gas Sector

A UN-convened position statement from the Net-Zero Asset Owner Alliance (NZAOA) highlights the necessary changes required in the global economy to transition from Oil & Gas to more renewable sources of energy. The position is expressed in the form of the expectations and actions required from investors, companies, and policymakers to ensure that greenhouse gas emissions are aligned with 1.5°C targets (limits to global temperature increase). Kudos to our friend Ryan McQeeney at Wespath who contributed to the report, which represented a collaboration of over a dozen non-UN organisations, just two of which are faith oriented.

In our work with various Faith-Based Asset Owners (FBAOs), we find that virtually all are concerned about what actions they can take as stakeholders, trustees and fiduciaries to assist with the global energy transition. This position statement highlights the key actions FBAOs can take such as: allocating to low/zero carbon solutions and technologies or by not making investment in organisations linked to new investments in new Oil & Gas fields and via other approaches and techniques; these actions can be found on pages 22 - 24 of the report.

We found it interesting that the paper recognizes a unique 'trilemma' that exists in the transition to Net-zero - affordable and equitable access to energy, low carbon energy and environmental sustainability, and long-term energy security - but, given the relationship between energy consumption and GDP growth, (which is linked to life expectancies and other social benefits), there will no doubt be ongoing debates around what may prove to be multiple conflicting priorities. Some other observations:

  • The adjustment needed to hit the 1.5 Celsius target by 2040, by one method, is ambitious: oil and gas as a share of global energy needs to drop from 52% in 2019 to just 16% by 2040 - a "seismic shift".

  • It's not all about the energy companies we may own and engage, governments are also key as "90% of oil reserves and 75% of product is controlled by state-owned companies".

  • The report recommends that "investors should consider participating in credible carbon credit markets, in both voluntary markets and regulated schemes." The critical word, in our view, is "credible"!

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