With President Biden hosting the virtual Leaders Summit on Climate this week and preparing to issue an executive order directing federal agencies to take sweeping actions to combat climate-related financial risk, the natural gas and oil industry has been and will continue to be a leader in driving meaningful activity on environmental, social, and governance issues (ESG).
Close observers of our industry know this focus isn’t new. American Petroleum Institute (API) member companies were among the first to develop and continuously update sustainability reporting guidelines, and today, our industry is at the forefront of the evolving ESG picture. The financial sector can count on the longevity and safety of our products, and investors can continue to be confident in our industry’s focus on these important issues.
This is critically important because expert projections indicate natural gas and oil will continue to account for nearly one-half of the world’s energy mix in 2040, even under the terms of the Paris Climate Agreement. Our industry recognizes that, as the world’s population continues to grow, energy demand will increase over the next several decades. We must deliver the fuels that advance human development, while making progress toward global emission targets—with transparent sustainability reporting that allows companies to effectively assess ESG issues. We have a plan to do both.
API’s new Climate Action Framework offers workable solutions that turn the dual challenge of energy security and emissions reductions into a transformational opportunity. It includes support for carbon pricing, methane regulations, and investments in low-carbon innovations, including carbon capture and hydrogen technologies. A key element in the framework is our industry’s commitment to drive climate reporting, which is integral to ESG discussions.
On ESG issues, our industry is poised to go even further in two critical ways.
First, companies use hundreds of indicators and measurements when it comes to ESG performance, but there is not a unifying set of parameters. If you’re a bank or investor or policymaker or consumer, it’s hard to be sure you’re comparing apples to apples from one company to the next.
We believe providing consistent emission reporting would enhance transparency for stakeholders, and that’s why we are making it a top priority this year to develop a template of core greenhouse gas emissions indicators for companies across the industry to use.
Second, we are committing to improving the way we operate, for the benefit of our workers and the communities we serve. Our recently announced API Energy Excellence initiative establishes a set of 13 core elements against which our members report progress in the areas of safety and sustainability.
This dual strategy—implementing industry sustainability blueprints and developing a template of greenhouse gas emission indicators to encourage consistency in reporting across the natural gas and oil value chain—will help companies bolster existing sustainable operations and continue delivering meaningful progress toward national objectives—such as meeting the UN Sustainable Development Goals.
A combination of sensible public policies and industry-led initiatives will allow businesses and investors to appropriately manage environmental risks and opportunities. Free-market mechanisms will incentivize further innovation and expand access to cleaner fuels in the U.S. and among our trading partners around the world.
As the administration reviews the impact of climate change on the financial sector and considers regulatory action on climate reporting, we encourage policymakers to collaborate with industries like ours and complement private-sector efforts that are already underway to improve transparency.
Amanda Eversole is the executive vice president and chief operating officer at the American Petroleum Institute.
