A UN-sponsored group of institutional investors managing $11 trillion in assets called for the elimination of investment in carbon-intensive oil and gas projects as part of the global effort to achieve net-zero carbon emissions by 2050.

The Net-Zero Asset Owner Alliance issued the directive March 29 as part of new guidance to its 85 members, predominately European institutional investors.

The group asked consumers and suppliers of oil and gas to set science-based goals to reduce emissions from their own operations, their suppliers, and the use of their products, commonly referred to as Scope 1, 2 and 3 emissions. The alliance called for investors to back energy projects that align with net-zero emissions goals and for oil and gas companies to adopt emissions targets aligned with those of the UN's Intergovernmental Panel on Climate Change or bodies such as the International Energy Agency.

"On private asset investment in new unabated oil and gas infrastructure, investors, including alliance members, shall align with credible 1.5-degree C net zero scenarios," the Net-Zero Asset Owner Alliance said in a news release. "This cannot be achieved if there are new upstream infrastructure investments in new oil and gas fields."

The alliance called for an immediate end to investments in carbon-intensive oil extraction projects such as oil sands. Shale gas and oil projects often have lower carbon footprints than their conventional peers and could be financed on a case-by-case basis, Alliance spokesperson Oliver Wagg said in an email. It will be up to individual investment managers to decide which projects support a path to net-zero, Wagg said.

Climate campaign

"The world must achieve a net-zero economy by 2050, with a maximum 1.5 degrees C of temperature rise," Günther Thallinger, vice chairman of the management board at German insurer Allianz SE and a member of the alliance, said in the statement. "How energy is provided and consumed must therefore dramatically change. This includes the need to phase out non-renewable sources like oil and gas in many, if not most, of its current uses."

The guidance from the Net-Zero Asset Owner Alliance reinforced a UN warning on global climate efforts. In a March 20 report, the UN Intergovernmental Panel on Climate Change warned that the world has only nine years to avoid a "climate time bomb."

In another effort to change business as usual and head off climate change, the Glasgow Financial Alliance for Net Zero, a group formed to decarbonize the world's financial sector, has focused on moving capital to emissions reduction projects. The Net-Zero Asset Owner Alliance is one of the seven organizations that make up the Glasgow initiative.

While European majors such as BP PLC, Equinor ASA and Shell PLC have set emissions reduction goals across all three scopes, US oil and gas companies have resisted accounting for customer emissions, saying they have no control over customers and being accountable for customer use permits a single group of emissions to be counted multiple times.

Few exceptions

The Net-Zero Asset Owner Alliance plan will allow for continued investment in oil and gas in countries with national pathways to help keep the world to less than 1.5 degrees of temperature increase or in locations where energy users do not have access to affordable and reliable energy resources. The group said exceptions should be rare and short in term.

"The alliance strongly advises against investment in long-lived assets that are likely to be stranded in a 1.5 degrees-aligned transition," the group said.

At the same time, the investors group called for national policymakers to enact measures encouraging research and development of alternative energy resources while discouraging oil and gas demand, in particular by putting a price on carbon emissions.

The alliance said action will be needed within three to five years for the world to stay under the 1.5-degree goal. "Beyond this decisive time period, all stakeholders will need to make more difficult choices regarding the ongoing viability of oil and gas assets," it concluded.

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