Big bright spot in a disappointing season for shareholder climate resolutions

By Andrew Howell, CFA

It’s annual general meeting season in the U.S. — when shareholders hold companies to account and press management to do better.

A record 71 climate-related resolutions will be presented this year at public companies, more than double the number last year. But with a more ambitious suite of resolutions, fewer are being approved: just 21% of climate resolutions have passed so far this year, compared with 33% last year.

So it is big news that yesterday brought the passage of the first two climate resolutions in the oil and gas sector at ExxonMobil and Chevron. And while the successful Exxon resolution, requiring reporting on the financial impacts of a net zero by 2050 world, received more attention, the Chevron resolution is equally noteworthy. Chevron’s shareholders voted overwhelmingly in favor of a resolution filed by Mercy Investment Services pushing the company to improve its reporting on methane emissions.

Methane is a critically important issue to mitigate climate emissions and improve energy security. Having reliable, quality data is the key to rapidly address both imperatives now.

The Chevron methane resolution was backed by a whopping 98% of shareholders and was supported by the company’s board — one of the first times a climate resolution has achieved this status.

Gold standard reporting

The resolution points explicitly to the Oil and Gas Methane Partnership as a model reporting framework for “improving methane data quality and consistency.”

OGMP is the gold standard in methane measurement, reporting and target setting. More than 70 companies, representing half of global oil and gas production, have committed to measuring and reporting their methane emissions through this transparent, science-based and globally standardized protocol.

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Major investors such as EOS at Federated Hermes, LGIM and Blackrock have backed the initiative and OGMP membership is already gaining traction across the U.S. energy sector — from EQT and Diversified Energy in Appalachia to Oxy, PDC and Crescent Energy in Texas, Colorado and Oklahoma.

Now Chevron has both the opportunity and obligation to become the first U.S. oil major to join OGMP.

Methane’s data quality moment is now

This is the first shareholder resolution vote focused on methane data quality. Given the importance of this climate issue, we doubt it will be the last. Up until now, industry has measured methane emissions using antiquated desktop equations that don’t tell the real picture. As stated in the shareholder resolution, “in certain basins, studies have found [methane] emissions to be more than 10 times higher than industry-disclosed figures.” If companies don’t abide by transparent, science-based emission reporting standards, it will be impossible for the industry to make any real progress on methane reductions.

For investors committed to net-zero, reducing oil and gas methane emissions represents the single fastest, most cost-effective way to slow the rate of warming right now. Because methane is a powerful climate warmer — 80 times more potent than carbon dioxide for the first two decades after it’s emitted — it is estimated to be driving at least 25% of the human-caused warming we are experiencing today.

As investors and lenders look to rapidly decrease emissions across their portfolio, having a robust methane mitigation plan backed by credible data will increasingly be seen as an indicator of an oil and gas company’s preparedness for the broader energy transition.

Chevron must follow through

This shareholder proposal should be a wake-up call for industry that emission data integrity is crucial for companies to deliver methane reduction results.

Despite increasing numbers of company targets, current standards for estimating and disclosing methane emissions provide limited insights to stakeholders. To address this issue, leading companies in basins around the world are taking proactive steps to integrate higher levels of direct measurement into their operations.

From global oil majors like bp to small independent operators such as Jonah Energy in Wyoming, OGMP participants have committed to measuring their methane emissions using clear science-based quantification standards as opposed to traditional, often inaccurate, desktop-based estimates. Chevron should be no different.

Yesterday shareholders made their voice heard, now it’s time for Chevron to show it is listening.

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