Pledges from energy giants to address climate change are not showing up in their long-term plans, according to a report Wednesday from the Transition Pathway Initiative, a $22 trillion global investor group assessing companies' preparedness toward a low-carbon economy.
According to TPI data, none of 59 major coal, oil and gas companies has set a credible emissions target in line with the Paris Agreement goal of limiting the average global temperature rise to below 2 degrees Celsius by 2050.
Only seven — all European companies — have set emissions targets that align with "Paris pledges" made by companies to align their emissions with the goal by 2050. The seven companies — five in oil and gas and two in coal — are on track to align with emissions pledges made by countries as part of the Paris Agreement, but those pledges still leave the world on track for 3.2 degrees Celsius of warming, according to a United Nations assessment.
Three oil and gas companies are getting closer to a 2 degrees Celsius climate pathway by 2050 but will need to do more to meet that benchmark, the TPI report said.
The report also found electric utilities making more progress than fossil fuel companies toward climate goals. Of 66 utility companies, 39 are aligned with the Paris pledges and 22 are aligned with the most ambitious benchmark of below 2 degree Celsius.
The report's author, Simon Dietz, said some of the divergence between sectors may be due to heavier regulation of electricity sector emissions in some regions and the availability of technologies for decarbonizing electricity production.
"For oil and gas companies, the route to Paris alignment is much more of a challenge to their basic reason for being. Some companies have started grappling with this challenge, but none have met it yet," Mr. Dietz said in a statement.
Energy companies are also falling short when it comes to governance of climate risks, the study said. On a scale from zero (unaware) to 4 (strategic assessment), the average score for energy companies was 2.7, a slight uptick from last year. While 94% of energy companies have a policy commitment to act on climate change, few take further steps, according to the report.
It noted that only 9% of companies ensure that their climate change policies and the lobbying positions taken by their industry groups align. No longer disclosing involvement in trade associations active in climate lobbying caused three energy companies to fall down on the governance score, while 20 companies improved their score since last year, including two that had their operational greenhouse gas emissions verified for the first time.
The latest TPI report "shows some encouraging signs of progress, particularly with more electric utilities and European oil and gas companies making 'net zero' commitments to align their strategies with the goals of the Paris Agreement, said Bill Hartnett, stewardship director of ESG investment for Aberdeen Standard Investments, a TPI research funding partner. "The key challenge is to turn these net zero pledges into actions and reflect ambitions in investment plans."
Mr. Hartnett said in a statement that the research "provides us with an important investment and stewardship tool to develop strategies to address these risks on behalf of our clients."