PRI Awards 2024 Winner: Recognition for Action – Climate
Organisation: Nordea Asset Management
Signatory type: Investment manager
HQ country: Sweden
Other responsible organisation(s):
Amundi, AP7, British Columbia Investment Management Corporation, Brunel Pension Partnership, California State Teachers’ Retirement System, Caisse de dépôt et placement du Québec, Church of Norway National Council, Church Pension Fund Finland, ELO Mutual Pension Insurance Company, Grieg Investor, Lærernes Pension, P+, PenSam, Sampension Administrationsselskab A/S, Save the Children, Norway; The Norwegian Society for Sea Rescue, The State Pension Fund of Finland and Varma Mutual Pension Insurance Company.
The approach, initiative, or process
As signatories of the Net Zero Asset Managers Initiative, we are mindful of the acute risks that climate change poses to investment portfolios and the real economy. Mitigating these risks is critical for our mission to deliver returns with responsibility. Moving swiftly to reduce methane emissions offers one of the best near-term opportunities for doing so, especially for investors who opt to stay invested across all sectors of the economy.
Methane is a powerful greenhouse gas, contributing to 30% of global warming today. As methane is a short-term climate forcer, 80 times more potent than CO2 over 20 years, reducing it provides critical short-term mitigation benefits and is a cost-effective mitigation strategy for the oil and gas sector.
In 2022, we decided to prioritise methane in our stewardship efforts, focusing on sectors that are major contributors to anthropogenic methane emissions. We initiated a three-year collaborative engagement with selected partners and clients to engage with companies in energy (phase 1), utilities (phase 2) and waste management (phase 3) sectors on methane measurement, reporting and mitigation.
The engagement focuses on public markets with a regional focus on the US and Canada. The US oil and gas industry has the largest public market methane footprint in the world. In 2023 there were no OGMP 2.0 members in Canada, a country with strict regulation of methane but historic under-reporting of methane emissions.
Nordea Asset Management has been leading the engagement and has onboarded nearly 20 investors, primarily asset owners, with more than €3.7 trillion in assets under management. We collaborate with expert partners such as the Environmental Defense Fund, Carbon Tracker and the United Nations Environment Programme (UNEP), who contribute scientific expertise and data insights. The collaboration is structured to facilitate knowledge-sharing, elevate investor expertise and shape opinion on methane. Raising the collective ownership share in target companies and involving investors across relevant markets also increases the likelihood of success.
The primary engagement ask in phases 1 and 2 is for companies to join the Oil and Gas Methane Partnership 2.0 (OGMP2.0), the UNEP’s global ‘gold standard’ in methane measurement, reporting and target-setting, and for companies to achieve near-zero methane emissions according to this standard. Implementing OGMP 2.0 and direct measurement helps improve the data accuracy for emission sources and increase visibility of mitigation opportunities, thereby maximising real-world methane mitigation.
In addition to joining OGMP 2.0, companies are asked to map methane mitigation actions and share their cost / benefit analysis. We also engage with them on progress towards aligning with a 1.5°C pathway, for which methane mitigation is vital and prepares companies for leading the energy transition. Progress is tracked against milestones, general alignment KPIs and specific methane maturity criteria.
The engagement is ambitious in reach and scope. It grew from 15 oil and gas companies to 63 companies at the end of 2023 (including utilities) and is structured around workstreams for corporate engagement, policy engagement, methane thought leadership and research and data. We use a tiered approach to determine the engagement intensity for all companies, based on business models and methane progress to date.
Engagement efforts are aligned with global agreements and initiatives such as the Paris Agreement, Global Methane Pledge, Oil and Gas Climate Initiative, Oil and Gas Decarbonisation Charter, Methane Guiding Principles and Nordea’s own targets.
Nordea Group’s sector guideline for fossil fuel industries encourages investee companies to join OGMP 2.0. Nordea Asset Management’s Fossil Fuel Policy criteria are being updated to incorporate methane management consistent with the OGMP 2.0 ‘gold standard’ for effective methane mitigation. As of today, none of the oil and gas companies currently in scope of our methane engagement are investable for the majority of Nordea AM portfolios that are subject to our Fossil Fuel Policy, which requires fossil fuel companies to demonstrate a decarbonisation strategy consistent with well below 2°C. We are also expanding our escalation approach and proprietary ESG data platform to incorporate the OGMP 2.0 framework.
The engagement has delivered substantive results. Nine target companies joined OGMP 2.0 in 2023: Aker BP; Coterra; Chesapeake; Diamondback; EOG; INPEX; KazMuynayGas; Petrobras and PPT E&P. In 2024, ExxonMobil, Chevron, Woodside, OMV and Pertamina joined, bringing the total to 14. By joining OGMP 2.0, companies commit to establishing a methane emissions target in line with a 45% reduction by 2025 and a 60-75% reduction by 2030.
We also follow up as companies progress towards the gold standard for operated and non- operated assets. Equinor, Petrobras and Pioneer achieved alignment with the gold standard pathway in 2023 on the basis of credible implementation plans.
The engagement’s theory of change is agent-centric, emphasising the role of companies’ board members, leadership and key employees to drive and implement change.
We use a range of tools to influence ‘key change agents’ best positioned to define the roadmap to near-zero methane emissions and drive mitigation. For example: letters to the board and CEOs; one-on-one meetings with company leadership and operational specialists; practical half-day workshops together with UNEP and EDF experts and OGMP2.0 member companies; and field trips to meet with plant personnel.
Our methods and workstreams are more holistic than standard practices and we utilise deep methane research that breaks new ground for the financial sector. For example, ahead of the launch of the Global Fossil Fuel Registry, we collaborated with Carbon Tracker on company methane briefings to elicit abatement opportunities as the basis for engagement discussions. We have also concentrated on strengthening methane-related investment data by working with methane satellite providers on investor use cases to drive transparency and accountability.
Policy engagement is important for driving performance across markets and industries, especially at a time when the US, Canada and Europe are strengthening methane regulations. We have engaged directly and publicly with the SEC, ECCC, EPA and ISSB on our support of draft regulation and encouraged investee companies to publicly support methane and pipeline safety regulation.
The measures to ensure transparency
We maintain transparency towards target companies on our expectations and how we assess progress. We have communicated this through letters, meetings and workshops, presentations at oil and gas industry conferences in Amsterdam, Houston and Calgary, in webinars, via media and in our reporting and communications.
The transparency with collaborators and stakeholders on the process, methodologies and milestones is also high, with regular research-sharing and progress updates. The investor cohort joins engagement meetings and investor trips. We also travelled with a documentary film crew to Texas to document the engagement and share best practices. Watch this video for highlights from our June 2023 investor trip to Texas.
Holding workshops with investors, OGMP 2.0 members and non-members, as well as experts from UNEP and EDF, has been effective to help companies better understand what is involved in implementing the OGMP 2.0 framework and achieving the gold standard. It has also contributed to building operator and investor capability on the challenges and opportunities in methane mitigation.
All engagements are tracked on our Esgaia stewardship platform and we highlight detailed case studies in our public reporting, for example in the Nordea Asset Management UK Stewardship Code submission.
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Nordea Asset Management disclaimer: Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB and their branches and subsidiaries. This material is intended to provide the reader with information on Nordea Asset Management, general market activity or industry trends and is not intended to be relied upon as a forecast or research. This material, or any views or opinions expressed herein, does not amount to an investment advice nor does it constitute a recommendation to buy, sell or invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy.
Unless otherwise stated, all views expressed are those Nordea Asset Management. Views and opinions reflect the current economic market conditions, and are subject to change. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information. Published by the relevant Nordea Asset Management entity. Nordea Investment Management AB and Nordea Investment Funds S.A. are licensed and supervised by the Financial Supervisory Authority in Sweden and Luxembourg respectively.
