ESG in the Energy Industry – Embracing Change
The energy industry is taking yet another turn.
The COVID-19 pandemic and expectations on new energy policies have accelerated the focus on environmental responsibility and broader ESG measures. This has drawn industry-wide pressure from investors to allocate capital exclusively to companies prioritizing ESG.
Scroll down to learn more about what this means for the energy industry moving forward and why there’s an urgency to better understand ESG metrics, and the impact they have on energy companies.
So, what exactly are ESG metrics?
- ESG stands for environmental, social and governance.
- These metrics are a set of standards for a company's operations that socially conscious investors use to screen potential investments.
Environmental
Environmental criteria examine how a company performs as a steward of nature.
Social
Social criteria examine how a company manages relationships with employees, suppliers, customers and the communities where it operates.
Governance
Governance criteria examine a company’s leadership, executive pay, audits, internal controls and shareholder rights.
ESG Breakdown for Energy Companies
These three factors are used to measure the societal impact of a company and can be calculated to help better determine the future financial performance of said company. There has been a strong correlation with low GHG emissions and high ESG scores which, in turn, correspond to higher company profitability.
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ENVIRONMENTAL
This metric tracks GHG emissions, flaring rates, how companies are using their land and how efficiently they are using their water resources.
SOCIAL
This metric relates to sustainability statistics including diversity statistics, social and community spending.
GOVERNANCE
This metric evaluates share ownership ratio, health and safety fines, pay disparity and CEO pay ratio.
Increase Your
"E" Score
For energy companies looking to position themselves favorably to investors, the ENVIRONMENTAL metric is possibly the most critical. The following factors all play an important role in managing their impact and ensuring they remain investable and competitive in the market:
- Reducing Greenhouse Gases: Gas molecules found in the atmosphere that absorb and emit thermal energy
- Mitigating the Greenhouse Gas Effect: The trapping of energy from the sun due to increased greenhouse gases in the atmosphere, resulting in global warming.
- Controlling Flaring: Different operational practices, such as choosing to flare or not, vary emission levels.
- Navigating new Regulations: Low regulations seen in North America around greenhouse gas emissions will be a thing of the past, and tighter restrictions will come into place.
CORRECT
Correct! This statement is true.
In fact, there has been a strong correlation between low GHG emissions and high ESG scores which, in turn, corresponds to higher company profitability.
INCORRECT
Sorry, this statement is not false, it is TRUE!
In fact, there has been a strong correlation between low GHG emissions and high ESG scores which, in turn, corresponds to higher company profitability.
ESG metrics, including GHG emissions and flaring, are incredibly hard to structure and organize because they come from multiple public sites, where companies submit disparate and disorganized information.
As things are now, the information needed to understand a company’s CO2 footprint and how it stacks up against its peers is generalized by non-energy focused research shops and siloed from other key operational metrics. Until now.
DID YOU KNOW?
To gain a holistic view of ESG metrics, the raw data needs to be combined with industry leading operational and economic analytics to really be useful. This is where Enverus ESG™ Analytics comes in.
65%
of investors agree that O&G companies should prioritize ESG even if it means lower earnings per share.*
Source:
What industry are you part of?
Financial
(Investor / Private Equity)
ESG visibility will allow you to:
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Understand operator performance
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Evaluate long-term portfolio risk
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Align money with top performers
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Benchmark and monitor portfolio companies’ ESG metrics
Upstream
ESG visibility will allow you to:
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Understand performance relative to peers
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Gain visibility into data used by investors
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Easier access to capital
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Attract top talent
Midstream and OFS
ESG visibility will allow you to:
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Quantity lost gas due to flaring
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Identify potential clients to utilize in-field solutions
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Understand performance relative to peers
Enverus ESG Analytics
Energy Metrics Driving the Future
Enverus ESG Analytics lets users track emissions intensity, flaring rates, land use and water use via satellite-enabled proprietary analytics alongside industry-leading objective data related to production and economics.
The “S” and “G” elements including pay disparity and diversity, allow operators to see how they perform holistically against their peers, and gives investors the objective, verifiable data necessary to rank prospective investments for the first time.
ESG visibility is changing the energy industry, and #EnverusESG is delivering unrivaled transparency.
Now, more than ever, energy companies need to pay attention to corporate governance metrics. #EnverusESG
Find out who and what are the most environmentally responsible and investible opportunities in the energy space. #EnverusESG
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