KEY TAKEAWAYS

• The Energy sector comprises the Oil, Gas & Consumable Fuels (OG&CF) and the Oil & Gas Equipment/Services (OGES) industries.
• The Energy sector is a major contributor to global climate change and environmental degradation. Investors are focused on the sector’s approach to the challenge of reducing emissions in accordance with the Paris Agreement.
• Only 4.2% of OG&CF companies and 2.4% of OGES companies achieve Prime status; meaning they fulfill ambitious sector-specific performance requirements as defined by ISS ESG.
• The most ambitious climate targets have been set by European companies. These companies only contribute a minor share of global fossil fuel production, however.
• Net Zero targets are becoming increasingly prevalent, although these targets are not expected to align with the “well below 2°C” target set in the Paris Agreement.
• The most common breaches of global norms in the OG&CF industry are related to controversial environmental practices; and labor rights violations in OGES.
• OG&CF companies are slow to transition to a low-carbon economy, thus posing a long-term financial risk.
• Facing challenges in the form of workforce restructuring; investor-led pressure for climate action; and net-zero targets, will the Energy industry be able to keep its profitability throughout the necessary transition towards renewable energy?