Environmental groups criticise Ceres for threatening GFANZ progress

'Risks eradicating progress in establishing norms for net-zero finance'

A group of environmental organisations has criticised sustainability firm Ceres for – they say – allowing oil and gas companies to hijack the Glasgow Financial Alliance for Net Zero (GFANZ) movement.

At the centre of the row is a paper produced by US non-profit Ceres, aimed at explaining actions that oil and gas exploration and production companies (E&Ps) should take to reduce their emissions. The paper is called Key Elements for a Net Zero Transition at Oil & Gas Exploration & Production Companies.

Its aim is to provide useful information on climate alignment to the sector’s investors and bankers. 

However, according to the environmental groups, the paper “suffers from alarming weaknesses which threaten to reverse progress on setting standards for net-zero finance”. 

For example, the Ceres paper does not insist E&Ps reduce their overall emissions or align their activities with credible 1.5°C pathways. 

Reclaim Finance, Oil Change International, the Center for International Environmental Law, Stand.Earth and Urgewald, launched the attack in a joint statement.

They said the Ceres paper, “risks eradicating whatever progress has been made in establishing norms for net-zero finance by acting as a conduit for the self-interested concerns of the oil and gas industry into GFANZ-related processes”. 

This is of particular concern, the groups said, because Ceres plays a leading role in the governance of two of the GFANZ sectoral alliances, the NZAM initiative and the Paris Aligned Investment Initiative (PAII). 

Patrick McCully, senior analyst at Reclaim Finance, said: “There is no way that financiers can consider oil and gas companies to be aligned with net zero if they keep ramping up fossil fuel production.

“The Ceres’ principles set the bar too low, way below the emerging net-zero standards from the UN, the International Energy Agency, and GFANZ and its alliances. The finance sector must apply standards that are aligned with net zero to meet the climate challenge.”

Sustainability in finance

In response to the criticisms, Andrew Logan, senior director of oil and gas at Ceres, said the paper “was not designed to be a gold standard but rather a foundation that oil and gas companies can use as they either start or hasten their journey to decarbonisation”.

Ceres’ stated mission is to advance sustainability issues within finance, and as such is an advisor to GFANZ’s workstreams on mobilising private capital and financial institution transition plans.

“Ceres should use its influence within GFANZ to advance the phase out of finance for fossil fuels,” the environmental groups said in a statement, adding financial institutions “should not use this [Ceres] paper to guide their decisions on engagement with E&Ps”.

According to Ceres it is a “suite of common yet strategically flexible actions that can facilitate emissions reductions for E&Ps and may ultimately influence investment decisions”. 

It is the result of a series of roundtables facilitated by Ceres with E&Ps, banks, and investment managers.

The names of the entities involved in the roundtables have not been revealed but both ConocoPhillips and major fracking company Pioneer Natural Resources disclose on their websites that they were involved with the initiative. 

ConocoPhillips is the developer of the highly controversial Willow oil-drilling project in the Alaskan Arctic and is listed in the Global Oil and Gas Exit List as the world’s 14th largest developer of new oil and gas fields. 

“Given the involvement of these companies in this secretive process it is not surprising that the paper’s recommendations are biased toward favouring business as usual for E&Ps,” the environmental groups said.

Ceres’s role

Ceres’s role at the heart of the GFANZ movement means it has a responsibility to push for the protocols and guidelines of the GFANZ alliances towards meeting their goal of helping to limit warming to 1.5°C.

But the environmental groups said the actions for E&Ps laid out in Cere’s ‘Key Elements’ paper are weaker in various key respects than those recommended by GFANZ and its sectoral alliances, as well as by the UN’s Race to Zero Campaign and the UN High-Level Expert Group on net zero.

“The Key Elements’ recommendations are in no way adequate to ensure that E&Ps contribute their share to the “steep and immediate” reductions in energy-related CO2 emissions without which the IEA says there “is no credible pathway to 1.5°C,” they said.

For example, the paper fails to acknowledge the IEA’s finding that the carbon budget leaves no room for new oil and gas production in a 1.5-aligned world, a finding backed up by the IPCC and acknowledged by the Race to Zero, and HLEG.

It also fails to require comprehensive net-zero transition plans based on credible 1.5°C scenarios, or to require Scope 3 targets, or to specify years and percentage reductions for interim (pre-2050) targets.

“The members of GFANZ and any other financial institutions committed to addressing climate change should not use this paper to guide their decisions on engagement with E&Ps,” said the environmental groups.

They should instead use the recommendations of HLEG, they added, which have been informed by the work of the Race to Zero, IEA, IPCC and others, as the primary set of principles for guiding their decisions on E&Ps and other fossil fuel companies.

Ceres’s senior director of oil and gas Andrew Logan, said the paper at the heart of the criticisms brought together a number of stakeholders, including energy companies, banks and asset managers to discuss the challenges of the transition to net zero. 

“As our announcement of the principles made clear, the purpose of the document was to find common ground. Certainly not every participant agreed with every point made,” he said.

Ceres pointed to a recent methane benchmark report that makes clear there is a huge spectrum of climate performance across the industry, and “tremendous climate benefits that can come from bringing laggard companies up to a minimum standard”. 

Logan said: “For our part, Ceres remains committed to encouraging all companies to meet the expectations laid out in the Ceres Roadmap 2030which is a 10-year action plan and vision for sustainable business leadership. 

“To be clear, oil and gas companies have a lot of work ahead of them in decarbonising the sector. No one disputes that. Our communities, our economy and our planet need the industry—and all industries—to step up their plans to transition to more sustainable operations. This paper is just one of many tools to help them achieve it.”