Field trip to Texas: Nordea in dialogue with oil and gas companies on emissions reduction
Nordea Asset Management is actively engaging with oil and gas companies in the Permian Basin to address methane emissions, a powerful greenhouse gas contributing significantly to climate change. Per the full note source, Nordea's efforts aim to push these companies towards joining the OGMP 2.0 initiative, which sets a high standard for methane reporting. This initiative aligns with broader market trends emphasizing sustainable investments, particularly in light of recent pressures for carbon neutrality. As institutional traders navigate shifts in energy investments, Nordea’s proactive stance underscores a critical intersection of environmental responsibility and investment strategy.
What the desk is arguing
The desk posits that Nordea's engagement with oil and gas companies is a strategic move that may influence sustainable investment flows in the energy sector. Per the full note source, the firm highlighted that methane accounts for approximately 25% of current global warming, emphasizing the urgency of addressing its emissions.
By directly participating in dialogues with industry leaders like Diamondback Energy, Nordea seeks to pinpoint actionable solutions, reflecting a broader industry trend towards recognizing the financial risks associated with climate change.
Where it sits in our coverage
Our consensus target for the relevant currency pairs stands at 1.075, with a range of 1.04 to 1.12. The targets from key firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This outlook positions us at the higher end of the range, suggesting a bullish sentiment consistent with Nordea’s proactive climate engagement.
How other firms see it
Firms aligning with Nordea’s sustainability cues include jpmorgan, which supports similar green initiatives. Conversely, bofa appears skeptical, maintaining targets that reflect a more conservative view of market developments.
Monitoring USD/EUR may prove insightful, particularly as changes in oil and gas regulations could affect energy prices and thereby the spread between these currencies.
What the calendar says
With no upcoming events of note in the calendar for the next month, traders should watch for any developments from industries linked to Nordea's engagements, which could impact their positioning in the FX markets.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Nordea's dialogue with oil companies highlights the increasing focus on sustainable investments.
- 02Methane emissions are a significant contributor to climate change, prompting proactive measures from investors.
- 03TheOGMP 2.0 initiative sets a high standard for companies to follow, indicating a shift in industry norms.
- 04This engagement could influence future investment flows within the energy sector.
Market implications
Traders should monitor potential shifts in investment strategies within the energy sector, particularly around firms committing to methane reduction. The financial markets may react to more rigorous reporting standards set by OGMP 2.0, potentially influencing currency valuations in the USD/EUR pair.
Risks to this view
A sudden decline in regulatory support for methane reduction or a resurgence of fossil fuel-centric policies could undermine the momentum built by initiatives like OGMP 2.0, potentially reversing investor sentiment and altering market dynamics.
Responsible investments Field trip to Texas: Nordea in dialogue with oil and gas companies on emissions reduction 18-08-2023 In the blistering heat of Texas, Nordea Asset Management went on a week-long field trip to Houston and the Permian Basin to engage 12 important oil and gas companies in reducing their methane emissions. During the trip in June, Nordea Asset Management went to Midland in the Permian Basin, which is the second largest oil and gas field in the world and one of the basins with the highest methane emissions. They visited Diamondback Energy’s headquarters and one of their facilities to better understand onshore unconventional oil and gas operations and to see first-hand their monitoring technology for methane detection.
Photo: Fredrik Stedtjer. For the minority of the Nordea Asset Management funds that may invest in the oil and gas industry, the tool of engagement can be used to get short-term wins for the climate. In Texas Nordea Asset Management visited its investee companies and the aim was to ask them to join the Oil and Gas Methane Partnership 2.0 (OGMP 2.0) which was launched by the United Nations (UNEP) and partners.
The OGMP 2.0 is recognised as the ’gold standard’ in methane measurement, reporting and target setting. We met with Nordea’s Head of Responsible Investments, Eric Pedersen, and Director in Active Ownership, Renée Tengberg, to ask why Nordea chose to meet face-to-face with several industry giants in the middle of the summer: It’s part of Nordea’s sustainability targets to reduce carbon emissions across our lending and investment portfolios to contribute to a more sustainable economy, but why is it needed to have a special focus on methane? Renée Tengberg: “Methane is a powerful greenhouse gas, estimated to account for as much as 25% of the global warming we’re experiencing today.
It’s a short-lived climate pollutant that is 86 times as potent a greenhouse gas as carbon dioxide over a 20-year period, but it doesn’t stay in the atmosphere for as long as carbon dioxide does. This means that methane has not only had a huge impact on global warming to date, but also that reductions offer a critical near-term opportunity, as reductions achieved today will be felt in as little as 10 years.” “Reducing methane emissions from oil and gas in the next decade is one of the most cost-effective forms of climate risk mitigation, since about 40% of human-caused methane emissions come from leaks from fossil fuel exploration, production and transportation.” The team engaged with 12 investee companies during the week – Chesapeake Energy, Chevron, Coterra Energy, Denbury, Diamondback Energy, Enbridge, EOG Resources, Exxon Mobil, Hess Corporation, Occidental Petroleum, Kinder Morgan and Targa Resources. Nordea has investee companies all over the world, what was the reason for choosing Texas as destination?
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