Deals in which oil and gas assets move from companies with climate goals to companies without such goals are on the rise, according to a study by the U.S. non-governmental organization Environmental Defense Fund.
A company shifting polluting assets from its balance sheet by selling them can claim a better climate scorecard, but if assets land in the hands of less scrutinized and climate-committed firms the overall environmental impact might be negative.
“When assets move from public to private markets or from operators with environmental commitments to those without, near-term emissions can increase, energy transition planning can falter, and climate disclosure can worsen,” the Environmental Defense Fund (EDF) said in a report on the study, released on Tuesday.
The study looked at mergers and acquisitions between 2017 and 2021 and different parameters to determine whether assets stayed with companies with targets to reduce their planet-warming emissions of CO2 and methane.
EDF found 155 deals worth $86.4 billion moved assets away from net zero committed companies.
It said 211 deals worth $115.6 billion removed assets from companies with explicit methane reduction goals.
“In 2018, reduced-environmental-commitment transfers accounted for roughly 10% of total deals. By 2021, that percentage rose to 15%,” the report said.
“The proportional value of reduced-environmental-commitment transactions also ballooned from 15% of overall deal value in 2018 to 30% of overall deal value in 2021.”
Deals which shifted oil and gas fields from publicly traded companies, which face much stricter scrutiny and higher disclosure pressure from shareholders, media and authorities, to private firms outnumbered reverse transactions.