Why would a credit rating agency decide to take first the oil and gas sector to structure its energy transition stage assessment methodology?
With a significant increase in Net Zero ambitions from companies across sectors in recent years, its became relevant to assess the progress being made by a company on its transition journey.
Sustainable Fitch developed a methodology to deliver that information and monitor it.
The assessment builds on work of the Sustainable Markets Initiative (SMI) launched at COP27 and benchmarks, differentiates and positions each company’s path towards net zero. The framework recognises the following two potential pathways:
Decarbonising: emissions reduction by advancing in technology and efficiency gains, complemented by emissions removal
Greening: decarbonisation of existing activities as well as the replacement of emissionintensive technologies with greener alternatives
The analysis output is a colour-coded spectrum, representing different stages of a company’s transition pathway.
Click at the image below to access the "Transition Assessment Methodology: Oil and Gas Sector", upon a short registry.
And by doing so, if you go to the "Appendix 3: Important Facts About the Oil and Gas Sector", you will have the full answer to the question at the top.
Here (and at the image below) a spoiler:
"Scenarios ... demonstrate a decrease in global demand for oil as a primary energy source in the coming decades ...<several entities quotes> project peak oil demand to occur in or before 2025. Similarly, the same scenarios project that global natural gas demand has already peaked and that demand will decrease significantly between now and 2050. The changes to oil and gas demand are expected to be driven mainly by changes in consumer behaviour, such as the shift from internal combustion engines (ICEs) to electric vehicles (EVs) and the switch from oil and gas to renewable energy and heat pumps for electricity and heat generation."
Sustainable Fitch is part of the Group Fitch Ratings, one of the "Big three credit rating agencies" (together with Moody's and Standard & Poor's), and provides insights, tools and data to support decision-making by the ESG financial community.
