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Dirty business: M&A activity may raise climate risk

22/6/2022

6 min read

Graphic of red and purple dollar signs with trading figures in the background Photo: Shutterstock
Oil and gas M&A activity risks transfer to operators with less environmental commitment

Photo: Shutterstock

Brian Davis looks at a new report by the Environmental Defense Fund (EDF) which raises concerns that oil and gas merger and acquisition (M&A) activity may increase climate risks, often transferring to operators with reduced environmental commitment and limited climate disclosure.

Booming merger and acquisition activity in the oil and gas sector could have an alarming impact on efforts to reduce emissions in the energy transition. A disturbing report by the EDF on Transferred emissions: how risks in oil and gas M&A could hamper the energy transition highlights the potential for reduced environmental stewardship and limited climate disclosure.

 

The EDF carried out detailed analysis of the scale of ‘transferred emissions’ during M&A activity over a five-year period to 2021. The US environmental advocacy group did a deep dive into transaction data and found a troubling trend of assets moving from owners with strong climate commitments and established climate disclosure practices to those with weaker standards.

 

Case studies showed clear evidence that asset sales could result in reduced environmental commitments and corresponding increases in greenhouse gas (GHG) emissions (see Box 1 and 2).

  

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