Environmental, Social and Governance Reporting
The OGA Strategy is clear that operators and licensees should develop good Environmental, Social and Governance (ESG) practices in their plans and daily operations. In doing so, they will also meet investor requirements, as vital climate-related information will be included alongside other key metrics in oil and gas operators and licensees’ financial reports.
In order to achieve this, the Oil and Gas Authority (OGA) organised an ESG taskforce when it became clear from engagement with the investor community - which is itself coming under pressure to play a greater role in supporting low-carbon business - that there was a gap between investor expectations and what was actually being reported.
The taskforce focused on the ‘E’ of ESG and considered environmental reporting, in light of a perceived lack of standardised metrics that are manageable, repeatable, and comparable for industry and investors.
A second stimulus for action was the OGA’s revised Strategy which requires operators and licensees to support the drive to achieve net zero while also ensuring economic recovery from the UK continental shelf. Furthermore, from 2023, reporting on these factors will be mandatory, so the OGA are helping industry to prepare to make the transition.
The taskforce agreed on a series of expectations for the future direction companies should take:
- Operators and licensees to disclose climate related data in their financial reports, and/or websites
- Industry to be mindful of the gap between investor expectations and what industry are currently reporting and we will encourage and ensure better disclosure & transparency
- Disclosure should both be quantitative and qualitative with signalled improvements over time
- Senior leadership teams to set the tone at company strategy level
The Taskforce agreed an outline for optimal ESG reporting and several key indicators which it expects industry to meet, mindful of investor expectations around attracting capital in the future and in particular the mandatory compliance by 2025.
It recommended that operators and licensees align to a common minimum standard of reporting and concluded that individual operators and licensees should be ready to report in Q1 22, alongside the publication of their 2021 full year audited financial reports financial reports.
The Taskforce report can be viewed here.
Note: On 20 September the OGA opened a formal consultation into our proposed Governance Guidance as per Supporting Obligation paragraphs 3 and 4 of the OGA Strategy, and which sets out when the OGA will normally consider the adequacy of a licensee’s governance arrangements, and the factors which will usually be considered.
The consultation will run for 8 weeks until Friday 12 November