The Louisiana Energy Conference, held virtually on May 27-28, included a panel addressing ESG and its relevance during the COVID19 crisis. PESA President Leslie Beyer and Advisory Board Member David de Roode, Partner & EVP, Lockton Global Energy & Marine, joined the discussion along with Kensey Biggs, Senior Counselor, Abernathy MacGregor; and Jim Tramuto, President, Tramuto Energy Advisors.
Panelists opened by discussing why companies should pay attention to ESG in the current environment. With global disruptions due to COVID-19 and volatility in oil prices some companies are under high financial pressure.
“The primary piece of ESG is managing risk across the enterprise, but safe and healthy workers are critical right now, and critical to demand coming back. It’s essential for people to feel comfortable going back to work and for companies to know they’re doing the right things to keep their employees safe,” she said.
Some companies are embracing ESG disclosures and view those as a competitive differentiator. Beyer agreed that companies with a strong program in place will have a competitive advantage over non reporting companies.
“Those companies with a solid program and understanding of what they need to be reporting are going to have easier access to capital,” she said. “When discussing ESG programs within the scope of the services and equipment space, supply chain transparency in such an important factor. Operators have to report on the entirety of the supply chain; services companies showing they know how to track and improve upon environmental and governance metrics definitely provides a competitive edge.”
Regarding the various ESG frameworks in existence today, some are seen as more favorable than others. Looking through the lens of the service providers, when it comes to measuring and reporting ESG accomplishments, Beyer said companies need to focus on data.
“Companies can look at the major frameworks of SASB and TCFD and use them as a guidepost as long as they maintain focus on the data on their public website. Completing every single question on the framework forms is not necessary. The guidance PESA has given members is to focus on data and ensure that information is public facing, which is the information the investors want.”
Education around ESG was also a topic the panel addressed, touching upon the importance of information around financially material issues by sector. Communication with investors around preferred frameworks is key as well as educating ratings agencies. “This is our opportunity as service providers to educate and explain what we do as energy technology companies, and how our sector differentiates itself from the other subsectors of the industry” Beyer said.
Moving to longer-term issues, panelists discussed Blackrock CEO Larry Fink’s letter issued earlier this year and if financing has fundamentally been reshaped, along with capital reallocated as part of a transition to a lower carbon economy. Biggs stressed the fact that this type of transition does not happen overnight. Tramuto emphasized that ESG needs to become part an organization’s overall commitment. Beyer pointed out that Fink’s letter offers an opportunity to talk about advancing collaboration and diversity in the sector.
To close, panelists were asked about their thoughts around investors, financial institutions and insurers being under pressure from ESG activists to not support the oil and gas industry.
Panelists agreed the energy industry should focus on telling their story from all sides of ESG, continuing to educate the public and clarifying the sector’s message: the oil & gas industry is a sustainable one and continuing technological advancements will complement and support broader climate goals.