Analysing the quality of oil & gas policies

Bonus / penalties:

• Bonus +1/2 if additional commitment to phase out oil and gas-fired power generation activities by 2040 worldwide/and by 2035 in OECD and European countries.
• [Unconventional] Penalty -1 if phase-out commitment for unconventional sectors applies between 2031 and 2040.
• [Unconventional] Penalty -1 if phase-out commitment only covers a few unconventional sectors.
• [For scores between 1 and 8] Penalty -2 if commitment only applies to oil or gas.
• Penalty -1 when exceptions are minimal, -2 when exceptions are significant.
• Penalty -2 if standalone insurance coverage/direct insurance/facultative reinsurance of oil or gas projects is still allowed.
• Penalty -1 if the commitment does not apply to all lines of business****.
• [For reinsurers/insurers with reinsurance activities] Penalty -1 when the restrictions do not apply to reinsurance treaties.
• Penalties do not apply below score 1.
• The total penalties in a sector cannot exceed the number of points earned by the financial institution regarding this specific sector.

Remarks:

*the company has committed :
– not to develop new oil and gas upstream projects;
OR
– if developing new oil & gas assets, closing existing oil & gas assets in order to stay in a 1.5°C pathway: closing assets should total an equivalent amount of resources and, if possible, a similar production profile as developing assets. Sold assets must not be considered when assessing oil & gas production reduction aligned with a 1.5°C scenario.”
**the company has committed:
– not to develop new oil and gas upstream and midstream projects;
OR
– if developing new oil & gas assets, closing existing oil & gas assets in order to stay in a 1.5°C pathway: closing assets should total an equivalent amount of resources and, if possible, a similar production profile as developing assets. Sold assets must not be considered when assessing oil & gas production reduction aligned with a 1.5°C scenario.
***Weak targets are absolute or intensity targets with some of the following criteria:

• scope 1, 2 and 3 covered;
• at least upstream activities covered. We recommend the financial institution to cover both upstream and midstream activities;
• at least a target based on CO2 measurements. We recommend the financial institution to present separate targets for CO2 and methane;
• ambitious reduction targets, with goals for 2030 reduction that are almost aligned with the global figures set in the IEA’s net zero scenario.

***Comprehensive oil & gas targets are:

• absolute targets;
• scope 1, 2 and 3 covered;
• at least upstream activities covered. We recommend the financial institution to cover both upstream and midstream activities;
• at least a target based on CO2 equivalent measurements. We recommend the financial institution to present separate targets for CO2 and methane;
• ambitious reduction targets, with goals for 2030 reduction that are aligned with the global figures set in the IEA’s net zero scenario.

Very weak targets do not allow to score points.

A phase-out for unconventional sectors after 2040 is not considered.

Reclaim Finance reserves the right to equate a long-term commitment with the adoption of robust relative and/or absolute thresholds in the short term.

• Unconventional thresholds considered as phase-out: a relative threshold of 5% based on a production metric or an absolute threshold of 2 mmboe.
• Conventional oil & gas upstream thresholds considered as phase-out: an absolute threshold of 20 mmboe.
• Conventional oil & gas upstream & midstream thresholds: a relative threshold of 5% fossil fuel share of revenues.

****By all lines of business, we refer to:

• P&C (Property & Casualty)
• Engineering Lines (Construction All Risk – CAR)
• Surety bonds

Reclaim Finance reserves the right to equate a phase-out applied to the financial institution itself with the request for a phase-out to financed companies. The request for a phase-out strategy to the company must be done within a well-defined framework (well-defined duration of engagement, restriction of financing in case of engagement failure). If the exclusion does not apply within 3 years, then a penalty -1 will be applied.