When asked about the top ESG risks in oil and gas, a familiar list typically emerges.  Health and safety, environmental harm, climate change, activities in a particularly high risk jurisdiction…  From a legal perspective, we do not disagree, but our key concerns come from a different angle:


  1. Did you do what you say you did?  Many oil and gas companies make varied and wide-reaching claims about their ESG performance.  This can be by way of “formal” ESG / sustainability reports, or other publicly made statements.  Oil and gas companies “sign up” to voluntary initiatives (often ones without “hard law consequences”) all the time.  Our experience tells us that not all statements are fully audited before they are made, and that not all businesses live up to the letter (or spirit) of the initiatives that they sign up to.  This opens them up to liabilities down the line.


  1. When was your last ESG audit?  By which, we do not mean, “How many health and safety breaches were committed last year?”  What we are most concerned about is, when did you last take an in-depth look at whether the business lives up to (1) its internal policies and (2) any external initiatives, in all matters ESG-related?  This cuts across a very broad range of activities, and a meaningful audit should not be a tick box exercise.


  1. Who checked it?  Internal advisors and consultants not familiar with the broader legal regime surrounding ESG-related obligations are unlikely to be able, on their own, to make sure that you are genuinely in compliance.


  1. What did you say about your global approach?  In a global world, with far flung operations, it can be tempting to proudly announce that you take the same, rigorous approach to ESG compliance globally.  We understand that in practice, this is very difficult to achieve, and from a legal perspective can be an impossible goal to live up to.  Communications may need to be more nuanced.


  1. Have you thought about future scenarios? Many oil and gas businesses have now adopted alternative courses for their businesses, including in respect of an increasingly carbon-constrained world.   Targets, on their own, only go so far.  We think that what investors are most focused on is the extent to which you have really thought this through, modelled different scenarios, and are readying yourself for the future.  Without doing so, sources of both debt and equity are likely to become more scarce.


  1. Do you know what the “S” is?  Or that it too can be measured, reported on and verified?  The social side of ESG is often ignored, and sounds relatively innocuous.  But getting matters such as the use of child labour and worker low pay wrong can inflict just as much damage to a business as a serious environmental spill.  S, to our mind, also stands for “supply chain”, and is a matter that oil and gas companies need to be paying closer attention to.


  1. B is for (net)biodiversity gain.  At the risk of adding another letter, it is increasingly recognised that, hand in hand with a climate crisis, the world is confronting a biodiversity loss crisis.  Addressing this matter is far from the exclusive preserve of the oil and gas industry.  Equally, it will not be possible for the oil and gas industry to avoid making progress in this area in the coming years.