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New SEC Challenge Over Climate: Will Oil Companies Play Ball?

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The SEC has instructed ConocoPhillips COP and Occidental Petroleum Corporation OXY, two of the biggest oil producers with huge global presence, to hold shareholder votes on new emission targets, per the Financial Times. Citing a letter that SEC sent to ConocoPhillips, Financial Times reported that the regulatory authority has denied requests from both companies to put away shareholder motions, which can otherwise force them to lay out a detailed plan for Scope 3 emission reduction. With the growing pressure from investors, the current measure taken by the U.S. Securities and Exchange Commission can be a game changer.

For the last few years, energy companies with hydrocarbon presence are being forced by investors to take proper measures to curb greenhouse gas emissions. The situation boosted investments in renewable resources as well as technologies like carbon captures. Several energy giants have already announced their emission reduction targets that fall in line with the Paris Agreement.

Although ‘net zero by 2050’ has become a common phrase in most of the oil companies’ long-term views, investors are not very happy with the plans as they demand more transparency. For example, energy mammoth Exxon Mobil Corporation XOM has been under constant scrutiny as investors thought that the company was downplaying its own environment reports and was lacking a strong emission goal. In response, by 2020-end, the company unveiled a new emission-reduction program.

The recent tougher approach from the regulatory authority, under the Biden administration, can lead to greater disclosures to shareholders by corporations regarding the effects of climate change on their businesses. While some might say that stricter regulations can affect the oil and gas spectrum, many investors think that a better transparency on climate issues can pave the way to a sustainable future for the hydrocarbon producers. A clearer picture on emission reductions can lead to a dramatic return of capitals from various activist investors to the hydrocarbons.

The SEC’s decision can be supported by environmental groups, while the U.S. energy companies’ European counterparts are aggressively curbing their carbon footprint. Companies like Equinor ASA EQNR, Eni S.p.A. E and BP plc BP are boosting investments in renewables, while oil and gas are expected to fund their energy transition ambitions. Some of their major renewable projects like the Dogger Bank, Elm Branch and Briar Creek are already hitting the headlines often for all the right reasons. Equinor, a Zacks Rank #2 (Buy) company, expects to boost production capacities from renewables to 12-16 gigawatts by 2035, while becoming a net-zero greenhouse gas emitter by 2050. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hence, the letter from SEC can be seen as a step toward a more transparent and sustainable future for the U.S. oil and gas companies while they become more competitive, globally.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Eni SpA (E) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
Equinor ASA (EQNR) : Free Stock Analysis Report
 
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