DBRS Morningstar Releases Commentary on How Canadian Oil and Gas Companies Address Climate Change Risks and the Potential for Clean Transition Bonds

DBRS Limited (DBRS Morningstar) released a commentary titled “A Greener Shade of Oil: How Canadian Oil & Gas Issuers Address Climate Change Risks and the Potential for Clean Transition Bonds.” This commentary looks at the initiatives and strategies undertaken by oil and gas (O&G) companies to reduce their carbon footprint as well as financial markets’ response and development. The piece also outlines how we assess climate change risks in evaluating credit ratings for our portfolio of O&G corporate issuers with a particular focus on the Canadian O&G industry and capital markets.

Summary of key takeaways:

-- Canadian O&G issuers have recognized the need to become "greener" for their long-term survival and have invested significantly in processes and technologies to lower greenhouse gas (GHG) emissions.
-- O&G issuers in Canada are subject to some of the most rigorous environmental regulations and reporting standards in the world and could be part of the solution by displacing fossil fuels produced in nations that do not have the same level of regulations and standards.
-- The industry's challenge going forward will be to lower the overall output of GHG emissions while growing the production of fossil fuels and petroleum products.
-- For Canadian O&G issuers to meet ambitious longer-term emission targets, commercially viable new carbon reduction technologies will need to be developed and adopted.
-- To help finance greener O&G technologies and processes, financial and industry groups are working on standard taxonomies to create a market for Clean Transition Bonds, which could expand opportunities for investors seeking Environmental, Social, and Governance (ESG) investments.
-- DBRS Morningstar's approach to rating O&G issuers includes ESG considerations (see “DBRS Morningstar’s Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings,” published on March 10, 2020).

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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