By Eric Pedersen, head of responsible investments at Nordea Asset Management

If the world has any chance of slowing the excessive rate of global warming, urgent action must be undertaken to cut methane emissions. A powerful greenhouse gas, methane is estimated to be responsible for more than 25% of today’s global warming1.

In fact, over the first two decades after entering the atmosphere, methane has more than 80 times the warming power of carbon dioxide. Although CO2 has a longer-lasting effect, methane sets the pace for warming in the near term. Unsurprisingly, the oil and gas sector is the largest industrial producer, contributing to 25% of global anthropogenic methane emissions2

Reducing methane emissions is therefore critical for companies to achieve a 1.5-degree pathway. More broadly, reducing methane within the oil and gas space is one of the most cost-effective forms of climate risk mitigation over the next decade, according to the International Energy Agency.

For the above reasons, methane is one of the most critical engagement issues for our Responsible Investments team at Nordea.

Collaborative endeavours can accelerate action

In July 2022, we initiated the first phase of a collaboration with selected partners and clients to engage with 15 companies in the oil and gas industry on the disclosure and mitigation of methane emissions. Our primary engagement efforts focus on encouraging investee companies with methane emissions to join the Oil and Gas Methane Partnership (OGMP) 2.0 framework. Part of the United Nations Environment Programme International Methane Emissions Observatory, OGMP 2.0 is the gold standard in methane measurement, reporting and target setting.

In addition to joining the OGMP 2.0, we asked the investee companies to identify the actions being taken to reduce methane emissions and to share the cost/benefit analysis of these actions in engagement meetings. During the second half of 2022, we expanded phase one of the engagement to additional companies, and our engagement efforts across the group have continued.

Although we still see gaps in the maturity of the companies in tackling methane emissions, we are noting progress through engagement. Many of the companies are taking action to reduce methane emissions and are in dialogue with the OGMP 2.0 on membership.

Progress in the engagement is tracked according to common engagement milestones across the companies

Pleasingly, Brazilian state-owned oil and gas giant Petrobras and US operators EOG Resources and Diamondback Energy joined the OGMP 2.0 in the first half of 2023.

Petrobras progress shows power of engagement

During 2022, we engaged with Petrobras on its methane emissions as part of our methane collaborative dialogue and on other climate topics – such as its net-zero reporting and targets – in our capacity as lead for the Climate Action 100+ investor cohort. We chose to focus our engagement efforts on methane emissions based on Petrobras’ methane emission volumes, its suitability as a candidate for the OGMP 2.0, and the urgency of reducing its methane emissions to achieve alignment with the Paris Agreement.

International Energy Agency data has clearly identified high levels of abatable emissions at offshore oil and gas assets, where Petrobras is a dominant player. Petrobras is in a production growth phase, so it should be prioritising engineering solutions to minimise methane emissions within new fields and production units. We saw a wide range of abatement opportunities at Petrobras, and we expect additional asset-level data on methane emissions – such as those reported to the OGMP 2.0.

We sent a letter to the CEO of Petrobras encouraging the company to join the OGMP 2.0 and had meetings with the company regarding methane in the second half of 2022. We expressed our expectation for the company to follow the example set by several peers and business partners by improving the measurement and management of methane emissions. The company acknowledged the importance of this issue and conducted an extensive technical review on the feasibility of reporting according to OGMP 2.0 standards, before eventually joining in January this year.

As always, we believe engagement is a powerful tool for investors, as improved management of sustainability risks and opportunities is vital to creating returns with responsibility. We see engagement as a competitive advantage, increasing the likelihood of corporates being successful in the long run – which benefits companies, investors, and society at large.


1United Kingdom methane memorandum, Dept for Business, Energy & Industrial Strategy, Dept for Energy Security & Net Zero, 15.11.2022

NAM’s ongoing engagement with Xcel Energy

In an effort to enact real-world change, we have undertaken numerous engagement efforts with today’s heavy emitters.

With approximately 45 million tons of direct carbon emissions, US regulated utility group Xcel Energy, a holding in Nordea’s Global Climate Engagement Strategy, is a major US electricity supplier and among the world’s 30 largest greenhouse gas (GHG) emitters. As it currently owns and operates coal-fired power plants, Xcel is often automatically overlooked – or outright excluded – by ESG-conscious investors, despite becoming the first major US utility to set net-zero emissions targets already in 2018.

While still part of the climate problem, we have already witnessed rapid decarbonisation from Xcel. Its coal-fired electricity production has dropped from almost 56% of its total generation in 2005 to 25% in 2021 – while the share from renewables increased from about 9% to 36% over the same period. We have been engaging with Xcel on climate topics individually, and through the Climate Action 100+ initiative, since 2019. Over the course of this engagement, Xcel have significantly strengthened its climate-related reporting and linked executive compensation to emission reduction targets. Moreover, it has recently sought regulatory approvals for coal plant retirements, which will mean it completes a full retirement of all remaining coal plants by 2030, or sooner.

In light of Xcel’s ambition to achieve net-zero methane emissions by 2030, we recently focused our engagement on this powerful GHG – which contributes to about 25% of global warming – urging Xcel’s CEO and management team to join the Oil and Gas Methane Partnership 2.0 (OGMP 2.0) without delay. To date, more than 100 companies have committed to measuring and reporting methane emissions through this transparent, science-based, and globally standardised protocol.