Climate & TCFD
Established by the Financial Stability Board, the Task Force on Climate-related Financial Disclosures (TCFD) identifies and suggests voluntary disclosures that help investors, lenders and insurance underwriters to understand material risks. TCFD structures its recommendations in four categories that represent core elements of how organizations operate: governance, risk management, strategy and metrics and targets. Ovintiv has been incrementally adopting the TCFD recommendations since 2018. This year we have strengthened our disclosures through enhanced climate policy scenario analysis and a commitment to implement climate-related performance targets tied to our compensation program.
TCFD structures its recommendations in four categories that represent core elements of how organizations operate: governance, risk management, strategy and metrics and targets.
Ovintiv has been incrementally adopting the TCFD recommendations since 2018. This year we have strengthened our disclosures through enhanced climate policy scenario analysis and a commitment to implement climate-related performance targets tied to our compensation program.
Disclosed how we identify, assess and manage climate-related risks
Committed to publicly disclose and link climate-related performance targets to employee compensation
Communicated additional governance around climate-related risks and opportunities
Committed to establishing a Scope 1&2 GHG intensity target tied to 2022 compensation while continuing to focus on improving our methane intensity
Enhanced our climate scenario disclosure and potential impacts related to climate risks and opportunities
Our corporate governance framework allows us to effectively manage climate-related risks. The Ovintiv Board evaluates sustainability and ESG risks on a quarterly basis. It also annually reviews and adopts the company’s strategic plan, which considers risks and opportunities to our business, including all elements of ESG.
While several Board committees manage ESG risks and opportunities, our EH&S committee is responsible for environmental matters, including sustainability strategy and policy, risk identification and management, environmental compliance and climate change. This committee reviews and reports material environmental issues to the overall Board. Our Board is actively involved in company performance goal setting, including evaluating which ESG goals should be tied to our employee compensation program.
We integrate climate-related considerations into key business planning and risk management processes throughout the company.
As outlined in our Corporate Risk Management Policy, our Board is responsible for ensuring an effective risk management process is in place to identify, monitor and manage significant risks to our business and reputation.
Our enterprise risk management process and our ESG materiality assessment help identify and monitor any significant risks. Each quarter, we present risk reports to the Board with corresponding mitigation strategies.
Potential Climate-Related Impacts to Our Business
Carbon tax currently affects our Canadian operations, and we recognize that carbon taxes may impact our U.S. assets in the future. We account for an escalation of our Canadian carbon tax costs in our planning and budgeting processes. We also run scenarios to determine how a U.S. implementation would impact our costs structures.
Commodity Prices and Capital Management
To better predict the risks associated with future commodity prices, including potential GHG reductions, our scenario planning includes a range of prices representing varying levels of supply and demand of our products. This planning considers how our cost structure and capital efficiency could be impacted by factors such as the oilfield service market, carbon mitigation, new technologies, well design challenges and quality of future inventory.
Severe weather events including hurricanes, fires and floods can impact our operations. We continue to identify and pilot new technology, equipment and processes to mitigate the physical risks of a changing climate.
We believe our corporate strategy and our focus on being a low-cost producer enables us to meet the challenges posed by current and future climate-related risks. We aim to be the leading North American E&P by generating free cash flow and delivering superior returns both to our shareholders and on the capital we invest in our multi-basin portfolio. By focusing on execution excellence, disciplined capital allocation, commercial acumen & risk management, and driving ESG progress, our business can thrive across a variety of scenarios.Read More
Ovintiv’s risk-informed business strategy incorporates key ESG issues that have the potential to affect our performance.
We conduct our strategic planning and scenario analysis on an ongoing basis, considering the impacts of commodities pricing, carbon taxes, regulations and the potential long-term impacts of climate change.
This process incorporates insights from various contributors within the company, as well as external advisors and private commodity market analysis firms. We follow four, interconnected and iterative workflows for our strategic planning.Read More
Climate-Focused Scenario Analysis
We consider climate-related risks throughout our corporate strategic planning and scenario analysis process. In conducting our scenario analysis, we utilized internal modeling supported in part by the International Energy Agency’s (IEA) World Energy Outlook (WEO) to better understand the future patterns of a changing global energy system. In its 2020 Outlook, the IEA included three scenarios, each of which contain assumptions regarding future population, economic growth and hydrocarbon supply and demand.Read More
Metrics and Targets
Climate-related performance metrics have been included in our disclosures since we began sustainability reporting in 2005. Measuring our emissions profile provides visibility into which cost-efficient measures are most effective in reducing GHG emissions. We continue to improve both the reduction of our emissions intensity and the transparency of our reporting.
Our executive leadership team, with the support of our Board, continues to enhance our approach to climate and emissions disclosure. These enhancements include a process to measure near real time emissions and to set further climate-related performance targets, which will be tied to our compensation program. Target setting to drive performance is part of Ovintiv’s culture and we don’t take this exercise lightly. Our purposeful climate targets drive meaningful improvements in our emissions performance, are integrated into our business performance management system and are transparent to our staff and external stakeholders alike. The results of this ongoing initiative, including updating our climate-related targets, will be announced in early 2022.
Target setting to drive performance is part of Ovintiv’s culture and we don’t take this exercise lightly. Our purposeful climate targets drive meaningful improvements in our emissions performance, are integrated into our business performance management system and are transparent to our staff and external stakeholders alike. The results of this ongoing initiative, including updating our climate-related targets, will be announced in early 2022.