Methane – the primary component of natural gas and a climate pollutant 84 times more powerful than carbon dioxide over a 20-year period- is responsible for a quarter of the global warming happening today, says the Environmental Defense Fund (EDF). The largest industrial source of methane emissions globally is the oil and gas sector, costing an estimated $30 billion in lost product each year.

Investors in this sector face increasing financial, reputational and regulatory risks from such emissions, and a guide has just been launched to help them manage methane risk.

An Investor’s Guide to Methane, a collaboration between EDF and the Principles for Responsible Investment (PRI), is a response to growing demand from investors globally for practical guidance on how to manage such risk.

“Investors want to understand how companies should measure their emissions, what they should be reporting, and what kinds of best management practices they should adopt to keep more product in the pipeline. This guide provides details on what leading methane management looks like,” said its lead author, Sean Wright of EDF.

“Just as investors use quarterly earnings to understand who the most profitable companies are, they can use the performance benchmarking framework included in the guide to help differentiate relative methane performance. Because methane management is such a powerful proxy for operational excellence, understanding relative performance on the issue can be a helpful insight for investment decision-making. As such, early-engagers will have a first-mover advantage,” he added.

As of early 2016, none of the 65 leading upstream and midstream oil and gas companies operating in the United States disclosed methane reduction targets, according to another EDF report. It found that less than a third disclosed baseline emissions information via accessible, investor-facing data sources.

With COP22, the Climate Change conference in Marrakech only weeks away, this topic assumes even greater relevance for investors. In April this year global investors backed by $3.6 trillion in assets highlighted methane emissions as a growing investment risk. 

They supported the United States and Canada adopting methane emission reduction targets of up to 45 percent by 2025. Investor support from Europe, the largest natural gas importer, totaled $2.1 trillion dollars. 

For their part, some global companies in the oil and gas sectors have taken first steps to act on methane emissions. In September 2014, the Oil and Gas Methane Partnership (OGMP) was launched at the U.N. Secretary General’s Climate Summit, and produced its first report this year. In order to join the initiative, companies must commit to surveying nine core sources of methane emissions, evaluate tested technology options for mitigation and report on their progress. 

As of October 2016, the initiative has eight partner companies, which produce roughly just 10 percent of global natural gas. 

These companies include among them BP (LON:BP), Eni (BIT:ENI), Repsol in Spain (BME:REP) , Southwestern Energy Company (NYSE:SWN), Statoil (STO:STLO) and Total SA (EPA:FP). 

When announcing those first year initiative results, Eldar Saetre, CEO of Statoil said addressing methane emissions was "one of the most effective short-term climate measures available, and key to ensuring that gas is seen as a credible part of the low-carbon future." 

Investment firms welcomed the launch of this guide. “The evidence is clear that methane emissions are an important financial and environmental risk in the oil and gas industry,” said Jonas Kron, Senior Vice President at Trillium Asset Management, the sustainable investment firm. 

“This guide provides investors with an extremely valuable tool to understand these risks. But even more importantly, it gives them the ability to engage with senior management in constructive dialogue to identify concrete actions to improve methane performance. Oil and gas executives should expect to hear from their shareholders in short order,” he added.

Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com.