(Bloomberg) -- Mexico’s state oil company laid out a plan Monday to drastically cut emissions, improve safety standards and invest in new green technologies, but ESG investors say they may need to see results before infusing more capital in the debt-saddled company.
Pemex is promising to cut its greenhouse-gas emissions by 54% over the next six years, and is targeting net-zero emissions by 2050, the executives said in a call to present the company’s sustainability plan.
Among other targets, the company is aiming for a 90% cut to its sulfur-dioxide emissions from its gas-processing facilities, a 39% reduction in water usage at its refineries, and is weighing participating in carbon-credit markets to offset its carbon footprint. The company will also cut its methane emissions by 30% and will phase out gas flaring by 2030, executives said on the call.
“We are committed to reducing our environmental footprint through efficient practices and sustainable operations,” Pemex acting Chief Financial Officer Carlos Cortez said on the call. “This is a roadmap to a more prosperous future.”
Time will tell whether the ambitious proposal is enough to bring wary ESG investors back to the table.
“Some investors might need to see concrete steps to achieve the goals stated in order to fully embrace the ESG theme,” said William Snead, an analyst at Banco Bilbao Vizaya Argentaria SA in New York. “Nevertheless, this starts to open the window of opportunity for those investors with ESG restrictions,” especially European investors.
Read more: Pemex ESG Plan Promises to Reach Net Zero Emissions By 2050
Pemex will allocate between 14% and 18% of its capital expenditure in 2024 to ESG projects, as well as 10% to 14% annually from 2025 until 2030. The company has no immediate plans for sustainable bond issuances, but is working with Mexico’s finance ministry to secure funding for the initiatives, executives said.
The company will seek partnerships with private companies for work on projects such as the production and import of hydrogen and electric-car charging infrastructure, the oil firm said during the call.
Pemex is also promising to invest in public schools, clinics and hospitals, mobile medical units, and local road and urban infrastructure, and would reduce corruption by implementing a zero-tolerance policy for misconduct. It’s targeting zero fatalities from accidents under an accident-prevention program, according to the call.
The plan, which has been in development for the past year, aims to help Pemex meet the requirements of some funds that have been limiting exposure to the company’s bonds because of its ESG record, especially as a growing number of banks and investors are demanding companies mitigate practices that are harmful to the planet.
Pemex’s reputation has been marred by a host of problems over the past few years, including two massive methane leaks, a deadly offshore platform accident and a gas explosion that set the Gulf of Mexico ablaze.
The company, the world’s most indebted oil firm, is also in desperate need of financing as it tries to reinvigorate production that has dwindled to about half its output from two decades ago, as well as reduce its roughly $106 billion debt burden.
Pemex’s $4 billion in outstanding bonds due 2027 edged lower about 0.1 cents Monday to around 94 cents on the dollar, as of 3:09pm in New York.
--With assistance from Michael O'Boyle.
(Updates with more details from the call in the eighth paragraph, bond prices in last paragraph.)
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