12 then this would provide an even tighter constraint on future oil and gas supply and demand. Identifying the potential winners and losers This analysis focuses on the metric: “percentage of potential capex outside 2D budget”. This can effectively give investors a sense of what proportion of the company’s investment plans may fail to deliver an acceptable return in the scenario of a world limited to 2°C global warming outcome (i.e. which project capex is within budget and which is “unneeded”). This can be interpreted in different ways according to investment strategies and policies. In terms of risk management, some investors may prefer a degree of optionality – but the higher the level of unneeded capex, the more growth strategies would have to be tempered. For investors seeking to align with a 2D scenario, it is clear that some companies are better positioned than others. Find more here. Appendix II – 2 Degrees of Separation Update Retrieved from: https://www.carbontracker.org/reports/2-degrees-of-separationupdate/ 2 Degrees of Separation: Company-level transition risk July 2018 update 17 July 2018 This report updates our 2 Degrees of Separation report, published in June 2017 2 Degrees of Separation laid out a framework for estimating relative transition risk to a universe of major oil & gas producers, looking through the lens of capital expenditure that might in future be committed to high cost projects that would be outside a 2°C pathway for their products – a 2°C “budget” in aggregate. Methodology Updated In response to user feedback, we have made some tweaks to the methodology. In general, these are consistent with the methodology used in Carbon Tracker’s report Mind the Gap, published in March 2018.