Oil and gas companies will only survive the climate crisis if they spend more now

London(CNN Business) The oil and gas industry needs to work harder and faster to tackle the climate crisis if it wants to remain profitable, a leading energy group says.

Oil and gas companies should do much more to respond to the threat of climate change, and cannot rely on fossil fuels to keep driving returns, the International Energy Agency said in a report Monday.

Since 2015, the industry has directed less than 1% of its annual capital expenditure towards low-carbon businesses, according to the report.

Some companies have spent up to 5% but "there are few signs of the large-scale change in capital allocation needed to put the world on a more sustainable path," it said.

"No energy company will be unaffected by clean energy transitions," the International Energy Agency's executive director, Fatih Birol said in a statement. "Every part of the industry needs to consider how to respond. Doing nothing is simply not an option," he said.

Oil companies are facing mounting pressure from investors, governments and activists to invest in renewable energy to tackle the climate crisis.

But despite low oil and natural gas prices, environmental commitments by the likes of Shell (RDSA), BP (BP) and ExxonMobil (XOM) have been relatively modest so far.

BP invested $500 million in low carbon activities in 2018, about 3% of annual capital expenditure, according to its annual report.

Shell has a three-year target beginning in 2019 to reduce its carbon footprint by 2-3%, while ExxonMobil has invested $9 billion over almost two decades in lower-emission energy solutions.

Reducing emissions

"The first immediate task for all parts of the industry is reducing the carbon footprint of their own operations," said Birol.

"As of today, around 15% of global energy-related greenhouse gas emissions come from the process of getting oil and gas out of the ground and to consumers. A large part of these emissions can be brought down relatively quickly and easily," he said.

Oil and gas companies can also play a crucial role in accelerating the deployment of clean energy technologies such as offshore wind, hydrogen, and carbon capture and storage. "Without the industry's input, these technologies may simply not achieve the scale needed for them to move the dial on emissions," Birol added.

The cost of developing these technologies represent an investment in companies' ability to prosper in the long term, the report said.

State oil firms

The report highlighted the important role to be played by state-owned oil companies, such as Saudi Aramco, which account for well over half of global production and an even larger share of reserves. In many cases, their host countries rely heavily on oil income.

The seven largest oil and gas companies account for just 12% of oil and gas reserves, 15% of production and 10% of emissions from industry operations, according to the report.

"The scale of the climate challenge requires a broad coalition encompassing governments, investors, companies and everyone else who is genuinely committed to reducing emissions," said Birol.

The International Energy Agency's report will be presented at the World Economic Forum in Davos, Switzerland on Tuesday.