After BP takes a hit, investors widen climate change campaign

Investors managing €1.9 trillion in assets are widening a campaign pressing oil majors to better reflect climate risks in their accounting, and will soon target other businesses with heavy fossil fuel exposure, the group said.
After BP takes a hit, investors widen climate change campaign
The investors believe their campaign is working, noting the "hugely important" news of BP joining other oil majors in lowering the value of its assets amid a global transition to cleaner energy. Picture: Reuters
The investors believe their campaign is working, noting the "hugely important" news of BP joining other oil majors in lowering the value of its assets amid a global transition to cleaner energy. Picture: Reuters

Investors managing €1.9 trillion in assets are widening a campaign pressing oil majors to better reflect climate risks in their accounting, and will soon target other businesses with heavy fossil fuel exposure, the group said.

The investors believe their campaign is working, noting the "hugely important" news of BP joining other oil majors in lowering the value of its assets amid a global transition to cleaner energy, said Natasha Landell-Mills, head of stewardship at asset manager Sarasin & Partners.

"The question all company directors and their shareholders now need urgently answered is, 'Where else might company positions be overstated?'" the group of more than 20 leading funds said in a joint statement seen by Reuters.

BP declined to comment on the campaign.

The investor group can't be certain whether its efforts played into BP's decision to reduce the value of its assets by up to €15.5 billion, announced on June 15.

But they have already begun lobbying building materials company CRH and plan to write to Anglo-Australian miner Rio Tinto, which supplies the steel industry. Along with cement, steel is a major source of greenhouse gases.

"We will be rolling out similar engagements with other fossil fuel-dependent companies," Landell-Mills, who is coordinating the campaign, told Reuters in an interview.

The investors were also planning to include European and U.S. banks financing fossil fuel projects, Landell-Mills added.

Rio Tinto and CRH declined to comment.

Early last year, the investors began lobbying the Big Four accounting firms - EY, Deloitte, PwC and KPMG - to do more to ensure climate-related risks are adequately reflected in company financial statements they audit.

The campaign is one of a number of efforts by investors to push companies on environmental policies, amid concerns many businesses are both contributing to the planet's warming while also failing to take full stock of the risks they face.

Major fund managers including BlackRock have issued increasingly strident public statements about climate change, while other investors have threatened to pull money out of Brazil unless Amazon deforestation is curbed.

The campaign led by Sarasin & Partners emphasizes the legal duty companies have to ensure their financial statements fully reflect how government moves to ratchet up climate action and the falling costs of renewable energy are likely to affect future profitability.

"It's a very serious thing from their perspective," said Landell-Mills. "This is a matter of ensuring there is no misrepresentation going on."

Accounting for potential future losses can weaken a company's balance sheet, making it harder to finance new investment in carbon-intensive activities such as oil exploration, the investors argue.

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