Commenting ahead of BP’s AGM, Simonetta Spavieri, senior engagement analyst at Royal London Asset Management (RLAM) said:
“RLAM has decided to abstain on BP’s first climate transition plan as we cannot fully support it in its current state. We continue our engagement with the company to close identified gaps in their report. Our vote reflects RLAM’s upgraded Net Zero engagement strategy, triggered by our commitment to the Net Zero Asset Managers Initiative (NZAMI) 1.
“Within the report, there is a reliance on divestment to achieve emission reductions, which may have unintended consequences and limited impact in the real economy. In the context of current supply-demand balance, we strongly believe in a ‘close not sell’ approach, accelerating the winding down and closure of fossil assets instead of divesting and leaving others, who may not be as well equipped, the responsibility to manage the transition to a low carbon economy.
“Furthermore, although we welcome the company extending its scope2 target3 to be more comprehensive, demonstrating the level of ambition required, it still needs to restate its scope 3 emissions baseline, to include physical traded oil & gas sales. In our view, BP’s current scope 3 emissions disclosures cannot be considered a fair assessment of the company’s emissions.
“Following engagement with the company on their climate plan and discussion of our 12 milestones on climate4, we are encouraged by the company's commitment and expect to see some of our concerns addressed in future reports. For example, the company has committed to be Net Zero by 2050 in operations, oil and gas production and sales and also states it will only use offsets for residual emissions. We welcome the move by BP to invite investors ahead of the AGM to address any concerns on the strategies, allowing room for constructive dialogue.”
- The Net Zero Asset Managers initiative is an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees Celsius; and to supporting investing aligned with net zero emissions by 2050 or sooner.
- Greenhouse gas emissions are categorised into three groups or 'Scopes' by the most widely-used international accounting tool, the Greenhouse Gas (GHG) Protocol. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain.
- BP has extended its climate goals by setting a 2050 absolute net zero target for its indirect, or Scope 3, greenhouse gas emissions. Previously, it had aimed to reduce its Scope 3 emissions intensity by 50% by 2050. Source: ESG Clarity February 2022.
- RLAM’s Net Zero engagement framework has 12 milestones, divided into three categories on which we assess and evaluate companies’ climate transition plans. These asks are: to set targets aligned with the 1.5 degrees ambition; bring along the wider economy to Net Zero; and demonstrate climate action now. RLAM’s 2022 Stewardship Report contains greater information about these three asks and how they branch into specific asks for companies.
About Royal London Asset Management (RLAM):
Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.
RLAM manages £164 billion of assets and employs 129 investment professionals as at 31 December 2021. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.
For professional clients only, not suitable for retail investors.
Issued by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.
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