BP PLC’s (LON:BP) US$17bn write-down of its exploration assets could be just the start of a whole stack of charges by fossil fuel-dependant firms, according to a group of influential fund managers.
Natasha Landell-Mills, head of stewardship at asset manager Sarasin & Partners, which is co-ordinating the actions of the fund manager group, said it has started to lobby construction giant CRH and plans to write to mining titan Rio Tinto PLC (LON:RIO).
Speaking to Reuters, Landell-Mills said assumptions being used in valuing assets were a serious issue for the large users of fossil fuels in the face of the growing market share for cleaner energy sources.
“This is a matter of ensuring there is no misrepresentation going on,” she said in an interview.
BP and its oil titan peers Royal Dutch Shell PLC (LON:RDSB) and French group Total, were written to in November by the lobby group, whose members handle handles trillions of pounds of investment funds and include M&G Investments, Jupiter Asset Management and others.
In the letters, the group questioned whether crude price assumptions being used in asset valuations were aligned with the reduction in fossil fuel use implied by the 2015 Paris climate accord.
Landell-Mills conceded it was impossible to say precisely what effect its lobbying had had on BP, but all three companies have lowered their price expectations for the long-term price of oil recently.
BP said explicitly that its action was the result of the coronavirus pandemic and the likelihood this would accelerate the pace of transition to a lower-carbon economy and energy system.
Landel-Mills said the lobby group had highlighted that ‘BP’s accounts may be overlooking material climate considerations, and consequently potentially overstating both performance and capital’.
Unlike Shell, BP has not yet reduced its dividend but Landel-Mills said that investors in oil groups will have to get used to lower payouts.
“Investors will have to understand that they (oil majors) are not going to be able to pay dividends like they did before,” she told Reuters.