Investors Urge Fossil Fuel Companies To Account For Climate Risk

Fund managers with more than US$2.2 trillion in combined managed assets have urged companies with exposure to fossil fuels to take note of BP’s colossal asset write-down and properly account for climate change risks in their price assumptions and asset valuations.

“The question all company directors and their shareholders now need urgently answered is where else might company positions be overstated. And this question is not only pertinent to oil and gas companies, but any company that depends on fossil fuels to deliver future profits,” wrote Natasha Landell-Mills, head of stewardship at asset manager Sarasin & Partners.  

The asset manager is one of the two dozen signatories to the investor statement urging companies to align their accounting to the Paris climate goals.

“We will be rolling out similar engagements with other fossil fuel-dependent companies,” Landell-Mills, told Reuters in an interview published on Monday. The investors plan to campaign for climate risk-aligned accounting with miners such as Rio Tinto and banks in Europe and the United States that finance fossil fuel projects, she added.

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Last week, BP warned investors that it would book pre-tax writeoffs on assets and exploration to the tune of US$16-21 billion in its second-quarter results as it revised down its long-term oil price assumption and launched a review into its exploration plans. Post-tax impairments and writeoffs will be in the range of US$13 billion to US $17.5 billion, BP said.

“This move by BP should be commended. It is hugely important, not just to BP shareholders who now have greater clarity over climate risks embedded in the business, but it has far-reaching implications for the world’s ability to deliver on its commitment to the Paris Agreement,” the investors said on Monday.

The investor group of more than 20 asset managers called on company directors and auditors “to act sooner rather than later to ensure Paris-aligned accounts that deliver a sustainable planet.”

By Charles Kennedy for Oilprice.com

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