Colossal fossil BP has been blacklisted by two major investment houses in London, UK worried that its attempt to decarbonize its product lines will “cripple profits and dividends”—and apparently, because they don’t think the company is being transparent about stranded asset risk in its oilfields.
“Influential asset managers Fidelity International and Sarasin & Partners said they had serious concerns that energy firms are sitting on assets such as oilfields that may become worthless,” This Is Money reports. So Fidelity “has pulled all its investment in the oil sector from its flagship £6.7-billion Fidelity Global Dividend fund,” retaining just an 0.08% share in BP through some of its smaller funds. “Sarasin, which controls around £15 billion on behalf of investors, has sold out of all oil and gas companies over the past two years,” the publication adds.
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The two investment firms “are among a raft of asset managers that have signed a letter to BP, Shell, and other major carbon-producing firms asking them to come clean about ‘hidden risks’ on their balance sheets from the shift to cleaner energy,” This Is Money adds. “The signatories believe the falling demand for fossil fuels and the slump in the oil price will hit the valuation of energy firms’ assets—and that this is not being fully disclosed to investors.”
‘If you look at our blockbuster funds, our holdings are not exposed to the listed oil companies because, unfortunately, our assessment is that most of them are not able to promise a sustainable dividend for the long run,” said Romain Boscher, Fidelity’s global chief investment officer. “Their shift to renewable energy is definitely not risk-free.”
Sarasin Head of Stewardship Natasha Landell-Mills said many fossils are failing to reflect the impacts of the transition in their financial statements. “She warned that without improved transparency, energy firms could be overstating the value of their assets—or putting money into assets that may become worthless, creating so-called ‘stranded assets’,” This Is Money states.
“Financial statements must reflect the true cost of the energy transition so capital is deployed in the right way,” Landell-Mills said. “This has profound implications for the way investors allocate money on behalf of their clients. If we have visibility, and we know companies are deploying capital correctly, then investors have more confidence in investing in those firms.”
With backing from the Institutional Investors Group on Climate Change, Sarasin & Partners is coordinating a letter to major publicly-traded companies in Europe, demanding greater transparency on the hidden climate risks on their balance sheets. It’s a move that will “heap further pressure on oil firms, which are trying to reassure investors by maintaining dividends while investing heavily in their transition to lower-carbon energy,” This Is Money says.