Latest news: Repsol SA aligns itself with Paris goals
We have been pressing fossil fuel companies to commit to align with a net zero emissions pathway by 2050 for some time. It is good to see energy company Repsol showing this leadership, including clear milestones along the way.
Critically, it is aligning its financial statements with this goal, by lowering the long-term oil and gas price assumptions that underpin asset valuations on the balance sheet. Bringing these assumptions down to levels that reflect the anticipated structural reductions in demand linked to decarbonisation has resulted in a EUR4.8bn impairment.
Repsol taking this step should cause other large oil and gas companies and their auditors to ask themselves whether they may also be using excessively optimistic oil price assumptions when drawing up their balance sheets. Alongside several other investors we have recently written to audit committee chairs at leading oil and gas companies Shell, Total and BP to seek comfort that these price assumptions are prudent. This comes on the back of our letters to audit firms in January, published last week below, on the same topic.
In the end shareholders need to know their companies are looking forward, not back, when it comes to the energy transition.
Read Repsol SA's announcement
At Sarasin & Partners, we consider ourselves stewards of our clients’ assets.
- We are long-term in our approach to investment; we look for businesses that will create enduring value for our clients; and we aim to own - as opposed to trade - these companies
- We seek out and support exceptional executive teams, but hold them to account where we have concerns
- We are not preoccupied with short-term market movements, but look at underlying financial performance and its sustainability
Taking a long-term view in our investment process
As long-term investors we believe it is critical to take a holistic view of the underlying financial performance of a company and its sustainability: as we look a decade ahead, the impact of a company on the environment and society matters in our evaluation of its investment prospects. We also consider very carefully the potential impact of a wide variety of trends ranging from climate change to labour conditions and resource scarcity as an integral part of our thematic investment approach.
Active engagement with companies
Investors in companies have an important shared responsibility in holding the board and company executives to account for the performance of the business. On behalf of our clients we closely monitor investee companies and engage with management on issues of concern relating to corporate governance, capital structure and strategy. We carefully vote on matters put to shareholders. Poor governance can adversely affect the returns for investors and – equally – good stewardship can lead to better returns.
Read more about active engagement and voting
Responsible stewardship does not stop with our stock selection and engagement activities. Where we believe we can play a positive role in shaping markets and regulation in a way that contributes to boosting sustainable economic growth, we will engage in policy outreach. We undertake much of our policy work in collaboration with other investors.
Read more about our policy outreach.
UN Principles for Responsible Investment
We are signatories to the United Nations' Principles for Responsible Investment, and are pleased to report that we have been graded A for our stewardship approach.
For more detail, please see the in-depth reports: