Shot across the bows of banks and energy companies

Oil majors and banks must make greater strides in making good on climate promises, or risk losing support in key votes at their annual meetings, warns Border to Coast Pensions Partnership.

The pool is responsible for £38.3 billion of investments on behalf of 11 Local Government Pension Schemes (LGPS) funds. It has raised expectations of the oil and gas and banking sectors to ensure they align with a low carbon economy and support global net zero ambitions.

Jane Firth, head of responsible investment, Border to Coast, said: “Oil and gas companies are amongst the highest carbon emitters in our portfolios and must do more to address the systemic risk climate change poses.

“We will continue to leverage the strength of our collective voice to influence companies, via both voting and engagement, to drive greater progress.”

The pool will vote against the chair of the board at oil companies that fail to meet one of the first four indicators of the Climate Action 100+ benchmark, which includes short-, medium- and long-term emission reduction targets.

Oil companies that achieve a score of three or lower by the Transition Pathway Initiative (TPI) will also be opposed by the pool. A score of this level means that as an organisation, they have yet to develop a strategic understanding of climate risks and opportunities, or integrated this into business strategy and capital expenditure decisions. The pool will continue to engage oil and gas companies on decarbonisation, net zero goals and concerns around development of new fossil fuel reserves.

Colin Baines, stewardship manager, Border to Coast, said: “We must now see transition plans that have a realistic prospect of delivering that objective.

“That means the alignment of capital expenditure with net zero, with urgent attention on the development of new fossil fuel reserves, which, as the International Energy Agency (IEA) 1.5C pathway makes clear, must be addressed as a priority.”

Banks that have failed to meet the TPI’s first four indicators will see the pool vote against the chair of the sustainability committee. This includes banks that have not sufficiently integrated targets, decarbonisation strategy, or climate policy engagement into business strategy.