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BP and Shell not serious about net zero: Sarasin

Oil and gas majors face votes on actually bringing their strategies in line with the Paris Agreements, while activist fund Sarasin & Partners says they are marching towards stranded assets and more write-downs
BP and Shell not serious about net zero: Sarasin
  • Follow This resolutions at BP and Royal Dutch Shell AGMs asking for Paris-aligned strategies 
  • Sarasin & Partners says current plans too weak and also put investors at risk through stranded assets

Asset management firm Sarasin & Partners has said that BP (BP.) and Royal Dutch Shell (RDSB) are still working on unrealistic price and demand forecasts for oil and gas, while underdelivering on climate despite splashy net zero plans. 

BP faces a shareholder vote today, with a resolution by the activist organisation Follow This calling for the adoption of Paris Agreement-aligned strategies, including scope 1, 2 and 3 emissions targets. The board has recommended that shareholders vote against this. 

The same resolution is up for a vote at Shell’s meeting next week, while the oil major is also asking shareholders to vote for its existing strategy.  

Sarasin head of stewardship Natasha Landell-Mills said that neither major was close to shifting their business models from extracting oil and gas. 

“We do not believe BP or Shell can be serious about getting to net zero until their accounts and capex plans are aligned with that goal,” she said.

BP said the Follow This resolution would "have a negative impact on BP’s ability to deliver its Paris-consistent strategy and value for shareholders". Follow This released analysis of BP's climate plans on Tuesday which pointed to its exclusion of Rosneft from its targets as a major oversight. BP owns just under 20 per cent of the Russian oil and gas producer. 

Shell said the Follow This resolution was "redundant", given its own resolution and existing climate goals. 

Landell-Mills said there were two reasons why the majors clearly needed tougher climate goals.  

"First, the vast bulk of their capex continues to replenish fossil fuel supplies," she said.

"Second, these ambitions are only possible because their balance sheets continue to be propped up by overly optimistic assumptions of future cash flows from selling oil and gas."

Both Shell and BP are riding high so far in 2021 because of the strong oil price, which has been buoyed by the Covid-19 recovery and continued Opec production cuts. We recommend selling both companies because their long-term outlooks mean they cannot be the reliable dividend-paying, decades-long holdings that they were in the past. 

Last IC View for Shell: Sell, 1,405p, 29 Apr 2021

Last IC View for BP: Sell, 299p, 27 Apr 2021