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They can’t Shell’ve their responsibilities

We believe that well-run organisations with sustainable environmental practices have a higher chance of long-term success and are more likely, over the long-term, to provide good investment returns.

But what happens when a company you invest in isn't on the same page or, even worse, sets targets to commit to be environmentally sustainable and doesn’t follow through on their promise?

At Nest it’s a key priority that the companies we invest in are trying to ‘future-proof’ their businesses. That includes taking things like workforce issues, diversity, and climate change seriously in their business planning.

Climate change is one of the largest environmental and socio-economic threats worldwide. While it may feel like the world is moving in the right direction, with the amount of media coverage focused on climate change and much talk about the green recovery post covid, scientific data shows we’re not on target to meet the Paris agreement goals.

If the world is to meet net zero targets and avoid irreversible climate breakdown, it’s crucial for all companies, in particular highly polluting energy companies to implement robust climate change strategies.

We believe we can use our role as asset owners to highlight how the whole industry should be taking action – this isn’t just about one company, it’s the oil and gas industry as a collective. There are many oil and gas companies in our portfolio who could be doing much more to transition their business and we need them to act now. We believe it’s crucial not to stay silent on these issues and exert the influence we may have as share or bond holders.

By engaging with oil and gas companies, especially in collaboration with other investors, we have a better chance to help those that are progressing too slowly in their transition to a low-carbon economy. After all, as investors we need to remember that the emissions of our investee companies are by default our emissions too.

The oil and gas industry isn’t yet in line with the global transition to a green economy. That’s why we felt strongly about ClientEarth’s derivative claim against Shell – while the company has made some progress in developing its strategy, the lack of transparency they had on the scenarios used to determine its alignment with the Paris Agreement is concerning. Their lack of short- or medium-term targets for its scope 3 emissions and the continued expansion of fossil fuels concerned us as asset owners, and ultimately being the guardians of how our members’ money is being invested. Investors need to challenge those who aren’t doing enough to transition their business and that’s exactly what we’ve tried to do by writing to Shell. We also plan to write to BP to express our disappointment after it rowed back on its pledge to cut oil and gas production by 2030.

Investing or saving money with a financial institution requires a certain level of trust between investors and the customers. In the same way, that level of trust is also needed between the investor and the companies we put our members’ money into. We want to be able to trust that our companies will do the right thing for their investors and step up to take responsibility for the impacts they’re having on the planet.

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