Log in
Show password
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
  1. Homepage
  2. Equities
  3. United Kingdom
  4. London Stock Exchange
  5. BP plc
  6. News
  7. Summary
    BP.   GB0007980591


SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Company valuations and climate strategies are poles apart

11/25/2021 | 06:36am EST
FILE PHOTO: General view of the coal power plant in Neurath near Cologne

(In Nov. 24 story, corrects methodology in paragraph 12)

By Elizabeth Howcroft and Simon Jessop

LONDON (Reuters) -Companies in the most polluting sectors that have invested in climate action often find themselves valued below peers that have been slower to do so, highlighting the difficulty of getting shareholders to back sustainability.

Investors have poured more than $30 trillion https://www.reuters.com/business/sustainable-business/sustainable-investments-account-more-than-third-global-assets-2021-07-18 into environmental, social and corporate governance (ESG) strategies, data from the Global Sustainable Investment Alliance showed.

But the demand for sustainable investment has yet to remove the pressure to put profits first and pro-climate analysts are concerned the outcome of U.N. climate talks https://www.reuters.com/article/climate-un-idCNL1N2S405F earlier this month did too little to help.

Analyses of companies globally by management consultancy Kearney in November seen exclusively by Reuters, as well as data by Credit Suisse Group AG published in April, found that companies that lowered their emissions in sectors where doing so was expensive and government regulation was limited were valued less, on average, than more emitting peers.

Investors were only found to reward the most emitting companies, such as energy, mining and heavy industry, for taking action on climate change when the cost of doing so was relatively small and government support and regulations were relatively strong.

"Investors want climate leadership, they want tangible transition plans, but at the same time they are only willing to reward companies that can do so without sacrificing returns," Betty Jiang, Credit Suisse's head of U.S. ESG research, said.

Given changing attitudes as climate change becomes more extreme, some see an opportunity to invest in companies cheaply before the market values their climate action more highly.

Others worry the risk of losing value is making corporate boards reluctant to act to avoid catastrophic climate change, especially after governments at the United Nations talks in Glasgow this month failed to send a strong message that global warming can be capped at 1.5 degrees Celsius (2.7 Fahrenheit).

"There is currently no clear line of sight between climate investing and its impacts. Green (investment) portfolios have not yet equated to a green planet," said Anthony Cowell, head of asset management at KPMG Islands Group.


Kearney calculated the valuation of 481 companies globally as a function of their cash flows.

It then assessed their climate action using the Transition Pathways Initiative benchmark (TPI), an investor initiative launched in 2017 to assess companies' response to climate change.

Where TPI scores were not available, Kearney looked at a ratio of companies' greenhouse gas emissions to their revenue to assign ESG leadership or laggard status.

Steel, chemicals, cement and power companies in Europe with top-rated carbon reduction plans have an average valuation premium of 62% to peers who are climate action laggards, the Kearney analysis found.

In the rest of the world, that premium is 25%, demonstrating that European investors value sustainability more than others globally.

Companies with higher climate scores in the aluminium, airlines, autos, diversified mining, infrastructure, maritime transport and oil and gas sectors show the opposite trend.

In Europe they trade at a 27% discount on average to environmental laggards, the analysis found. In the rest of the world, that discount is even wider - 41%.

Although many factors can skew a company's valuation, Alexis Deladerriere, head of international developed markets equity at Goldman Sachs Group Inc, said that in heavy-emitting sectors ESG scores were not reflected in a company's valuation premium.

"There is basically no correlation - no valuation premium - for having a high ESG score in general or having a high 'E' score specifically," Deladerriere said.

"If you are behaving badly, if you are polluting and you're not doing anything about it, do you get penalised for doing that? Unfortunately, not really in the short term."


The energy and mining sectors are dominated by risks that can impact valuation, but still the evidence is that the very sectors with leading roles in decarbonising are not being rewarded for moving away from fossil fuels.

BP Plc, for example, is viewed as a climate leader with a top "4STAR" TPI level. Yet it has a lower valuation, as measured by its enterprise value to cash flow ratio, than many ESG laggards with lower TPI scores, such as U.S. peer Valero Energy Corp.

In the mining sector, Rio Tinto Plc is considered a climate leader, with a TPI score of 4, but its valuation premium is less than a third of that of Freeport-McMoRan, which is a climate-laggard by the TPI measure, Kearney's data showed.

BP, Valero and Rio Tinto did not respond to requests for comment. A spokeswoman for Freeport-McMoRan said the company had made "significant progress" on climate in the last two years and is committed to "integrating our climate initiatives into our long-term business plans".

As climate change becomes an even bigger focus for markets and regulators, some corporate directors say boards will start to take stronger action on climate change as more investors begin to give them credit for it.

"Every company wants to figure out how to do (sustainability) quickly and easily because it's a shorter return on investment," said Orlando Ashford, a director on the boards of companies including drug maker Perrigo and solar energy equipment manufacturer Array Technologies.

"If you fold it into the construct of how you are running your business it will take longer, but it's not a fad," Ashford said.

(Reporting by Elizabeth Howcroft and Simon Jessop in LondonAdditional reporting by Jessica DiNapoli in New YorkEditing by Greg Roumeliotis and Barbara Lewis)

ę Reuters 2021
All news about BP PLC
12:06aUS Appeals Court Reinstates Litigation As BP Shifts Deepwater Claims To Contractors
01/19BP P.L.C. : Release of a capital market information
01/19CAPITALGAINSREPORT : Equities Benefitting From Crude's Sharp Rise (RDS.A, AGYP, TTE, BP, P..
01/18Exxon vows to have net-zero carbon emissions from operations by 2050
01/18Energy Stocks Advance Leading Up to Tuesday's Opening Bell
01/18HSBC Keeps BP At Hold, Lifts PT
01/18BP to Promote Renewable Energy, Green Hydrogen Project in Oman
01/18BP : Barclays maintains a Buy rating
01/18BP Awards Norway's PGS Carbon Capture Contract For Endurance Reservoir in UK
01/17BP P.L.C. : Release of a capital market information
More news
Analyst Recommendations on BP PLC
More recommendations
Financials (USD)
Sales 2021 160 B - -
Net income 2021 9 337 M - -
Net Debt 2021 37 871 M - -
P/E ratio 2021 11,5x
Yield 2021 4,02%
Capitalization 105 B 105 B -
EV / Sales 2021 0,89x
EV / Sales 2022 0,72x
Nbr of Employees 63 600
Free-Float 94,0%
Chart BP PLC
Duration : Period :
BP plc Technical Analysis Chart | BP. | GB0007980591 | MarketScreener
Technical analysis trends BP PLC
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 24
Last Close Price 5,36 $
Average target price 5,72 $
Spread / Average Target 6,74%
EPS Revisions
Managers and Directors
Bernard Looney Chief Executive Officer & Director
Murray Auchincloss Chief Financial Officer & Director
Helge Lund Chairman
Gordon Young Birrell Executive Vice President-Production & Operations
Paula Rosput Reynolds Senior Independent Director
Sector and Competitors
1st jan.Capi. (M$)
BP PLC19.24%105 381