Bonham Carter: engagement is a ‘journey’ to net zero

Engagement with invested companies is a “journey” consisting of “measurable milestones” that will ultimately deliver the transition to net zero, according to Edward Bonham Carter.

Jupiter Asset Management’s director of stewardship and corporate responsibility, speaking at Room151’s LGPS Investment Forum, said that to achieve the UK fund manager’s net-zero commitments it had to switch from “pure fund management in the traditional sense” to “proper engagement with companies on a whole range of issues”.

Jupiter has committed to achieving net-zero emissions across its investments and operations by 2050. In 2022 so far it has engaged with 1,100 companies.

Bonham Carter said: “We're trying to engage with companies over time and these conversations are a journey, rather than just a one-off annual general meeting voting record.”

He outlined that Jupiter engages with companies by agreeing to “measurable milestones” regarding their carbon emissions over a period of time. “So, you can make apples-to-apples comparisons on the company's progress” towards its net-zero ambition.

Bonham Carter has worked in the investment industry for 40 years and recently announced that he will leave Jupiter in December after 28 years at the firm.

Renewable energy

BP is one high-profile company with which Jupiter engages. Bonham Carter highlighted that engagement with the UK oil and gas giant includes assessing progress on the percentage of its capital dedicated to renewable energy.

He told Net Zero Investor: “So, you want to see over time, the legacy business to go down, so they're not replacing their reserves over a long period of time. But that money they generate from the bad stuff, if you like, goes into the good stuff.

“In the case of BP, we feel they're further ahead compared to other carbon companies in reallocating capital from carbon emitting, which they will do for many years, into renewables.”

He stated that Jupiter has chosen to engage with BP in this way as “we feel they have the capability” to invest in renewables. Bonham-Carter detailed that the net-zero transition requires “big” project engineering and the building of offshore wind and solar, which requires large amounts of capital that the likes of BP have.

“My personal view is that divesting in general, does not help with the problem, because the entity still exists, and you're just transferring ownership, possibly to owners who might have less scruples about sustainability,” Bonham Carter added.

He also outlined that Jupiter’s engagement collaboration with companies has evolved over time to include different management levels.

“I'm not saying we're unique, but in my day as a fund manager, you would meet the CEO and the finance director to talk about the strategy. There was also a tendency in the whole industry to focus on very short-term results.

“Now, the whole point is that you're engaging with companies, both at CEO level but often with the chairman and sometimes a head of the relevant committee separately, such as the head of audit,” Bonham Carter continued.

Industry ‘hogwash’

However, Bonham-Carter suggested that engagement and attempting to achieve Jupiter’s net-zero commitments can be “demanding”. This was due to the challenges that “industry hogwash” and “complicated” regulations present when delivering the transition.

He said: “The really challenging thing in my view is we've got quite a big fixed-income book and it's how you do this [net-zero transition] in your fixed-income portfolio, particularly with sovereign credit around the world.”

In addition, he said that engagement was also “challenging” for the companies involved. This is because companies will have to engage with all their top shareholders, “each of those shareholders are going to be asking them slightly different things with different emphasis”.