We have been pressing fossil fuel companies to commit to align with a net zero emissions pathway by 2050 for some time. It is good to see energy company Repsol showing this leadership, including clear milestones along the way.
Critically, it is aligning its financial statements with this goal, by lowering the long-term oil and gas price assumptions that underpin asset valuations on the balance sheet. Bringing these assumptions down to levels that reflect the anticipated structural reductions in demand linked to decarbonisation has resulted in a EUR4.8bn impairment.
Repsol taking this step should cause other large oil and gas companies and their auditors to ask themselves whether they may also be using excessively optimistic oil price assumptions when drawing up their balance sheets. Alongside several other investors we have recently written to audit committee chairs at leading oil and gas companies Shell, Total and BP to seek comfort that these price assumptions are prudent. This comes on the back of our letters to audit firms in January, published last week below, on the same topic.
In the end shareholders need to know their companies are looking forward, not back, when it comes to the energy transition.