Fixed Interest – Individual Engagement with BMW


We remain invested in the automotive sector across both fixed income and equities. Our scenario analysis and proprietary research has identified this sector as being at risk of negative credit migration and as having known environmental impacts.

Climate transition risks and failure to exploit transition opportunities drive credit migration risk because of changing regulations, new technologies and shifting consumer preferences.  These factors also put this sector at increased reputational risk.

To remain invested in companies in the sector, we must understand how companies are addressing these systemic issues. Our aim is to assess the future resilience of their business model to these transition risks and assess whether they are playing their part in the netzero transition.  Within the automotive sector, we invest in the stronger investment-grade names. We look for issuers that are embracing electrification and are transitioning the product fleet from combustion engines to electric, integrating climate risks and opportunities into their strategy.  Nevertheless, we acknowledge that cars are significant contributors to emissions.  Therefore, we are engaging proactively with businesses in the sector to understand their approach and encourage transition.  Like all issuers in the automotive sector, BMW was flagged for environmental issues and, as a result, selected for engagement as a systemic target in accordance with our prioritisation and engagement framework. Notwithstanding the environmental issues, our credit research team considers BMW a leader in its sector. It received a neutral social
and governance assessment.


We like to see sustainability issues integrated into business-as-usual activities at our investee companies. So, this year we sought to understand BMW’s approach to embedding climate change into its overall strategy. As a secondary objective, through our research (gathered from company reports, the transition pathway initiative (TPI) and CA100+ benchmark datasets), we identified four areas that merited further investigation with the
company. These were short-, medium-, and long-term net-zero targets, decarbonisation strategy, climate lobbying, and just transition.  We had a valuable introductory conversation with the company to understand and assess
its net-zero strategy and agree expectations around feasible milestones and timelines.  There was a technical area of target setting, which we had some questions and concerns with.  BMW was asked to expand on how they are tackling these themes, clearly outline how much progress we can expect on each, and relative timeframes.

Outcome and Next Steps

The meeting has set the foundations for a solid bilateral relationship. Not only were the company’s representatives willing to meet our needs in terms of further disclosure and clarity, but they also proactively requested feedback on specific performance indicators we would like them to report on in the future, commenting that their position is made harder through a lack of reporting standardisation in the industry.  We were also pleased by the company’s approach in seeking to embed sustainability considerations across the business rather than dealing with it as a standalone issue.  This provides comfort around the extent to which the topic is, and will in the future, be
embedded in their business strategy.

Finally, clear objectives and expectations were set around the themes we‘d raised. This will facilitate monitoring and holding the company to account. We’re pleased to report that the company has made some progress already on these objectives, including further alignment to 1.5 degrees in the technical area where we had concerns and improved climate lobbying disclosure.

During 2023, we plan to continue monitoring BMW’s progress and feed this assessment into the prioritisation and engagement framework for the year. Moreover, we plan to move the conversation forward to increase the level of detail of the discussions and widen the set of topics covered.

This example illustrates that engagement can be a meaningful bilateral process, enriching our understanding of a company and allowing us to share what we see in other companies in the sector. It validates our approach to engage with companies in sectors simultaneously so we can where appropriate share back to companies in the sector best.