As a signatory to the existing FRC UK Stewardship Code we publish quarterly on our website the following engagement information:
Number of Borrower meetings / updates
Number of corporate actions
Summary of Corporate engagements
We reached out to Barclays for a call to understand in more detail their decision to exit the Net Zero Banking Alliance (NZBA). Importantly we want to understand whether this marks a departure from their NZ targets set under the alliance.
Management reiterated that their targets set under the alliance remain unchanged. They believe that, following the withdrawal of several Wall Street and European banks, the alliance has lost much of its relevance and influence. While they were not directly subjected to political pressure, it did play a role in their decision, as they sought to mitigate the risk of becoming a potential target by remaining in the group.
They emphasised that their US business is meaningful, and that their decision aligns with what we have heard from peers. The alliance was originally established primarily for knowledge sharing; however, since banks have since built their own internal teams, that purpose has largely run its course. They never viewed the alliance as a permanent structure.
Management stressed that membership in the alliance had not constrained their activities, and therefore they do not expect any change in their lending approach.
Overall, we see that their message is consistent with peers, and they should not be considered an outlier. We remain comfortable with their commitment to stated targets and will continue to monitor for any changes.
We engaged with NextEra, an electric power and energy infrastructure company, to assess their alignment with the Paris-Aligned Benchmarks (PABs), to understand any recent changes in their investment approach toward renewables and fossil fuels in light of the shift in the current administration, and discuss their remaining coal-fired power generation exposure.
NextEra reaffirmed its commitment to net-zero carbon emissions across its operations by 2045, despite the policy shift under the new US administration. The company outlined its interim reduction target of 70% by 2025, 82% by 2030, 87% by 2035, and 94% by 2040 (2005 baseline) achieved through solar, wind, storage, and green hydrogen.
Despite the new administration’s pro-fossil stance and skepticism toward renewables, management stressed there has been no change in strategy, highlighting that renewables remain the lowest-cost and most reliable long-term option. However, they have exited offshore wind due to halted federal permitting.
Management emphasised a disciplined, long-term approach not tied to political cycles. New fossil projects are viewed as uneconomic compared with renewables, with gas further constrained by supply chain bottlenecks, such as a four-year wait for turbines. Coal investment remains firmly off the table, with both economics and viability ruled out. The company is progressing with the decommissioning of its small remaining coal fleet, underscoring its strategic shift toward a cleaner generation mix.
Regarding PAB alignment, management stated that compliance information is explicitly disclosed. We also asked whether the company intends to commit to Science-Based Targets initiative (SBTi) validation, and we plan to follow up on this in future engagements. Given the current US political backdrop, management suggested that such commitments may face external headwinds.
This was considered a constructive engagement. We were encouraged by the company’s sustained commitment to renewables, its clear stance against coal and new fossil investments, and its transparency regarding the impact of federal policy, particularly the halt to offshore wind. We will continue to monitor progress toward its net-zero targets.
Urbaser, a Spanish waste management specialist, launched a €1bn payment-in-kind (PIK) toggle note to fund a dividend to its owner, Platinum Equity, just six weeks after issuing a Senior Secured debt package to part-fund an additional €1bn of dividends. The deal proved controversial since it significantly weakened the balance sheet shortly after the previous deal, despite no warning for investors who bought into the Senior Secured notes.
We participated in a small groupholder meeting with Urbaser’s management team and a representative of Platinum Equity, the private equity owner of Urbaser, to voice our concerns and highlight that we viewed the new dividend issuance as overly aggressive. Management claimed they were confident the business could withstand the additional debt burden, given its strong recent financial performance and robust industry outlook.
Although we don't expect Urbaser to encounter operational trouble in the near term, Platinum Equity's overly aggressive approach made us uncomfortable holding the name. We sold the bonds opportunistically and will exercise caution in any future Platinum Equity deals. We also published a blog discussing how transactions such as Urbaser’s erode credit quality and increase systemic leverage, as evidenced by both S&P and Moody’s immediately downgrading Urbaser’s senior notes following the PIK issuance.
We engaged with the Enra team to enhance their social strategy, as part of our targets regarding the United Nation's sustainable development goals.
Enra acknowledged the importance of developing their ESG policy following our engagements on TwentyFour's sustainable investment definition.
We held an educational discussion with Enra, surrounding market best practice in aligning to SDG's and scope three emission reporting.
In response, Enra have formulated a number of targets that align to UN SDG 10 (Reduced inequalities), including a KPI measuring development in mortgages to first time buyers. There is a clear timeline for implementation in the near-term, and this aligns to our definition of a sustainable issuer at TwentyFour.
This was considered a strong engagement. We were impressed with the agility of Enra's response to our feedback and are now comfortable with the classification of a sustainable lender. We will continue to engage with the team as the policy landscape evolves on the topic.
Earlier in the quarter, the European Banking Authority released answers to a previous Q&A regarding the methods of compliance with European risk retention requirements under the current regulatory framework. This deemed that CSAs (conditional sale agreements) are considered out of scope with compliance.
Where we had flagged that a manager had used the CSA method for compliance, we reached out to the team to understand their timeline and approach for compliance. The common remedy for this, was to 're-season' assets in the portfolio using an FPA (forward purchase agreement) or, by qualifying as an originator.
The market response to this announcement has been encouragingly swift. Participants have been coordinated, and there has been little disruption in new issuance as a result.
We expect mangers to action an amendment to risk retention language in documentation. Where we have relevant exposure, we have created a record of manager response and will continue to engage as the remedial timeline progresses.
