How we engaged with a British integrated energy company.
Background
Centrica, a British integrated energy company, delivers energy services to households via its retail brands, including British Gas – the UK’s second largest gas and electricity utility in the UK – and Bord Gáis Energy in Ireland. The company also produces and stores energy through its stake in the UK’s nuclear fleet, a portfolio of renewable, storage and flexible assets, Spirit Energy (gas production business), and the Rough gas storage facility. Centrica is also engaged in the trading of energy, including through its LNG shipping business.
Technological change, innovation, and the energy transition challenge the company’s traditional business model of fossil fuel-driven electricity generation, natural gas retail and storage and gas boiler installation and maintenance. At the same time, the transition presents a considerable commercial opportunity for Centrica to lead in low-carbon solutions, reshape its service offerings, and accelerate progress towards a more sustainable energy system.
In a series of technical engagements with the company’s head of environment and sustainability strategy teams [we exchanged views] on strategic opportunities for the energy transition.
Our engagement
In 2021, we began engaging Centrica as co-lead of the CA100+ collaborative investor engagement initiative on the company’s energy transition strategy. At the time, the UK had announced its target for a net-zero power grid by 2035, but uncertainty remained over how heat would be decarbonised to achieve the UK’s wider net-zero-by-2050 commitment. This raised questions around how the company would deliver its targets, including implications for capital expenditure and long-term profitable growth.
In 2021, the company had established a target to reduce its customer emissions intensity (electricity and gas sales) by 28% by 2030 versus 2019.1
Over the next couple of years, we met several times with the CEO, the chair, the head of environment, the head of strategy, the company secretary, and technical experts from the company. We asked the company to consider whether this target was sufficiently ambitious to remain competitive, including evaluating the compatibility of this plan with the Paris Agreement goal of 1.5C and the commercial opportunities this presents.
In 2024, the company invited us and another investor to participate in a series of technical engagements with its head of environment and sustainability strategy teams to allow an exchange of views on strategic opportunities for the energy transition.
These covered how the company would address its gas-fired electricity generation, commercial levers for low-carbon heat provision, its LNG growth strategy and its public policy advocacy strategy.
We also engaged with the chair, CEO and head of strategy.
Changes at the company
In 2025, the company published its updated climate transition plan. It brought forward its Scope 1 and 2 emissions net-zero commitment to 2040 (from 2045), while retaining its 2050 net-zero commitment for customer Scope 3 emissions, currently primarily attributable to the use of natural gas for domestic and commercial heating.
On the customer emissions intensity associated with electricity and heat, the company retained its target to reduce this figure by 28% by 2030 versus 2019, while also referencing a new ‘stretch’ goal to reduce the customer emissions intensity by 40% by 2030, recognising this would be required to deliver a 1.5C-aligned pathway.2
While the company states that its core target is aligned to a ‘well-below-2C’ scenario, the 1.5C-aligned stretch goal drives the company’s advocacy and investment in the required areas to increase the commercial feasibility of such a pathway.
Supplementing these targets, the company has identified and quantified individual decarbonisation levers across electricity, heat electrification, and gas distribution, guiding investors on the strategic positioning of the business.
The plan brings clarity to the roles for heat electrification versus hydrogen solutions, and each lever is complemented by an articulation of the company’s policy dependencies, as well as proactive advocacy actions identified to promote an enabling external environment.
For example, the company targets a 10% market share of the heat pump market by 2030, equivalent to its current boiler installation market share.3
Over 50% of its future capex over the period from 2023 to 2028 is classified as ‘green’ by the company.4
