BP shareholders demand climate action, but reject calls for hard targets

BP is now legally bound to set out a strategy that is compliant with the Paris Agreement on climate change. [FlipboxProjects / Flickr]

An overwhelming vote in favour of climate action at BP’s annual meeting yesterday (21 May) shows how activist investors have started to move the oil and gas industry. But it also showed the limits to their appetite for change.

As investors gathered for BP’s annual meeting in Scotland yesterday, it was already clear that they would most likely back a call to force the company to become compliant with the Paris climate accord.

BP’s board already said in February that they support a binding resolution calling for the company to prove that its business plans are in line with the Paris goal to keep global warming well below 2°C. The resolution was introduced by a group of 300 investors with over €30 trillion in assets, called Climate Action 100+.

Over 99% of investors voted to back the resolution yesterday (21 May), meaning BP is now legally bound to set out a Paris-compliant strategy. BP believes it already meets this objective, so it will now have to demonstrate that this is the case.

Stephanie Pfeifer, the CEO of the Institutional Investors Group on Climate Change (IIGCC) who represents the Climate Action investors, said after the vote that the scale of support, “sends a clear message that investors expect companies to act on climate change.”

Renewable energy will be world's main power source by 2040, says BP

Renewable energies will be the world’s main source of power within two decades and are establishing a foothold in the global energy system faster than any fuel in history, according to BP.

The UK-based oil company said wind, solar and other renewables …

Second vote

But a second vote, which also took place yesterday, showed the limits of that investor expectation. A more ambitious resolution introduced by the Dutch investor group FollowThis, calling on the company to set hard targets for emissions reduction for both itself and its consumers, was not backed by BP’s board.

The motion was overwhelmingly rejected by shareholders at yesterday’s meeting, with only 8.35% support. Such a target would include fuel used by consumers for electricity, heat and transportation.

FollowThis has been successful in convincing Dutch oil and gas giant Shell to include its customers emissions in its targets. In December, Shell said it would link its executive pay to whether it has been successful in reducing its overall emissions. However Shell’s shareholders have not shown the same enthusiasm, having last year rejected a similar resolution to the one rejected yesterday by BP investors.

BP has insisted that it cannot control the energy use of its consumers, with its chief executive Bob Dudley saying they “do not feel comfortable in setting goals for others”.

Climate campaigners such as Greenpeace have balked at this excuse, and have said both BP’s and Shell’s investment in exploration and drilling for new fossil fuel sources are not in line with the Paris goals. Greenpeace has been sceptical of the limited investor calls to action.

Big oil’s ‘double speak’ on climate exposed in new report

The world’s five largest listed oil and gas companies have spent more than $1 billion touting their climate credentials since the Paris Agreement was signed, whilst lobbying to protect and expand their fossil fuel operations, according to new analysis published on Friday (22 March).

Shareholder resolutions on the rise

However other climate specialists have a more positive take on the investor pressure.

Carole Ferguson, Head of Investor Research at CDP – a not-for-profit running a global emissions disclosure system for companies, investors and governments – said the BP vote shows shareholders are having a real impact.

“It’s clear that shareholder resolutions addressing climate issues are on the rise,” she said. “CDP’s analysis has shown investors are putting increasing pressure on oil and gas companies, with the number of climate shareholder resolutions filed more than doubling in the last five years compared to the five years prior.”

According to Ferguson, even the 8.35% support for the hard targets resolution by BP shareholders at yesterday’s annual meeting (AGM) is a sign of progress. “This is higher than a similar resolution filed at Shell’s AGM last year, where the vote achieved a 5.1% motion in favour with 7.2% abstaining,” she remarked.

Shell has said it will respond to the shareholder vote by preparing a demonstrable plan to reach the Paris Agreement goals.

European oil majors better prepared for energy transition than US, Chinese counterparts

Oil majors are “lagging” when it comes to preparing for the low-carbon energy transition, according to a new report from financial watchdog CDP, which nonetheless praised BP, Eni, Equinor, Total, Repsol and Shell for taking the industry’s lead.

[Edited by Frédéric Simon]

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.