Oil and gas major BP has announced it will support a resolution put forward by a group of institutional investors which calls for the company to align its business strategy with the goals of the Paris Agreement and to improve its corporate reporting and transparency on climate change-related risks and opportunities.
A group of leading institutional investors in BP and signatories to the Climate Action 100+ initiative proposed a far-reaching shareholder resolution which essentially called for BP to align its business strategy with the goals of the Paris Agreement. More specifically, the proposal says:
“That in order to promote the long term success of the Company, given the recognised risks and opportunities associated with climate change, we as shareholders direct the Company to include in its Strategic Report and/or other corporate reports, as appropriate, for the year ending 2019 onwards, a description of its strategy which the Board considers, in good faith, to be consistent with the goals of Articles 2.1(a) and 4.1 of the Paris Agreement (the ‘Paris Goals’)”
Further, the proposal calls on BP to lay out the following:
Its business strategy which it considers, in good faith, to be consistent with the goals of the Paris Agreement on climate change
How the company evaluates the consistency of each new material capital investment with the goals of the Paris Agreement
Related metrics and targets, consistent with the goals of the Paris Agreement, together with the anticipated levels of investment in oil and gas and other energy technologies; targets to promote operational greenhouse gas reductions; the estimated carbon intensity of energy products; and the linkage of its targets with executive remuneration.
In response to the proposal, and in discussion with the investors, BP announced on February 1 it would support the proposal at its Annual General Meeting (AGM) expected to be held in May.
“Investors are helping ensure climate change is firmly on the boardroom agenda, which is especially important for the oil and gas sector,” explained Stephanie Pfeifer, a member of the global Climate Action 100+ steering committee and CEO, Institutional Investors Group on Climate Change (IIGCC). “It’s encouraging to see major companies such as BP moving in the right direction. Global carbon emissions need to be reduced urgently and investors expect other companies in the sector to follow suit.”
The Climate Action 100+ initiative — which has been in discussions with BP for several years around the company’s reporting and climate change actions — involves over 300 investors with approximately $32 trillion in assets and has the backing of the Institutional Investors Group on Climate Change.
“Climate change poses risks and opportunities for investors, companies, workers and their communities who have a shared interest in urgent and bold action to fulfil the Paris Agreement goals,” said Anne Simpson, Climate Action 100+ global Steering Committee chair, and CalPERS Director of Board Governance and Strategy. “BP’s spirit of partnership with its shareowners shows that real progress is possible, and it is necessary. We applaud this important step towards a sustainable future.”
“We believe our strategy is consistent with the Paris goals,” added Helge Lund, chairman of BP. “The additional reporting specified in the resolution will build on BP’s history of progressive action in this area. We welcome the constructive engagement with Climate Action 100+ and, after careful consideration, have decided to support this resolution.
“This additional reporting will give investors better clarity about how BP can continue to deliver value through the energy transition in a way consistent with the Paris goals,” Lund added. “We will be open and transparent about our ambitions and targets as well as our progress against them. We recognise that the trust of our shareholders, and society more widely, is essential to BP remaining an attractive and reliable long-term investment. And only by remaining a world-class investment can we most effectively play our part in advancing a low carbon future.”
Announced separately by BP, the company revealed that it will now include greenhouse gas emissions reductions as a factor in the reward of 36,000 employees across the company and including executive directors. Specifically, BP announced in 2018 a target to reduce emissions by 3.5 million tonnes across its worldwide operations by 2025. The decision to incorporate progress towards this target as part of assessing the company’s performance will now play a part in determining annual bonuses for BP staff around the globe.
“Meeting the world’s growing demands for energy while also greatly reducing emissions will require more than rapidly growing renewables – all forms of energy must be made cleaner, better, and kinder to the planet,” said Bob Dudley, BP group chief executive. “This is why our people are already in action across BP, seeking opportunities to reduce our emissions, improve our products, and create new low carbon businesses.
“Building an emissions reduction target into the reward of people throughout BP further underlines the importance we place on this work. We expect it will catalyse even more ideas and activity and support BP playing our part in addressing the dual challenge.”
Dudley’s comments are interesting, and somewhat disheartening, considering his desire to make “all forms of energy … cleaner, better, and kinder to the planet” but also in the wake of comments he made in October 2018 in his keynote speech given as the “Petroleum Executive of the Year” which raised his concerns with the global divestment and disclosure movements, in which he said they “could lead to bad outcomes.”