BP shareholders advocate for a ballot on carbon emission objectives
BP Shareholders Call for Climate Vote Amidst Growing Tensions
A group of influential investors, including Robeco, Rathbones, Phoenix Group, and others representing £5 trillion in Assets Under Management or Engagement, have urged BP to allow shareholders to vote on its climate strategy at the upcoming AGM. The shareholder pressure underscores concerns about BP’s perceived retreat from ambitious climate commitments towards a renewed focus on oil and gas profitability, which threatens trust and ESG alignment.
The push for a shareholder vote comes amidst growing tensions around BP’s energy transition plan. Key implications for BP's transition plan and long-term value include:
- Pressure for renewed shareholder engagement and transparency: The absence of a shareholder vote on BP’s updated climate strategy has eroded trust among ESG-focused investors, who now seek formal mechanisms such as climate-related shareholder proposals to ensure BP commits credibly to net-zero goals and discloses detailed transition plans.
- Balancing profitability with sustainability under activist influence: Activist hedge fund Elliott Management, which recently became BP's third-largest shareholder, has pushed BP toward cutting low-carbon investments by 70% and reallocating $2 billion annually back to oil and gas projects. This creates shareholder divisions regarding BP's long-term climate risk management.
- Risk to BP’s long-term value from lagging climate ambitions: BP’s revised 2030 emissions target, which reduces scope unclear but is around 45-50%, is less ambitious than some peers', raising doubts about its competitiveness and resilience in an accelerating decarbonizing energy market. Ongoing investor skepticism is reflected in BP’s 8% stock decline year-to-date 2022 amid this uncertainty.
- Governance and leadership challenges: Shareholder dissent at BP’s AGMs, including a notable 24% vote against the chairperson, signals demand for stronger leadership accountability on climate strategy and energy transition progress. The appointment of an outsider as chair underscores efforts to rebuild trust and navigate the energy transition complexities.
- Potential for more shareholder proposals targeting just transition and climate accountability: Activist shareholders are increasingly using formal proposals requesting detailed climate policies, Scope 3 emissions disclosure, and "just transition" frameworks that consider social impact alongside emission reductions, pressing BP to adopt more comprehensive and inclusive transition strategies.
As BP prepares for a crucial capital markets day on 26 February, investors are setting out their position ahead of the event. Colin Baines, stewardship manager at Border to Coast Pensions Partnership, one of the signatories of the letter, has expressed concerns about BP's weakening of its climate targets and transition plans. Nick Mazan, company strategy UK lead at the Australasian Centre for Corporate Responsibility (ACCR), mentions the potential implications of Elliott's stake in BP for the oil giant's renewables business.
Mazan suggests that capital discipline should be applied to BP's upstream business, not just to renewables. The deadline to file a shareholder resolution at BP's upcoming AGM has passed, but investors could still file a resolution at an additional cost, according to Mazan. The investors express concern that BP might abandon its 2030 carbon reduction targets entirely.
This shareholder push for a vote on BP's climate strategy reflects a critical inflection point where BP must reconcile short-term profitability pressures with the demand for credible climate transition plans to safeguard its long-term value in a low-carbon economy.
