Brian McCowan, Zondits staff, 5/16/2023
British Petroleum (BP) is making record profits, but its shareholders are not necessarily pleased. The energy giant, which has long promoted itself as a defender of the environment, has recently pulled back their level of commitment to reducing emissions. BP’s annual general meeting was held the last week in April, and groups of major investors are challenging the company’s actions.
BP has revised its emissions targets to reductions of 20% to 30% from previously pledged cuts of 35% to 40% lower by 2030. The company states that increased demand for oil and gas requires them to keep expanding those investments.
European pension funds are some of the largest investors in BP and other oil industry firms. According to multiple news outlets, including MSN and CNBC, several of these funds, including four of the UK’s largest, are backing a resolution proposed by the activist investor group, Follow This, that would direct BP to revert to previous commitments to aggressively reduce carbon emissions. The group is also proposing that BP include “Scope 3” emissions (emissions generated by customer use of their products) in their climate targets.
BP is reporting the highest profit margins in the last 14 years. With the growth of cash reserves comes options. Invest more capital in fossil fuel exploration and exploitation, branch out into related business areas, ramp up investments in renewable energy projects and carbon capture, or return more money to shareholders in the form of increased dividends and elevated equity value.
The individual investor community appears to be just as conflicted as the institutional investors. UK’s ShareSoc, a non-profit investor education and discussion forum, is a prime example. Members are actively debating whether or not to endorse the Follow This proposals. Opinions expressed range from encouraging BP to fully embrace the spirit of the Paris Accords, to urging BP to “do what they do best” (fossil fuels) and enrich investors who can, in turn, invest in clean energy if they so choose.
According to investment analyst Morningstar the climate-focused investors are also prepared to vote against the reappointment of BP board chairman Helge Lund in response to the firm’s decision to scale back its climate goals without shareholder consent. Lindsey Stewart, the director of investment stewardship research at Morningstar told CNBC, “In investment stewardship, voting against a company chair is one of the strongest escalations a shareholder can implement. So, there’s clearly very deep frustration on the part of the pension funds who intend to vote against Helge Lund’s re-election as chair,” Stewart said.
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