BP shareholders to vote on climate risk disclosure

Oil major backs proposal to reveal threat climate action poses to its business plan, for approval at AGM on Thursday

(Pic: BP)

(Pic: BP)

By Megan Darby

BP is set to stress-test its business plan against a “safe” climate future, in response to shareholder pressure.

At the company’s AGM on Thursday, shareholders will consider a resolution on the risks climate action poses to BP’s future profitability.

If 75% vote in favour, BP will have to disclose how its assets would fare if countries took effective action on climate change.

Analysts at the Carbon Tracker thinktank warn high cost ventures in tar sands, deep water or the Arctic might not pay off, as climate regulations increasingly curb fossil fuel demand.

BP backs the proposal, which means it is expected to pass. Norway’s oil fund and California’s public sector pension fund also support the resolution, which was put forward by the “Aiming for A” coalition of UK investors.

Jeremy Leggett, solar entrepreneur and environmentalist, hopes to draw shareholders’ attention to climate risk by asking a question at the AGM.

“It’s vital that we use the power of the financial system to ensure that companies like BP are doing everything they can to assist us in the transition to a low-carbon future,” he said in advance of the event.

Emissions gap

Governments have agreed to limit global temperature rise to 2C above pre-industrial levels, beyond which the impacts of climate change become more severe.

That means capping carbon dioxide concentrations in the air at 450 parts per million, which in turn requires reduction in use of fossil fuels.

A recent study showed one third of known oil reserves are “unburnable” in that scenario.

Yet BP forecasts energy demand rising at rates that will push emissions to almost double the level consistent with a 2C world in 2035.

“It is not for us to lead, it is for us to do our job and respond to the incentives and structures provided by policymakers,” chief economist Spencer Dale said at the launch of BP’s energy outlook.

Mixed messages

Other oil companies have made similarly bullish projections for future demand, none of which are compatible with the 2C limit.

Agreeing to disclose information on climate risk does not automatically mean companies will act to limit their exposure.

Exxon Mobil last year adopted a similar resolution put forward by shareholder activists Arjuna Capital and As You Sow.

But in a report published less than two weeks later, Exxon dismissed as “highly unlikely” the possibility that governments will restrict greenhouse gas emissions to the extent required for 2C.

“They said there is a zero chance of a zero carbon economy,” recalled Julian Poulter, executive director of the Asset Owners Disclosure Project (AODP).

“We don’t know what the chance of a 2C world is, but it is not zero. I was very surprised that Exxon actually said that, it was so naïve.”

Leggett will argue at Thursday’s AGM that BP needs a contingency plan in case governments meet their commitments.

Cashback demand

In the US, Arjuna and As You Sow are taking the matter a step further, calling on Exxon Mobil and Chevron to give money back to shareholders instead of investing in high risk projects.

Both companies fought the proposals, appealing to regulator the Securities and Exchange Commission.

Exxon succeeded in getting the resolution struck off its ballot paper, but Chevron will face a vote at its AGM in a few weeks.

The resolution notes Carbon Tracker’s findings that 26% of Chevron’s projects need an oil price of US$95 a barrel to break even. It raises concerns that such projects could be stranded as the world responds to emissions constraints.

“Given structural challenges facing the industry – historically high capital expenditures, decreasing and volatile oil prices and profitability, competition from low-cost alternatives, and global climate change – Chevron’s continuing to pour shareholder capital into high cost, high carbon projects creates significant risk of unsaleable and stranded assets,” said Danielle Fugere, president at As You Sow.

AODP’s Poulter said such campaigns were “far more relevant” than those on disclosure, because they were about restricting capital.

“I think in the next year or so we are going to see attempts to wind these companies down,” he said. “That is when it gets really exciting.”

Cutting across divides

Catherine Howarth, chief executive of Share Action, which coordinated the BP shareholder resolution, said: “On an issue as important as climate change, it’s crucial we find ways to cut across the divides that still exist between savers and investment decision-makers.

“That means it’s important for individual shareholders to voice their support for these resolutions, both outside the AGM and inside, by asking questions about the issues they raise.”

As well as probing BP’s resilience in the face of climate action, the resolution questions its emissions strategy, research into low carbon energy and lobbying.

BP last year quit ALEC, a Washington-based lobby group which has attracted criticism for attacking the scientific consensus on climate change.

The oil major remains a member of BusinessEurope, CEFIC, FuelsEurope and OPG, which a recent Policy Studies Institute report revealed have resisted EU climate regulations.

And the Guardian last month found senior BP staff contributed to a fund that backed US senator Jim Inhofe, a notorious opponent of climate action.

Antony Melville, a Share Action supporter, is set to highlight a discrepancy between BP’s sustainability policy and the positions of lobbyists it supports.

He will ask: “Could the board please clarify whether you support the lobbying position of the European trade associations and US politicians who attempt to inhibit progressive policies on climate change?”

Shell has also backed a climate risk resolution put forward by “Aiming for A”, with shareholders due to vote at its 19 May AGM.

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