BP has defended its decision not to permit shareholders to vote on its watered down climate targets ahead of a crunch AGM tomorrow, where the future of its chairman is on the line.
The energy giant considers its plan to ease reductions in oil and gas production from 40 per cent to 25 per cent at the end of this decade to be an adjustment to its wider climate strategy, which was resoundingly approved by shareholders last year.
It also regards the moves to be in line with both its net zero target over the next three decades, and the ambitions of the Paris Climate Agreement to contain temperature rises to well below two degrees from pre-industrial levels.
A spokesperson said: “We have adjusted some of our interim targets and aims for 2025 and 2030 – we have increased our aims for reducing operational emissions, increased our aims for reducing emissions intensity of our energy sales, and significantly increased our aims to invest in our transition businesses.
“And we still expect our oil and gas production to fall, but our adjustment means that we now expect our oil and gas production in 2030 to be around 25 per cent lower than it was in 2019, as opposed to the previous expectation of 40 per cent lower.”
BP chairman faces re-election vote
This decision will not be included among the resolutions set to be voted on by shareholders.
Instead, concerned investors will have to express their disagreement through other key votes tomorrow.
This includes whether to re-elect chairman Helge Lund, with five UK pension groups announcing plans to oust him from his position – in response to the watered down climate pledges.
The pension groups include Border to Coast, Brunel Pension Partnership, LGPS Central, Nest, and the Universities Superannuation Scheme.
Diandra Soobiah, Nest’s head of responsible investment told City A.M.: “While it’s disappointing to see BP rowing back on their climate pledges, what’s particularly worrying is they haven’t gone back to shareholders and given us a chance to vote on such a significant decision. Actions like this undermine the confidence shareholders have in the board and their corporate governance.
“Last year BP made record profits of more than £23bn and we want to see them investing more in low carbon solutions and renewables, instead of new oil and gas sites. If BP continues on this path, we have serious concerns about them reaching their net zero goal and the long-term success of the company.”
Faith Ward, chief responsible investment officer at Brunel said: “We acknowledge BP’s ambition to be net-zero by 2050 or before and the increased commitment to invest in solutions, but we are using our votes at the AGM to flag our concerns about the changes in strategy.
“There was no shareholder engagement regarding the reductions in commitments relating to oil and gas production – a material change to the plan presented to shareholders in 2022, and one that seriously imperils BP’s credibility as a company that will deliver on its promises.”
Colin Baines, stewardship manager at Border to Coast Pensions Partnership said: “We have determined that BP has set insufficient emission reduction targets, triggering a vote against the Chair of the Board in line with our climate voting policy.
“We are also concerned about BP’s backtracking on its climate targets which were put to a shareholder vote only last year and received an overwhelming mandate. As a responsible investor we are seeking Board accountability for the decisions made, and the increased risk to which BP is now exposed.”
A Universities Superannuation Scheme spokesperson added: “We will vote against the re-election of the Chair of the board at BP due to the absence of meaningful engagement with shareholders on the recent strategic changes to BP’s Net Zero strategy, and the lack of opportunity to vote on its changes.
“We expect a company’s transition strategy to evolve in light of experience, regulatory changes and engagement with shareholders, and we encourage companies to put a review of their climate strategy up for a shareholder vote every three years, or sooner if significant changes are made to the strategy.”
LGPS has also been approached for comment by City A.M.
Lund formerly ran Statoil and BG Group and has chaired BP since 2019 -and was backed by 96.6 per cent of shareholders at last year’s annual meeting.
It is unclear how successful the pension groups will be in the push to remove the chairman but it does reflect concern over a lack of consultation in the industry.
Investors are also set to vote on resolution 25, Follow This’ annual push for BP to commit to scope three emission targets.
Last year, Follow This only secured 14.5 per cent approval for its resolution – and there is little prospect of the group attracting majority support tomorrow for its plans.
BP’s 25 per cent production cuts still place the energy giant among the frontrunners in the fossil fuel sector’s net zero race, and further reductions could leave it exposed if the transition slows – with them lacking supplies to meet demand.
The company’s shares soared over 20 per cent in February when it announced plans to ease fossil fuel reductions, which had powered the company to record £23bn profits last year.