Dutch green shareholder group Follow This and UK oil major BP will be working together to draft a joint shareholder proposal for next year’s AGM.
Follow This this year filed a proposal labelled “climate action”, telling BP that shareholders would be willing to support a Paris-aligned business strategy, meaning unquestioned inclusion of Scope 3 emissions and capex investments as per the Intergovernmental Panel on Climate Change’s scenarios.
Follow This has today withdrawn that proposal as BP convened shareholders to its AGM (likely to be held virtually if coronavirus restrictions remain on 27 May).
The withdrawal of the proposal follows BP’s net zero ambition announced in February by new CEO, Bernard Looney, which acknowledged responsibility for scope 3 emissions.
Looney said today that to endorse such an ambition “engagement with Follow This and their supporting investors have been immensely valuable.”
“It has helped us better understand their expectations and to develop a path we believe is consistent with the Paris goals. Importantly, this path includes aims for scope 3 emissions,” Looney said in a statement issued together with Follow This.
The development of a joint proposal, to be voted on by shareholders in 2021, will possibly start once BP hosts a “capital markets day” in September, aimed at setting out near-term plans for its net zero strategy.
Follow This founder Mark Van Baal said: “Looney has set a very ambitious agenda. So, he needs shareholders to support him through thick and thin in the transition. Oil majors will only act if they are pushed by investors.”
He described the change in BP’s tone at the top as a U-turn. During last year’s high-profile AGM, complete with Extinction Rebellion protests, former CEO Bob Dudley told Van Baal that scope 3 emissions were not BP’s problem.
Van Baal highlighted that the change has been driven by the 8% of shareholders who voted for the Follow This resolution, which – combined with abstentions – sent a powerful signal to BP that scope 3 emissions should be covered in order to be Paris-aligned.
Van Baal said Follow This will welcome the participation of fellow engagement body ClimateAction100+ and other interested investors in the drafting of the 2021 shareholder proposal.
Six of the top 10 Dutch institutional investors that have supported Follow This’ proposals are also members of CA100+. They are NN Investment Partners, PME and PMT (MN), ACTIAM, Aegon, Kempen Capital Management and Achmea.
In addition, CalPERS, M&G, Sarasin, Church Commissioners of the Church of England and Sweden’s AP4 are among CA100+ members that backed Follow This’ proposal at BP in 2019. Others, like Royal London Asset Management, showed dissent through abstention.
Carbon Tracker Senior Analyst Andrew Grant told RI that BP has taken a positive step forward, positioning themselves as leaders, ahead of peers like Shell in terms of commitments.
However, he said, BP “shoehorned a lot of keywords” into its rhetoric and there is additional information required to “tell the whole story”.
BP aims at net zero on carbon in its oil and gas production on an absolute basis by 2050. Grant said it is reasonable to “put net zero somewhere in the value chain”, in the case of BP within upstream activities.
But that does not cover, for instance, BP’s 20% stake in Russian oil company Rosneft. Crucially, it does not cover downstream activity either (BP’s aims at a 50% cut in the carbon intensity of products BP sells by 2050).
“When it comes to downstream, BP will be refining and trading crude that it is not only their own but also other people's. For that level of the business they've only set a 50% intensity reduction target,” Grant said.
Grant said carbon intensity targets are not ideal. That is because they measure emissions reduction in relative terms per unit of energy produced. So if energy production increases, so do emissions. That’s in contrast to a reduction in total or absolute emissions.
However, Grant described as “decent” BP’s argument that if other oil majors committed to net zero then such 50% target would not be required.
Carbon Tracker has analysed BP’s February announcement in more detail here.
Grant added that BP reported on how it evaluates each new material capex investment for consistency with the Paris goals, as requested by the CA100+ shareholder proposal passed at last year’s AGM.
“I didn't find it terribly convincing, as BP considered $50 (€45.5) a Paris-aligned price,” Grant said. Oil prices were trading in the $20s at the time of writing.
CA100+ was not immediately able to comment.