BP shareholders could face dilemma over two similar climate resolutions

(Updates to clarify names of filers under CA100+)

With oil giant BP negotiating a shareholder resolution with investors from Climate Action 100+ (CA100+), there could be two similar proposals at the AGM in May. The other was previously filed by Follow This, the Dutch responsible shareholder group known for its campaign at Shell.  
The two shareholder resolutions essentially make similar demands around the company’s transition towards achieving emission reduction targets, as BP currently lags behind Paris-compliant scenarios.
CA100+ said its resolution builds on the work of the ‘Aiming for A’ investor initiative of 2015 at BP and Shell, whose pre-agreed resolutions with the board garnered over 90% investor support. BP says it has decided to support the CA100+ resolution and not the Follow This one.
The ‘Aiming for A’ initiative later merged into the Institutional Investors Group on Climate Change (IIGCC) which is a coordinator of the CA100+.
The new resolution, filed under the umbrella of the $32trn coalition, recommends BP reports “in good faith” on whether the board’s strategy is “consistent” with the goals of the Paris Agreement.
The filers are Hermes EOS on behalf of its stewardship clients, Legal & General Investment Management, Aviva Investors, M&G Investments, Newton Investment Management, HSBC Global Asset Management, the Church Commissioners for England, APG – on behalf of ABP and other pension fund clients – and the Local Authority Pension Fund Forum.
They ask for disclosure of reduction targets, including “estimated carbon intensity of the Company’s energy products” (i.e. Scope 3 emissions are covered).
The resolution also tackles the alignment of capital allocation with Paris goals by asking BP to describe how consistent it is with their new material capex investment – including exploration of oil and gas resources and development of other energy sources.
Alice Garton, Head of Climate at ClientEarth said: “These shareholders have actually done BP a favour. Legally speaking, directors should already be addressing the risks and opportunities of climate change as part of their strategy, risk management, oversight and reporting processes – or they may face personal liability. We will be watching BP’s response closely.”
Amendments to UK company law in 2013 introduced the requirement to prepare a Strategic Report, which includes reporting on the impact of the company’s business on the environment. Follow This founder Mark van Baal told Responsible Investor that the wording of the CA100+ resolution is “unnecessarily prescriptive” by requiring capital expenditure disclosure. “Capex will follow once the right targets are set,” he said.

He added that there would be no reason not to support both resolutions at the BP AGM (adds missing word, not).
In December 2018, Follow This filed its BP resolution aimed at offering shareholder support to set reduction targets of scope 1, 2 and 3 emissions, in alignment with the Paris Agreement goals.
BP said its response to Follow This would be provided in the notice of meeting.
When Follow This filed the resolution in December, Helen Wildsmith, Stewardship Director, Climate Change at CCLA Investment Management and one of architects of the ‘Aiming for A’ initiative, told RI: “Everything to do with BP runs a month later than everything to do with Shell.”
Also earlier in December 2018, Follow This filed an identical resolution at Shell. Meanwhile CA100+ announced in a joint statement that Shell pledged “to set short-term targets” as steps to achieve its “long-term ambition” of reducing emissions. As part of this engagement, Shell also pledged to link these three-five year targets to executive remuneration.
When asked if CA100+ would also file at BP, Wildsmith told RI back then: “The most important proposals for the next season are going to be the ones across the globe that come from the institutional investors. Within CA100+ the use of resolutions globally is part of the process.”
Wildsmith is also the Co-chair (together with Hermes EOS’s Bruce Duguid) of the resolutions sub-group within IIGCC’s corporate programme. Wildsmith leads on Rio Tio, Chevron and Duke Energy, while Duguid focuses on BP.
Duguid, who is Hermes EOS’s Head of Stewardship and lead co-ordinator of the CA100+ resolution, told RI in a statement:
“We believe the CA100+ resolution requiring a strategy consistent with the goals of the Paris Agreement is the most effective way to deliver a sustainable future for BP. This resolution requests the company to set its own targets consistent with the Paris Goals and to report on the carbon intensity of its products.”
Asked whether Hermes EOS would recommend their clients to vote also for the Follow This resolution as an engagement escalation action, the press office said they are “still reviewing and will not be commenting.”