BP’s decision to cut its medium-term emissions reduction goals undermines management-sponsored climate votes and shows that they can be “disregarded at any time”, Colin Baines, stewardship manager at Border to Coast, told Responsible Investor.
“It does undermine Say on Climate votes,” he said.
Baines added that, while such a vote is a “useful avenue for climate engagement between company and investors”, investors should perhaps “be looking at binding independent resolutions to tie in science-aligned low-carbon transition plans”.
Last week, BP revealed that, in addition to posting historic profits, it was cutting its 2030 emissions reduction goal for oil and gas production from 35-40 percent compared with a 2019 baseline, to 20-30 percent.
That announcement came less than a year after shareholders endorsed the UK oil major’s climate plan, via a so-called Say on Climate vote, with 88 percent support.
“We are yet to produce a formal position, but generally speaking it is disappointing to see BP water down its ambition,” Baines said. “Considering that they put this to a shareholder vote with the Say on Climate vote last year, and got an overwhelming mandate, then just to disregard that a few months later, that’s very disappointing in principle.”
Baines joined the £38 billion ($45.5 billion; €42.7 billion) UK local government pension pool in November from UK charity Friends Provident Foundation, where he was investment engagement manager.
On Thursday, Border to Coast announced plans to ramp up its engagement efforts at banks and oil firms ahead of the 2023 proxy season.
The pension pool revealed that it would vote against the chair of oil firms failing to meet any of the first four indicators of the Climate Action 100+ company benchmarks, which includes setting short-, medium- and long-term emission reduction targets.
Baines added that the next two indicators of the benchmark, which assess decarbonisation strategy and capital alignment, will also be the basis for additional engagement by Border to Coast.
“We’ve already determined that if an oil company does not meet any of the indicators on capital alignment, in other words they are still investing in fossil fuel expansion, they’re going to be our priority,” he said.
Boards of banks are also up against greater scrutiny by Border to Coast, with the chairs of sustainability committees facing votes against if banks materially fail to meet the four indicators set out by the Transition Pathway Initiative’s (TPI) framework on the sector.
These indicators include not having sufficiently integrated targets, decarbonisation strategy or climate policy engagement into business strategy.
Scrutiny of banks’ fossil fuel financing by investors has been intensifying. Earlier this month, UK campaign group ShareAction convened a $1.5 trillion investor coalition urging European financial heavyweights, including Barclays and BNP Paribas, to cease financing new oil and gas fields by the end of this year.
Border to Coast also revealed that in 2022 it supported 80 percent of independent climate resolutions and voted against every management-sponsored Say on Climate vote at oil and gas firms. When it came to bank holdings, the pension pool supported 88 percent of independent climate resolutions and voted against 60 percent of management Say on Climate resolutions.
Baines told RI that a science-aligned transition plan “necessitates that you halt financing of the expansion and the development of new fossil fuel reserves” in line with the IEA 1.5C pathway. “So I think it’s totally reasonable to vote down transition plans that continue to fund the expansion of fossil fuels.”
During Baine’s time at Friends Provident, he championed Just Transition considerations. As part of its announcement, Border to Coast also stressed that it would work to “to ensure social considerations and risks are integrated into climate strategies”.