Investors show ire at directors of oil majors over climate

Woodside Energy has seen one of its directors suffer what is believed to be the largest shareholder revolt on climate grounds in Australia, after 35 percent of investors voted against the re-election of former Australian resources minister Ian Macfarlane. 

The vote on Friday came a day after 10 percent of shareholders voted against the re-election of BP’s chair Helge Lund, following the firm’s decision to roll back on its climate commitments. This result has been described as “significant” and a “sizeable protest” by market observers. 

Directors at both companies were in investors’ crosshairs ahead of the meetings due to a perceived lack of attentiveness to the views of shareholders on climate.  

Last year, Woodside – then called Woodside Petroleum – suffered the largest opposition to a Say on Climate vote, when 49 percent of investors rejected the firm’s climate plan.  

The company’s failure to respond to concerns around its climate governance prompted Aussie non-profit the Australasian Centre for Corporate Responsibility (ACCR) to team up with Vision Super and Australian ETF provider Betashares to file a members’ statement calling for three directors – including Macfarlane – to be held to account.   

The two other targeted directors – Shell Singapore chairwoman Swee Chen Goh and former ConocoPhillips senior executive Larry Archibald – were opposed by 10 and 13 percent of shareholders, respectively. 

Opposition to Woodside’s Macfarlane was likely buoyed by the recommendation of influential proxy adviser Glass Lewis, which opposed him on climate grounds.  

Rival proxy firm ISS also advised shareholders to oppose Macfarlane and the two other directors flagged by the ACCR campaign in its sustainability advice. However, the US adviser recommended the opposite in its main advice, a decision that was questioned by the CIO of Australian super fund Vision Super.  

Alex Hillman, ACCR’s lead analyst, described the vote against Macfarlane as “unprecedented”. 

“Until today, only one Woodside director over the last decade had ever received less than 95 percent support,” he said. 

He added that no director on any ASX100 energy company’s board has had a vote greater than 15 percent against them in the past decade.  

“One of the very clear reasons for today’s record-breaking result is that Woodside’s board has repeatedly failed to present a credible climate strategy and investors have had enough,” Hillman said. 

The vote at Woodside comes less than six months after four “climate competent” directors were elected at Aussie energy giant AGL in November following a first-of-its-kind campaign in the country by Grok Ventures, the activist fund owned by tech billionaire Mike Cannon-Brookes. 

BP backlash 

Morningstar’s director of investment stewardship and research, Lindsey Stewart, described the 10 percent opposition to BP’s chair as a “sizable protest against the absence of a shareholder vote on BP’s revised net-zero strategy”. By comparison, the average vote against a FTSE 100 director is just 4 percent.  

While BP “won’t be reaching for the panic button”, Stewart said, the tally will give the board something to consider. 

Several major UK pension pools – including Border to Coast, Brunel Pension Partnership and LGPS Central – pre-disclosed that they would be voting against the chair of BP in response to the UK oil major’s decision to cut its medium-term emissions reduction goal for oil and gas production. 

BP’s announcement in February came less than a year after shareholders endorsed its climate plan via a so-called Say on Climate vote that achieved 88 percent support.    

Patrick O’Hara, director of responsible investment and engagement at the LGPS Central, told Responsible Investor last week that it was “disappointed with the company’s decision to scale back their plans to reduce oil and gas production”, adding that the fund would have “welcomed” an opportunity to express their views before BP made the decision.    

Responding to vote, Brunel’s chief responsible investment officer, Faith Ward, told RI that 10 percent vote against the chair was “significant” and sends “a strong message to BP about the importance of climate governance and shareholders’ support for a credible climate strategy”. 

Colin Baines, stewardship manager at Border to Coast, added that the vote “shows that a significant number of shareholders share our concerns that BP’s transition plans are not sufficiently aligned with a 1.5C pathway and, as such, poses a key financial risk we do not believe is being adequately managed”. 

LGPS Central’s O’Hara told RI that the vote against BP’s chair is “significant” in the context of the firm’s shareholder base which is international and largely institutional.

“A significant proportion of votes cast are auto voted without consideration being given to longer term issues such climate change.”

He added that BP’s decision to row back on their oil production targets a year after presenting them to the annual meeting, “caused long term investors to consider what a transition plan is actually for”.

Support for Follow This goes up at BP 

Another item on the ballot at BP’s annual general meeting yesterday was the refined climate proposal from Dutch climate activist Follow This, calling on the company to align its 2030 Scope 3 emissions reduction goals with the Paris Climate Agreement. 

Support for Follow This dropped to 15 percent in 2022, down from 20 percent the year before. The re-framed resolution achieved 17 percent this year.  

Follow This founder Mark van Baal thanked those who supported the resolution “for their determination to achieve the Paris goal”.  

“We expect that they will take the same leadership positions at the AGMs of Shell, Total, Exxon and Chevron next month, and we hope that their peers will follow their lead.” 

Morningstar’s Stewart described the Follow This result as one that often leads to “both sides claiming victory”.  

“It doesn’t quite reach the 20 percent threshold that usually compels a UK board to take action, but it’s also a pretty significant one-sixth of shareholders.”  

Stewart added that in the case of BP there still is no consensus among institutional investors on the extent to which company boards should be held responsible for Scope 3 emissions.  

UK investment giant Legal and General Investment Management (LGIM) was one of those who opposed the Follow This proposal at BP, stating that while it supports the principles of the request, the wording “imposes inflexibility on the company that is challenging to justify at the present time, and could lead to unintended consequences as we transition to a net-zero emissions economy”. 

LGIM, which co-leads on the company as part of Climate Action 100+, did vote against BP’s chair.