Investors tight-lipped over Chevron’s offer of dividends over transition

‘Plant trees’ with earnings comment from US oil giant fails to rouse responsible investors

Last week, Chevron’s Chairman and CEO, Mike Wirth asserted that shareholders should use their dividend payments to invest in renewables, if that is what they want to do, as it wasn’t a strategy the US oil giant would be pursuing. 

Speaking on CNBC’s Mad Money programme, Wirth told host Jim Cramer that the company has concluded that it “can’t create value for shareholders by going into wind and solar”. Instead, responding to a question on whether shareholders should focus on what they invest in, he said, the company would rather focus on giving shareholders a “growing dividend” that they can use to “plant trees” with or invest in renewables.

“We’d rather dividend it back to shareholders and let them plant trees, go invest in a wind and solar developer and have the right to do that with a growing dividend that comes out of our company,” Wirth said.

Responding to those comments, Mark van Baal, Founder of Dutch shareholder advocacy group Follow This, tells RI that Wirth’s remarks “show no sense of urgency, no commitment to Paris, and no imagination beyond oil and gas”. Follow This filed a proposal this year at Chevron calling on the oil major to reduce its Scope 3 emissions. It was backed by an impressive 61% of shareholders – a clear sign that investors have concerns about the oil giant’s strategy. 

So what do investors make of the words from Chevron’s chief? Well, it is hard to say. Only a few investors RI contacted were willing to comment and those that did mostly spoke in general terms rather than respond directly to the CEO.

This reluctance, however, is not the result of a lack of familiarity; the oil major is, after all, one of the targets of Climate Action 100+ (CA100+), the multi-trillion dollar investor engagement initiative seeking to steer the world’s largest polluters globally toward low carbon futures. 

RI emailed a number of well-known responsible investors to get their response to the CEO’s words, including California public pension giant CalPERS, which co-leads the engagement on Chevron as part of the CA100+ initiative. But the $444bn fund declined to comment, as did its sister fund CalSTRS. The latter played an important role in Engine No.1’s successful campaign at Chevron’s rival Exxon this year – the $318bn fund was the first big institutional investor to publicly back the activist’s pioneering action. 

Another influential member of CA100+, BNP Paribas Asset Management, which last year filed a majority supported proposal at Chevron calling for Paris-aligned lobbying, also declined to comment on the CEO’s words.

Legal & General Investment Management, one of Europe’s biggest and most respected responsible investors, did not want to discuss Chevron specifically, but the head of stewardship and sustainable investing at its US arm, John Hoeppner spoke more broadly on the industry, telling RI that: “Returning more capital to investors who can deploy it towards low-carbon remains a viable option. But this needs to be accompanied by aligning a gradually declining industry production to global climate targets.”

Bruce Duguid, Head of Stewardship at EOS – the advisory arm of Federated Hermes and, RI understands, the other CA100+ co-lead on Chevron – describes returning cash to shareholders as part of a “managed decline” as a “viable strategy” for the oil & gas sector. On the oil giant in particular, he says, “we expect Chevron and other companies that seek to reduce fossil fuel output to set a Net Zero goal and short and medium term absolute emissions reductions in line with 1.5°C”.

Chevron has not yet set a 2050 Net Zero target, and last week CEO Wirth reportedly told investors the company was not ready to take that step. The company, however, did pledge to triple its investments in “lower carbon” businesses to $10bn through 2028, including investments in carbon capture, offsets, “renewable fuels” and hydrogen.  Axel Dalman, Associate Analyst at think-tank Carbon Tracker, told Reuters that Chevron’s announcement did “not represent a particularly large strategic shift”.

Earlier this month, Carbon Tracker published a report called Adapt to Survive: Why oil companies must plan for Net Zero and avoid stranded assets, which found that between 70-80% of Chevron’s business as usual upstream capital expenditure spending in unsanctioned projects – i.e. those that have not yet received a final investment decision – is outside of a well-below two degrees warming scenario. 

Carbon Tracker’s Founder, Mark Campanale tells RI that Chevron still “intends to invest substantial amounts of shareholder funds into projects that are clearly not aligned with the Paris agreement, which is why investors committed to Net Zero have such a problem with Chevron’s current strategy.”

A spokesperson for Chevron confirmed to RI that it planned to continue to invest in new oil & gas exploration, stating: “Most energy forecasts predict that oil and natural gas will continue to be needed to meet global energy demand in the future. We believe that this demand is best met by producers like Chevron who have the lowest carbon intensity in their operations.”

When asked if the company planned to align its spending with a two degree scenario, the oil major’s spokesperson tells RI that it is “committed to robust Environmental, Social and Governance (ESG) reporting”. “We aim to be a leader in our industry in the transparency of our ESG reporting so that we can hold ourselves responsible for our progress and our stakeholders can hold us accountable for our performance.”