Financial Times Opinion by Simon Mundy
As BP seeks to appease restive investors, it’s been moving closer to its larger US peer ExxonMobil’s seemingly winning strategy, tightly focused on fossil fuels rather than the low-carbon energy it once hailed as its future. But with its latest move from the Exxon playbook – slapping down an unwelcome climate-related shareholder proposal – BP may have overstepped the mark.
The proposal came from Follow This, a Dutch non-profit group that has long been a thorn in the side of Big Oil, taking stakes in companies to file climate-linked proposals at their shareholder meetings. Together with more than 20 institutional investors with total assets exceeding $1tn, it submitted resolutions at both BP and Shell, asking them to publish plans for how they would respond to a scenario of declining global oil and gas demand.
Shell agreed to let its shareholders vote on the proposal. BP refused.
Follow This founder Mark van Baal called the decision groundless. “I can only guess what they’re thinking,” he said, “but it appears they don’t want to answer the question: ‘How do we create shareholder value in a declining market?'”
[…]BP now finds itself in an uncomfortable situation. UK asset manager L&G, its sixth-biggest outside shareholder, has said it will vote against BP chair’s re-election due to concerns about the exclusion of the Follow This proposal.
Glass Lewis — one of the two dominant proxy advisers that help institutional investors decide how to vote — has recommended that other shareholders do the same at the meeting on April 23. The company had provided “limited explanation of the proposal’s deficiencies or the legal reasoning behind its exclusion,” it wrote, warning that the decision “raises questions about transparency, shareholder communication, and responsiveness to shareholder concerns”.
Yesterday the UK’s Local Authority Pension Fund Forum said it would also recommend its member bodies, who hold combined assets of over £425bn, to vote against Manifold’s re-election.
[…]As oil and gas companies rake in profits from elevated prices amid Middle East upheaval, van Baal’s fixation on a future structural decline in fossil fuel revenues may seem quixotic. But it’s perfectly plausible according to the International Energy Agency. In its annual outlook report last November, the central Stated Policies Scenario — based on its assessment of countries’ current “direction of travel” in energy policy — showed oil demand entering a long-term decline by 2030, and gas consumption following suit around 2035.
[…]BP may not be forced by its shareholders to draw up a plan for how it would deal with falling oil and gas demand. Exxon certainly won’t be made to do so any time soon. But they might still need to grapple with that problem much sooner than they’d like.
