AGM resolution for BP to address climate change risks receives unprecedented investor backing
Global investors are calling on BP to set out a business strategy that is consistent with the goals of the Paris Agreement on climate change. A shareholder resolution ‘co-filed’ ahead of the company’s annual general meeting (AGM) – requiring the company to meet their request – has received an unprecedented level of support1.
The resolution has been initiated, or ‘co-filed’, by investors acting as part of Climate Action 100+. This is an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
The 58 investors co-filing own just under 10% of the company’s voting shares between them – equivalent to a £10 billion holding in the company2. This group includes six of the UK’s 10 largest fund managers3. These same investors plus three others, in turn account for over a third of BP’s 20 largest shareholders globally4.
This marks a new global best for the level of support a shareholder resolution on climate change has received. Investor backing secured so far is already broadly double that of the previous best achieved5.
BP’s board are supporting the resolution at its AGM this year, as the outcome of constructive engagement with investors as part of Climate Action 100+. Globally the initiative involves over 300 investors with $33 trillion in assets, with investor engagement across Europe delivered with the support of the Institutional Investors Group on Climate Change (IIGCC).
It is also the first time that a number of leading investors have decided to initiate a shareholder resolution by co-filing. This includes some of the UK’s largest asset managers, such as UBS Asset Management with $781 billion in assets under management.
Support for the resolution reflects how investors are increasingly embracing an active approach to stewardship of assets they own or manage. This is facilitated through their involvement in Climate Action 100+, which sees investors engage with 161 companies, responsible for well over two-thirds of annual global industrial greenhouse gas emissions.
“The scale of investor support for the BP resolution is truly unprecedented. It is the first time globally that shareholders holding a 10 percent stake in a major listed company have filed a resolution on climate change,” explains Stephanie Pfeifer, a member of the global Climate Action 100+ Steering Committee and CEO, Institutional Investors Group on Climate Change (IIGCC). “This is further evidence that shareholder engagement is driving change across the corporate sector. Investors will continue to build on this momentum and expect companies to embrace the opportunity this provides to strengthen their business.”
The resolution, to be voted on at BP’s AGM on 21 May, requires the company to set out a business strategy which it considers, in good faith, to be consistent with the goals of the Paris Agreement on climate change.
Necessitating a high-level of ambition from the company, the investors are clear on the need for BP to act, as containing temperature increases to well-below 2°C as set out in the Paris Agreement requires a considerable decrease in demand for fossil fuels, and investment in their production.
The resolution then defines a number of robust reporting requirements, including:
- How the company evaluates the consistency of each new material capital investment with the goals of the Paris Agreement.
- Related metrics and targets, consistent with the goals of the Paris Agreement, together with the anticipated levels of investment in oil and gas and other energy technologies; targets to promote operational greenhouse gas reductions; the estimated carbon intensity of energy products; and the linkage of the company’s targets with executive remuneration.
Investors leading the Climate Action 100+ dialogue with BP commented on significance of the resolution:
“Investors want energy companies to continue being successful as the world moves to a low-carbon economy. This resolution calls on BP to provide more clarity about how its plans are consistent with the goals of the Paris Agreement on climate change,” adds Sacha Sadan, Director of Corporate Governance, Legal and General Investment Management. “The largest energy companies have a leading role to play, and we look forward to working with BP and others to develop more detailed disclosures in this area.”
“The scientific consensus is crystal clear on the need for far-reaching action by corporates, with the next decade critical in limiting global warming to 1.5°C. Investors have a responsibility to hold companies to account and to ensure they consider their alignment with the Paris Agreement,” explains Steve Waygood, Chief Responsible Investment Officer, Aviva Investors. “BP’s support for this resolution demonstrates how the investment industry can collaborate to instigate meaningful change. We hope that this first, but important, step represents a shift by the oil and gas sector in tackling today’s climate emergency head-on.”
Bruce Duguid, Head of Stewardship, Hermes EOS, adds: “This resolution is carefully designed to have the high ambition of a strategy consistent with the goals of the Paris Agreement, combined with robust reporting requirements by which to demonstrate this, while leaving flexibility for the company to set the precise strategy.”
The resolution itself and accompanying supporting statement from investors can be seen here. Subject to approval at its AGM, the responsibility will be on BP to provide additional corporate reporting for the year ending 2019 as directed by the resolution. While it will be for BP to set out the process and methodology, investors will be keen to ensure they are sufficiently robust and reliable.
A complimentary IIGCC initiative will set out broader investor expectations on climate change for the oil and gas sector. With publication expected in coming months, future dialogue with BP will cover implementation of related actions, in line with standard expectations of all oil and gas companies. IIGCC is one of five partner organisations that coordinate Climate Action 100+ globally.
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Download ‘co-filing grid’ for a list of all 58 investors to co-file.