Investors back BP net-zero plan as activist's climate campaign falters

BP PLC shareholders voted in favor of the company's net-zero emissions plan as a rival motion from an activist investor aimed at speeding up the British oil major's energy transition amassed a smaller share of the vote than in 2021.

Some 88.53% of shareholders at BP's annual general meeting May 12 backed the company's strategy to achieve net-zero emissions by 2050, while 85.14% voted down a rival proposal from Dutch group Follow This targeting faster emissions cuts.

"We are delighted with that shareholder support for BP's direction and progress," Chair Helge Lund said at the meeting after revealing the voting results. "We have engaged. We have listened. And this result gives BP a clear mandate for moving forward with our net-zero ambition."

Lund noted that the Follow This resolution had been rejected, adding, "The message from shareholders is clear: get on and deliver."

The meeting represented the first time BP had put its net-zero ambition to a shareholder vote. At the same event in 2019, 99.14% of investors voted in favor of a resolution filed by the Climate Action 100+ initiative calling for greater climate change disclosures by the company.

The British oil major's pathway to net-zero includes interim goals to reduce Scope 1 and 2 emissions — those from its own operations or purchased energy — by 20% by 2025 and 50% by 2030.

It aims to reduce Scope 3 emissions, produced from the products it sells, by 20% by 2025 and 35% to 40% by 2030. In February, the company expanded its target for life cycle emissions from its products to add a net-zero ambition for 2050 and include physically traded energy sales.

A May 12 report by the Carbon Tracker Initiative, a London-based research group, put BP in the top tier of 15 oil majors with the strongest emissions-reduction plans. BP's commitment to divest its stake in PJSC Rosneft Oil Co., Russia's largest oil producer, will also be beneficial for its climate goals, the group said.

However, the argument put forward by Follow This is that BP — like others in the oil and gas industry — is not transitioning fast enough, with the activist group continuing to call on the sector to set stronger targets that align with the Paris Agreement on climate change.

At ConocoPhillips on May 10, the Follow This motion received 39% of shareholder votes, while at Equinor ASA on May 11, 38% of nongovernment voters supported the group's proposal. Follow This also has motions on the ballot at Shell PLC, Exxon Mobil Corp. and Chevron Corp. this month.

Investor 'short-termism' to blame

Follow This has previously pointed toward research by advocacy group Global Climate Insights, which found BP's 2030 targets to be out of step with the Paris accord and its ambition to keep global warming to 1.5 degrees C and not strong enough to reduce emissions this decade.

And while shareholder support for the activist's campaign at the British oil major grew from 8.4% in 2019 to 21% in 2021, the 2022 result represents a loss of momentum.

Mark van Baal, founder of Follow This, suggested that investor sentiment had likely changed as a result of the energy crisis and the "windfall profits" achieved by BP since the war in Ukraine. BP recorded underlying replacement cost profit of $6.25 billion in the first quarter, up from $2.63 billion in the year-ago period.

"Investors' short-termism, fueled by the current windfall profits of BP, might have prevailed over the medium-term risk of value destruction caused by the climate crisis," van Baal said in a statement.

"Both crises can and should be dealt with simultaneously by shifting investments to renewables," van Baal added.

BP is planning annual low-carbon spending of $3 billion to $5 billion between 2023 and 2025, rising to $4 billion to $6 billion in the second half of the decade. Its hydrocarbons business will command investments of $9 billion to $10 billion out to 2025, adjusting to about $8 billion by 2030.

Other explanations for the lower vote share for the Follow This motion could be that BP investors believe the company's net-zero plan is Paris-aligned, Follow This said, or that previously supportive investors may have divested their stake in the oil major.

BlackRock Inc., one of BP's largest shareholders, voted in favor of the Follow This resolution in 2021 but may have shifted to vote against the motion in 2022, the activist said.

Follow This added that the 88.5% support for BP's in-house net-zero plan "signals discontent" with the strategy, given all the other management resolutions achieved support in excess of 90%.

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