Investors in FTSE 100 oil company BP will gather for the company’s annual general meeting (AGM) today, an event that is being held in person in London and online. As well as the expected environmental protesters outside of the venue, there are two resolutions that are of key interest to ESG investors. These come after the company recently scaled back its carbon transition targets, without putting the decision to investors. The AGM also comes after a period of record profits for oil majors.
Resolution 4: to re-elect chairman Helge Lund
And:
Resolution 25: to align the company’s Scope 3 emissions reductions targets for 2030 with the Paris Climate Agreement (to limit global warming to well below 2 degrees above pre-industrial levels).
Why is Resolution 4 Controversial?
Five UK pension schemes are planning to vote against Lund’s re-election to register their views on the company’s ESG strategy. A vote against a chair is seen as an escalation to hold directors accountable over its plans (see below).
Who’s Voting Against Lund?
NEST, the UK’s largest pension scheme, plus the Universities Superannuation Scheme (USS), Brunel Pension Partnership, Boarder to Coast Pensions Partnership, and the Local Government Pension Scheme Central.
“If BP continues on this path we have serious concerns about them reaching their net zero goal and the long-term success of the company,” NEST said.
“We want to see them investing more in low-carbon solutions and renewables, instead of new oil and gas sites.”
What About Resolution 25?
This is separate from Resolution 4.
Dutch climate activist group Follow This, which crowdfunds share purchases to have a say at AGMs like these, has put forward the resolution.
Who’s Against it?
Norway’s sovereign wealth fund, which owns nearly 3% of BP shares, said it will vote against Resolution 25. Institutional shareholders ISS and Glass Lewis are also against it. “The proposal would represent a change in strategy from the one developed by the Board, which implies a potential constraint on the Board to develop and implement strategy,” ISS said.
Who’s Backing Resolution 25?
The Local Authority Pension Fund Forum (LAPFF) recommends that investors support the Follow This resolution.
What Are the Rules for Resolutions?
Resolution 4 needs over 50% in favour to push it through, whereas Resolution 25 needs more than 75%, a higher hurdle.
What’s the Morningstar View on Resolution 4?
Lindsey Stewart, Director of Investment Stewardship Research at Morningstar says:
“Many pension funds and asset managers have frequently indicated that they intend to hold specific directors accountable for companies’ net-zero strategies this year — this is a good example. In investment stewardship, voting against a company chair is one of the strongest escalations a shareholder can implement. So, there’s clearly very deep frustration on the part of the pension funds who intend to vote against Helge Lund’s re-election as chair.
“We’ve seen the rise of ‘say-on-climate’ votes in the last couple of years at UK and European companies, at which shareholders approve companies’ climate strategies and reporting. These votes aren’t mandatory, but BP did choose to hold such a vote last year, as did several of its European energy sector peers including Shell, TotalEnergies, Equinor and Repsol. So now, many shareholders are dissatisfied with BP’s actions to adopt less ambitious net-zero goals without offering shareholders the opportunity to vote again on the topic.”
What Does BP Say?
It’s urging shareholders to vote in favour of all resolutions (1-24), but to reject number 25. “We do not consider it to be in the best interest of the company and its shareholders because it is unclear, it encroaches on the board’s accountability to set the company strategy, and it is simplistic and disruptive,” the company said in the note to investors ahead of the AGM.
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