BP and Shell fail to report “actions taken” after shareholder rebellion on product emissions (Scope 3)
- Code requires companies to report on “actions taken” within six months after more than 20% voted against management at AGMs
- BP in breach of UK corporate governance code for 20 days
- Shell and BP both ignore Scope 3 concerns
Thursday (20 days in breach), BP published a statement with no substance. This follows Shell’s statement, also lacking substance, save for a reiteration of targets for Scope 1 and 2.
Response by Mark van Baal, founder of Follow This:
- “Their silence about Scope 3 speaks volumes about oil majors’ reluctance to engage with the fundamental concerns raised by shareholders.”
- “We are keen to help the leadership of these companies to understand the consequences from this pattern of growing shareholder support for Paris-consistent targets for all emissions.”
- “These companies’ addiction to turning hydrocarbons into petrodollars has blinded them to opportunities in renewables, but investors are losing patience with oil majors’ determination to increase total emissions.” (for the record: Shell and BP promise to decrease average emissions (carbon intensity) while increasing total emissions (absolute emissions))
- “Investors should be aware that both Shell and BP consider a vote against the Follow This climate resolution as ‘clear support’ (BP) for their current strategies to increase emissions this decade, in contradiction to the Paris Accord.”
Notable remarks about Shell’s and BP’s recent statement:
- Shell’s goal to “fully understand the reason why [investors] voted both ‘For’ the [in house] Resolution 20 and ‘For’ the [Follow This] Shareholder Resolution” remains unanswered in its statement.
- “BP keeps shareholders in suspense for 20 days to say nothing. If you would read the statement without context, you would have no idea what it is about. The words climate and emissions are notably absent.”
Votes against management advice at BP: 21%
- BP board advised shareholders to vote against the Follow This climate resolution (Resolution 13) at AGM in May 2021. The company said “asking us to change our targets and aims now would necessitate a change in strategy” and “Going back to the drawing board on strategy, targets and aims would disrupt our business plans,” (Notice of Meeting page 24).
- Follow This resolution won support from 21% of votes cast
- After the ballot, BP said: “We recognise that some shareholders (20.65% of votes cast) chose to support this resolution. We will continue to engage with shareholders on our strategy, targets and aims so as to ensure their views are fully understood. We will publish an update on this engagement, in accordance with the UK Corporate Governance Code, within six months of the 2021 AGM.”
Votes against management advice at Shell: 30%
- Shell in the publication of voting results: “We will seek to fully understand the reason why shareholders voted as they did, particularly those who voted both ‘For’ Shell’s strategy and ‘For’ the Shareholder Resolution, and will formally report back to investors within six months”.
UK Corporate Governance Code, Provision 1.4: When 20 per cent or more of votes have been cast against the board recommendation for a resolution […] An update on the views received from shareholders and actions taken should be published no later than six months after the shareholder meeting (full text below).
Background, emission levels:
- The IPCC could not be more clear: “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach” (IPCC Sixth Assessment Report Press Release, 9 August 2021)
- The Glasgow Pact reconfirmed the necessity for a reduction of absolute emissions of 45% by 2030 (compared to 2010), not an increase as both companies plan for.
- BP expects “the absolute level of emissions to grow between now and 2030, even as the carbon intensity falls” (Reimagine Energy, slides & script).
- Where the emissions will be in 2030 is “a guess,” answered Shell CEO Ben van Beurden during the shareholders’ meeting in May.
- According to in-depth research of Shell’s strategy by Global Climate Insights (GCI) concluded Shell will increase its (net) CO2-emissions by 4% by 2030 (compared to 2019).
Background, joint resolution
BP’s negative voting advice followed a failure to reach agreement between BP and Follow This to draft a joint resolution, after Follow This withdrew its resolution in 2020. BP wanted a resolution that supports its current strategy, targets and aims, that increases absolute emissions in this decade, while Follow This maintained its ask for Paris-consistent targets.
UK Corporate Governance Code, Provision 1.4: When 20 per cent or more of votes have been cast against the board recommendation for a resolution, the company should explain, when announcing voting results, what actions it intends to take to consult shareholders in order to understand the reasons behind the result. An update on the views received from shareholders and actions taken should be published no later than six months after the shareholder meeting. The board should then provide a final summary in the annual report and, if applicable, in the explanatory notes to resolutions at the next shareholder meeting, on what impact the feedback has had on the decisions the board has taken and any actions or resolutions now proposed.