Five of the UK’s largest pension schemes, which together oversee £244bn in assets, will vote against the reappointment of BP’s chair Helge Lund in a growing revolt among key shareholders over the oil company’s decision to slow planned cuts in fossil fuel production and carbon emissions.
Nest, which is the UK largest workplace pension scheme, along with the UK’s universities pension scheme, Brunel Pension Partnership, Border to Coast and LGPS Central intend to signal their anger at BP’s decision to revise its production targets and carbon emissions goals without consulting with shareholders.
BP in February pared back its industry-leading commitment to cut its oil and gas output by 40 per cent by 2030, compared with 2019 levels, and is now targeting a 25 per cent decline.
BP chief executive Bernard Looney described the move as a response to increased concerns about energy security prompted by Russia’s war in Ukraine. He said the company remained committed to achieving net zero emissions by 2050. But the new targets also mean BP’s emissions will fall slower, with the company now seeking between a 20 and 30 per cent drop in emissions by 2030, compared with its previous goal of a 35 to 40 per cent fall.
BP’s shares rallied more than 10 per cent over the 48 hours following the announcement, reaching their highest level in three-and-half years.
Nest said investors should have been given an opportunity to vote on the changes.
“It is disappointing to see BP rowing back on its climate pledges and particularly worrying that the company has not gone back to shareholders and given us a chance to vote on such a significant decision,” said Diandra Soobiah, head of responsible investment at Nest, which owns a £48mn stake in BP.
About 88 per cent of BP’s shareholders last year approved the targets set as part of its net zero ambition.
BP made record profits of more than $27bn in 2022 and Nest wants to see the company invest more in low carbon solutions and renewables instead of fossil fuels.
“We have serious concerns about BP reaching its 2050 net zero goal and the long-term success of the company if it continues on this path,” said Soobiah.
The £91bn Universities Superannuation Scheme said the paring back of BP’s 2030 targets was a “significant negative development” that it would have expected to merit an investor vote.
“We will vote against the re-election of the chair at BP due to the absence of meaningful engagement with shareholders on the recent changes to BP’s net zero strategy,” said David Russell, USS head of responsible investment.
Patrick O’Hara, director of responsible investment and engagement at LGPS Central, which oversees £55bn in retirement savings for 1mn local government employees, said the pension scheme would have welcomed an opportunity to express its views prior to BP’s “disappointing” shift in strategy.
“It is our intention to vote against the reappointment of the chair. We consider transition plans to be an integral part of corporate strategy and any changes to this should follow due process and consultation,” said O’Hara.
Faith Ward, Brunel’s chief responsible investment officer, said the change in strategy “serious imperils BP’s credibility as a company that will deliver on its promises.”
BP said that it valued “constructive challenge and engagement” with shareholders.
“We took careful account of what we heard ahead of our update on strategy announced in February, but we recognise that some shareholders and other stakeholders may have different perspectives on the decisions we take. These decisions are taken in good faith and we remain confident that they are in the best interests of the company and its shareholders,” said BP.
Additional reporting by Josephine Cumbo