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BP battle lines drawn as investors demand vote over green shift

Influential shareholder group calls for vote before any significant reversal of climate strategy, it is reported

BP CEO Murray Auchincloss.
BP CEO Murray Auchincloss.Photo: BP
Senior Correspondent

A group of 48 international investors want British oil giant BP to allow a shareholders' vote before embarking on any "reset" of strategy that waters down its climate commitments, setting up a potential showdown with US hedge fund Elliott Management.

The investors' concerns were raised after BP CEO Murray Auchincloss announced plans to "fundamentally reset" strategy in order to boost profitability. The strategy is due to be announced at the company's investors' day next Wednesday.
Speculation about a significant retreat from renewables had already been swirling after it emerged that notorious activist Elliott Management had built up a stake of nearly 5% in the London-listed company.
An unnamed person said to be familiar with Elliot's thinking told the Financial Times newspaper that the hedge fund wants to see a "fundamental pivot including strong capital allocation, a right-sizing of costs and a divestiture plan".

BP's stock price jumped on news of Elliott's move, but institutional investors are concerned that BP's new strategy will result in a retreat from climate goals.

"BP has previously offered a shareholder vote on its transition strategy and we expect a similar level of accountability to be maintained for future material strategy changes," the investors stated, in a letter to BP chair Helge Lund quoted by the FT.

Signatories to the letter named in the report included Rathbones Investment Management, Phoenix Group, Robeco and Royal London Asset.

The sum of the shareholdings of this group still only amounted to about half of Elliott's position, according to the FT report.

The shareholder stand-off increases the pressure on Auchincloss, who has already steered BP away from the 'Reimagining Energy' strategy put in place by his predecessor Bernard Looney.

Launching his Net-Zero vision for the company back in 2020, Looney pledged that crude oil production would be allowed to decline 40% by 2030, with investment pivoting to renewables for an alternative source of revenue.

The reduction target for oil was lowered to 25% two years ago and, under Auchincloss, BP has streamlined its renewables and low carbon energy portfolio and boosted oil and gas capex to stave off an immediate decline in production.

A new offshore wind joint venture with Japan's JERA group was described as part of a BP strategy to "decapitalise" its renewables portfolio.

With Elliott in place, and fears that BP may be vulnerable to a takeover, there are growing expectations that the target for reducing oil production will be extended or dropped entirely, implying more capex for this division.

BP could also emulate Shell by placing more emphasis on liquified natural gas and the relative reductions in emissions that can be offered by substituting LNG gas for dirtier fossil fuels, as well as investing in combined cycle power generation.

Vote wanted

The Looney-led strategy, which promised to pursue profitability in a Net Zero environment, was put to a shareholder vote in 2022 and won an 88% approval rating, even with the proposed reduction in oil and gas production.

The group of institutional investors are calling for a repeat of that now, and want more detailed information on spending plans for oil and gas, including on how emissions will be constrained and the criteria for long-term profitability.

"We need a clearer picture of this expenditure's resilience and alignment with the Paris goals," Carola van Lamoen, head of sustainability at Robeco was cited in the FT as saying

The letter argued that it is "timely" to request that shareholder be given the opportunity to vote on the strategy at the next annual general meeting.

(Copyright)

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Published 19 February 2025, 11:10Updated 19 February 2025, 11:10
BPMurray AuchinclossHelge Lund