View the article online at http://citywire.co.uk/money/article/a794196
BP and Shell investors demand answers on climate risk
Shareholders concerned about the risk climate change poses to oil companies have filed a resolution calling for answers.
Shareholder action group ShareAction is spearheading a coalition of 150 investors in BP and Shell who are demanding that the oil giants provide details of their plans to adapt to climate change caused by greenhouse gases.
The alliance of investors includes the Church of England, the Environment Agency pension fund and pension schemes from the UK, US and Sweden, which in total control £15 billion of assets. They have filed a resolution requiring BP (BP) and Shell (RDSA) to disclose the climate change risks they face.
The resolution calls on the oil companies to be more transparent about their plans to comply with climate change goals, their lobbying activity and incentive schemes.
The investors want BP and Shell to:
- Stress-test their business models against the requirement to limit global warming to 2˚C, as agreed by governments at the UN Climate Change conference in 2010;
- Reform their bonus systems so they no longer reward climate-harming activities;
- Commit to reduce emissions and invest in renewable energy;
- Disclose how their public policy plans align with climate change mitigation and risk.
By filing the resolution, the companies will be forced to vote on these measures at their annual general meetings – BP’s AGM is in April and Shell’s is in May – and if a majority votes in favour of the resolutions, the companies will be forced to implement changes.
Matt Davis of ShareAction said that although the resolution was put forward by institutional shareholders, individual shareholders can make a difference. Many pension funds hold oil company shares because of their dividend paying benefits which mean many pension savers will be invested in BP and Shell.
‘What we want [individual shareholders] to do is email their pension funds and say they’ve heard about the resolution and ask whether [the pension fund] is supporting the resolution and if not then why not because [the companies] are putting investors at risk,’ said Davis.
‘Pension funds listen to engaged members. We have thousands of pension savers actively engaged and they are capable of having a big impact on the investment [choices of pension funds].’
ShareAction is also launching a website to help individuals contact their pension funds .
Why does it matter?
While there are obvious climate change concerns relating to BP and Shell’s business models, there are also profitability concerns for shareholders.
The first problem is impending ‘global regulation around climate change’ that will be put in force to try and meet the UN’s requirement to limit global warming to 2˚C, said Davis.
‘If we are really going to keep global warming to 2˚C then we really cannot burn much more [fossil fuels] that come out of the ground, and if we can’t burn anymore the big question is why get more of it out?’
The tumbling oil price has also put pressure on companies and last week Goldman Sachs slashed its forecast to $40 per barrel – a barrel of oil currently costs $50. However, in order to be profitable for oil companies, barrels need to be sold at around $90.
The combination of the need to keep fossil fuels in the ground and the lack of profit from extracting them means the share price of oil companies could be hit, and investors could be left with what is known as ‘stranded assets’.
‘What we have heard from savers is that they are concerned that the risk of climate change could affect their long term retirement plan and they want to know the financial services industry is taking this seriously,’ said Davis. ‘If it’s not taking it seriously then many are saving they want the option of pension funds that do not invest in those companies.’
Davis said climate change was not ‘a moral question but a question of where the value is’.
‘We are not calling for divestment but for change. [BP and Shell] have the opportunity to engage or keep their heads in the sand,’ he said.
‘More investors realise that being invested in fossil fuel companies is risky so there is only so long they can keep their heads in the sand…We want companies to do well because we would like to have a planet that works in 50 years and that is something everyone can get on board with.’
A spokesman for BP said: 'We continue to have constructive discussions with CCLA (which provides investment management for charities, faith organisations and local authorities) and other shareholders on these points. The shareholder resolution is being filed for our 2015 AGM, and we will carefully consider it and respond appropriately before the meeting.'
News sponsored by:
Making the most out of Europe's potential means seeing things differently. Learn more about how BlackRock's focused approach to investing in Europe helps investors unlock the continent's vast potential.
In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
More about this:
Look up the shares
More from us
- Alliance Trust: what we stand for
- Lawyers rally Tesco shareholders for redress fight
- Aviva: is Friends bid a rights issue in disguise?
- How to become a shareholder activist
- Renewable returns: 5 top green and ethical fund picks
- Ditch the coal and go green, says Jupiter's Thomas
- Ethical bond funds put to the test
- Plummeting oil: the impact on green investment
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add firstname.lastname@example.org to your safe senders list so we don't get junked.