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Troubled waters ahead as BP lowers its climate ambition

Troubled waters ahead as BP lowers its climate ambition

The CEO of BP Bernard Looney. Photo credit: BP / Graham Trott.

By Anders Lorenzen

When Bernard Looney took over the helm of oil and gas giant BP (British Petroleum) in 2020 it was with the objective to, once and for all, change its image to one without hydrocarbons.

The net-zero strategy unveiled under the leadership of Looney was largely applauded by energy transition experts and advocates and those in the clean energy investment space as one of the most ambitious in the world among any of the fossil fuel giants.

But the company which has gone as far as to brand itself as ‘Beyond Petroleum’ has yet again scaled back its climate ambitions for reasons that look very much like greed. 

When  the company, like many other fossil fuel giants, reported huge profits last year, largely due to the sudden increase in energy prices, some of its investors worried that a rapid shift towards clean energy would reduce the chances of gainful profits in the future, and pushed the company to scale back its green ambitions.

More oil and gas for longer

As a result, BP announced it would scale back its climate targets resulting in a cut to its 2030 emissions reduction target.

This has worried clean energy investors in BP. One of the key players in BP’s energy transition plans, Bruce Duguid, head of stewardship of Federated Hermes, who on the behalf of a large group of institutional investors called Climate Action 100+ (CA 100+), co-leads negotiations with BP on its energy transition plans, has voiced concerns of the break in ambition from the company. He explained that given the context of a very strong financial outcome, those investors with net-zero goals will be concerned about such a material change to BP’s absolute emissions reduction target. In addition, it raises a significant governance question, he added. 

According to data from Refinitiv Eikon, half of BP’s top-ten institutional investors are members of CA100+ and include 700 investors responsible for more than $68 trillion in assets under management.

The move by BP and Looney is even stranger as it comes only nine months after the company won shareholder support for a 40% cut in hydrocarbon output by 2030 from 2019 levels. After the u-turn by Looney, it is now estimated that this cut would instead be just 25%.

With this in mind, it cannot be ruled out that there might be a serious shareholder revolt at BP ahead of the 2023 shareholder vote  set to take place in May. CA+100 has said it will engage with the company ahead of May’s vote to make sure the strategy is consistent with the UN-backed target to limit warming to 1.5 degrees C.

BP has not changed its long-term ambition to reduce emissions to net-zero by 2050 and is still committed to using 50% of its spending budget on low-carbon businesses by 2030.

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