Vote Against BP And Shell Chiefs Unless They Do Not Strengthen Commitments To Tackling Carbon Emissions!

During their annual meetings, two of the UK’s largest pension funds will vote against the renewal of top directors at BP Plc BP.L and Shell Plc SHEL.L unless both businesses increase their promises to reduce carbon emissions. According to the sources, the plan by Britain’s Universities Superannuation Scheme (USS) and Borders to Coast, which together manage 130 billion pounds ($156.36 billion) in assets, was part of attempts to force oil corporations and banks to make faster progress on climate change targets.

Under the new stewardship and voting strategy, they will vote more directly against responsible directors wherever feasible, USS stated in a statement. As long-term investors, they will do this if the firm has not published its climate transition strategy, has not met diversity goals, or if CEO remuneration is not aligned with corporate performance. 

“Having a much more personal approach to vote is more likely to generate change,” said David Russell, USS’s head of responsible investment. Colin Baines, stewardship manager at Border to Coast, stated that voting against management was “one of the most effective techniques of altering corporate conduct accessible to investors”.

Why there is a need to use the power of vote (if required) against oil companies?

BP announced in February that it sought to decrease emissions from fuels supplied to consumers by 20% to 30% by 2030, down from a previous target of 35% to 40%, and that it aimed to reduce overall emissions to zero by 2050. Shell has vowed to be a net zero carbon firm by 2050, with total carbon emissions peaking at about 1.7 billion tonnes in 2018. 

BP and Shell have pledged to reduce carbon emissions to zero by 2050. Yet, environmentalists and some shareholders have criticized them for not reforming their operations faster. Concerns have been heightened by BP’s decision to scale down its pledge to reduce oil and gas output by 2030, as well as statements from Shell’s recently appointed CEO that the company may produce more oil for a longer period.

In response to heightened worries about energy security caused by Russia’s war in Ukraine, BP’s Bernard Looney stated that the company’s oil and gas output will decline only 25% by 2030 compared to 2019 levels, down from a previous aim of 40%. Shell’s Wael Sawan is reconsidering an earlier vow to allow oil output to decrease by 1 to 2% yearly.

£91bn Universities Superannuation Society, one of the largest pension systems in the UK, said BP and Shell’s statements might imply a weakening of earlier stances on climate change, which will be included in USS votes at annual shareholder meetings in May. USS also wants to vote against directors of oil corporations that refuse to offer a breakdown of spending on initiatives that increase their carbon footprint, as well as any banks that fail to reveal their climate transition plans.

£38.3bn Border to Coast has also said that it will vote against the reappointment of Shell chairman Andrew Mackenzie and BP chairman Helge Lund. Under a revised stewardship policy, the chairs of Total, Petrobas, and Eni may also risk a negative vote.

The pension system will vote against the chairperson of oil firms that fail to set short, medium, and long-term emission reduction objectives, as well as those that do not incorporate climate risks into their business strategy and capital expenditure choices, under the new policy.

According to Simon Rawson, the director of corporate engagement at ShareAction, a nonprofit that promotes ethical investing, some investors were “not surprised” by BP’s decision to backtrack on its output reduction pledge. The decision was applauded by Ethics for USS, a consortium of academics advocating for the pension system to take action in response to climate dangers.

According to Paul Kinnersley, a member of Ethics for USS, USS should also stop supporting all new fossil fuel ventures and divest immediately from fossil fuel businesses that are not rapidly reducing emissions. Railpen, which administers £35 billion for British railway employees, announced in December that it would vote against the chairs of firms that failed to deliver a realistic response to climate change.

The last line.

Institutional investors have traditionally been hesitant to target individual directors, thinking that doing so might make potential board recruits less likely to accept posts. Yet, asset managers such as BlackRock and Fidelity International are aggressively targeting board members due to a lack of action on climate change.

edited and proofread by nikita sharma