After a year of upheaval in which BP scaled back its green ambitions and turned back to oil and gas under fresh leadership, the British energy giant faces an exceptionally unruly annual meeting this month, with a snowballing investor revolt over its climate targets.
The company’s decision to exclude a resolution on climate targets filed by Dutch shareholder activist group Follow This has turned into a test of strength between investors and its new management, led by chairman Albert Manifold and Meg O’Neill, the first female chief executive of an oil major.
Legal & General Investment Management, a top 10 BP shareholder, said last week it would vote against Manifold’s election as chair, and warned that blocking the Follow This resolution marked a “reduction in transparency” that constrained shareholders’ ability to price risks associated with the energy transition.
Proxy adviser Glass Lewis, one of the firms that advises shareholders on voting, has also recommended ousting Manifold. Candriam, an asset manager, said it would vote against all incumbent directors, as well as the chair and CEO, over the company’s lack of progress in addressing “material long-term transition risks”.
BP said in a statement: “We are fully focused on building a simpler, stronger and more valuable BP.”
The company said last year it would increase oil and gas investment to around $10bn a year, up from previous guidance of $8.5bn annually, and had gone “too far, too fast” on the transition, as it came under pressure from hedge fund Elliott Management.
Its shares have rallied nearly 70% over the last 12 months, with a war-driven rise in oil prices giving the company’s valuation a sharp boost last month. But this year’s shareholder rebellion goes wider than the company’s return to petroleum.
BP is asking for support from shareholders to hold its annual meetings online, and to withdraw two climate reporting resolutions passed in previous years – moves that have provoked a backlash from investors sensitive about the G – for “governance” – of ESG.
The Local Authority Pension Fund Forum criticised “a pattern of actions that collectively reduce shareholder oversight and accountability”. It has also recommended its members vote against Manifold.
LGIM holds around 1.5% of BP’s shares, while the UK council pension funds hold 1.3%. Along with smaller investors who have challenged BP’s management, the declared revolt is over 3% and expected to rise.
Newsletters
Choose the newsletters you want to receive
View more
For information about how The Observer protects your data, read our Privacy Policy
The BP revolt marks a potential shift after years in which support for climate resolutions has stalled at industry shareholder meetings, while ExxonMobil has pushed back ferociously against green activists.
Two years ago, the US oil giant sued Follow This, in a lawsuit that was eventually dismissed on jurisdiction grounds as the group is based in the Netherlands. Exxon has now sought to build a firewall against shareholder campaigning by enlisting retail investors in a scheme that would cast their votes in line with the wishes of management. The US oil major holds its annual meetings entirely virtually.
Sarah Brewin, who works on investor outreach at the activist group the Australasian Centre for Corporate Responsibility (ACCR), said the BP annual meeting later this month will mark a critical test of investors’ stomach for a fight. “Every year there are one or two bellwether votes,” she said. “This will be one of those votes.”
ACCR has filed a resolution asking for disclosure from BP that shows how the company’s oil and gas investments promote a disciplined approach to capital expenditure. The activist group says oil and gas represents 75% of BP’s losses and impairments since 2020. Dutch asset manager Robeco said it supported ACCR’s resolution and would also vote against Manifold.
A person familiar with BP leadership’s thinking said the company was clear about bringing “discipline and rigour” to its capital allocation but that disclosing some project-level information might not be possible as it was commercially sensitive.
Mark van Baal, chief executive of Follow This, said the resolution filed for this year’s meeting followed a year of discussion with investors across Europe and a shift in tactics.
He said: “Exxon didn’t succeed in bankrupting us with the lawsuit because it was dismissed, but it sent an enormous chilling signal to other investors.
“If you are a large investor with a US office you can be sued for talking about climate, and you can lose the government as a client. So we asked for something every investor wanted to know: how are you going to deal with declining oil and gas markets?”
In a statement on BP’s website, Manifold said the Follow This resolution had been excluded as the board concluded it would be “ineffective”. He said the disclosure required by ACCR “cuts across the board’s responsibility to decide how to address disclosure for all shareholders.”
Manifold’s appointment last year prompted speculation he might move BP’s listing to the US, as he oversaw a transatlantic switch while CEO of building materials company CRH. There, the business might be less susceptible to green activism – but any such move would require rallying shareholder backing first.
Photography by Jason Alden/Bloomberg via Getty Images