Shareholders Challenge BP to Confront Climate Change Risk

Oil giant BP is being challenged to confront the risk that climate change may pose to its future in a shareholder resolution published on Wednesday.

Pension funds controlling hundreds of billions of pounds are among the 150 investors demanding the company tests whether its business model is compatible with the international community’s pledge to limit global warming to 2C.

The 2C target means only a quarter of existing, exploitable fossil fuel reserves are burnable, according to a series of recent analyzes, implying that trillions of dollars of oil, gas and coal held by investors could become worthless and that further exploration for fossil fuels may be pointless.

The same shareholder resolution, which includes a ban on corporate bonuses for climate-harming activities, has been tabled with Shell and both will be voted on at forthcoming annual meetings.

“Climate change is a major business risk,” said James Thornton, chief executive of the environmental law organization ClientEarth, which helped coordinate the resolutions. “BP and Shell hold our financial and environmental future in their hands. They must do more to face the risks of climate change. Investors can help them by voting for these shareholder resolutions.”

The co-filers of the resolution include local authority pensions funds in the EU and US as well as UK ones, such as Greater Manchester, Merseyside and Lambeth, the Environment Agency, the Church of England and the Methodist Church.

“The financial risks of climate change are greater in scale and closer in time than most investors realize,” said Howard Covington, former chief executive of New Star Asset Management. “These resolutions help contain those risks at minimal cost. Investors have every reason to support them.”

BP spokesman said: “We continue to have constructive discussions with these and other shareholders on these points. The shareholder resolution is being filed for our 2015 AGM [in April], and we will carefully consider it and respond appropriately before the meeting.”

Exxon Mobil responded to a similar shareholder challenge in 2014 by stating that it believed it was “highly unlikely” that governments would succeed in their aim of cutting carbon emissions by 80% by 2050. Shell’s response to the same concerns was to state “there is a high degree of confidence that global warming will exceed 2C by [2100].” The 2C limit is widely seen as the threshold of dangerous climate change.

BP and Shell were targeted by the new shareholder resolutions because they have the biggest carbon footprints of all the companies listed on the London stock exchange. The resolutions also challenge the companies to reduce their own emissions and invest in renewable energy.

Financial experts, including the Bank of EnglandGoldman SachsStandard and Poor’s and Axa IM, have warned of the risk climate change policies pose to fossil fuel companies. Coal, oil and gas companies are also under attack from a fast-growing campaign that aims to stigmatize them by persuading investors to dump their fossil fuel shares, a call backed by Archbishop Desmond Tutu, the Rockefeller Brothers Fund and others.

Some argue that engaging with fossil fuel companies is a more effective tactic than divestment. But Jonathon Porritt, one of the UK’s most esteemed environmentalists who spent years working on sustainability projects with BP and Shell, last week said engagement was now futile because “hydrocarbon supremacists” at the companies had successfully ousted reformers wanting to diversify into green energy.

• This article was amended on 21 January 2015. The caption originally described BP as British Petroleum. It is not called this any more. This has been corrected.

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