BP's naughty antics

Welcome to the Strawman, the daily climate newsletter that’s like a sunny spring day after the coldest of winters - here to warm you up and give you that fuzzy feeling.

Today, we’re looking at some new changes in BP’s strategy on the path to Net Zero that have left some angry, and other counting their cash - let’s dive in.

BP’s climate u-turn

Imagine this. You’re sitting an exam - you’ve put in the work, have revised, are writing out the answers and feeling pretty good. But then with 5 minutes left, you decide to go and scribble out most of your answers and write a bunch of new ones.

See, this is what’s happening with BP. Over the past few years, they’d been industry leading in some of their commitments to cut back on fossil fuels - aiming to cut oil and gas output by 40% by 2030 vs. 2019 levels.

Sounds good right?

Not anymore - BP has lowered it’s aims, now looking to cut ouput by only 25% by 2030 - citing the Ukraine war and energy security as the rationale.

Tinfoil hat time

While on the surface this seems like a feasible explanation, the Strawman has a bone to pick. See, one other thing has changed pretty significantly between when BP made these climate pledges and now.

Interest rates.

We’re no economists, but there’s an interesting thread to pull at here (see what we did there?)

Interest rates have risen significantly from all-time lows during the pandemic, to 30-year highs to combat inflation since - and these have a huge impact on how businesses are valued.

When interest rates are low, a dollar 5 years from now is worth a little less than a dollar today - but when rates are high, dollars 5 years from now are worth a lot less than dollars today. By pushing back on their pledges, BP will likely end up investing less in the transition over the next few years - meaning saving more dollars today.

Investors noticed this shift in strategy - BP’s share price went up 10% in 48 hours, but some investors were less than pleased.

The return of the investor

BP's U-turn on its climate pledges has ruffled the feathers of investors, who are now banding together to express their discontent.

Five major UK pension schemes, together overseeing £244bn in assets, are voting against the reappointment of BP's chair, Helge Lund.

Shareholders argue that BP should have consulted them before making these significant changes, as they hold a stake in the company's long-term success and climate strategy - a 10% overnight uptick is one thing, but not worth it if it threatens the long-term viability of the company.

BP's U-turn on its commitments is a stark reminder that businesses need to strike a balance between addressing immediate concerns and staying committed to the fight against climate change. One thing is clear: the battle for a greener future is not only being fought in the streets, but also in the boardroom, where investors are becoming a driving force for change.