BP Calls for Price on Carbon - Invest with Values

February 25, 2015

BP Calls for Price on Carbon
by Robert Kropp

Arguing that emissions are rising significantly more than scientists recommend, the oil and gas company states that a meaningful global price on carbon will incentivize participation in a low-carbon transition.

SocialFunds.com — Against odds with which US-based shareowners are unfamiliar, the UK-based Aiming for A coalition managed to file shareowner resolutions with BP and Royal Dutch Shell after identifying the two fossil fuel companies as having the highest carbon footprints in the FTSE100.

In the UK, a minimum of 100 co-filers is required to submit a resolution on proxy ballots. US-based co-filers of the resolutions include Christian Brothers Investment Services (CBIS), Mercy Investment Services, Connecticut Retirement Plans and Trust Funds, and Vermont Pension Investment Committee. According to the Church Investors Group, a number of whose members are co-filers as well, “These resolutions focus attention on the risks and opportunities that climate change poses for these companies and asks for further reporting on several areas.”

To the surprise of many, the board of directors of Shell publicly endorsed the resolution. By doing so the company has agreed to report on portfolio resilience to post-2035 scenarios, public policy interventions, and other areas essential to a low-carbon transition.

“Transparency and disclosure are at the foundation of good corporate governance for institutional investors,” Bill Seddon, Chief Executive of the Central Finance Board of the Methodist Church, said. “Shell has taken another significant step forward in recognizing that shareholder concerns on climate and carbon issues need to be addressed.”

Thus far, BP has not responded to the resolution with a similar endorsement, although the resolution does note that the company “recently joined over 70 countries and over 1000 companies in signing the World Bank statement for a price on carbon.” According to CDP, BP is one of some 150 global companies that use an internal price on carbon in their business planning; in BP’s case, the price used is $40 per ton.

In its 2015 Energy Outlook report, BP took the issue of carbon pricing into the public policy realm by calling for regulation. BP’s “projection shows emissions rising by 1% a year to 2035, or by 25% over the period, on a trajectory significantly above the path recommended by scientists,” the company stated. “To abate carbon emissions further will require additional significant steps by policy makers beyond the steps already assumed,” including “policymaking taking steps that lead to a meaningful global price for carbon which would provide incentives for everyone to play their role in meeting the world’s increasing energy needs in a sustainable manner.”

“History has shown the power of market forces in making economies less energy intensive as people have found more efficient ways to use energy,” CEO Bob Dudley said in a speech. “A global carbon price would help to unleash market forces and provide the right incentives for everyone to play their part.”

Last year, the Global Investor Statement on Climate Change, coordinated by four global investor groups on climate change, “called on government leaders to provide stable, reliable and economically meaningful carbon pricing that helps redirect investment commensurate with the scale of the climate change challenge.”

“Carbon is not priced and subsidies are distorting investment positions,” Anne Simpson, Director of Global Governance for California Public Employees’ Retirement System (CalPERS), said at the time. “If we don’t get the market aligned with our fiduciary responsibilities, we won’t capitalize the investment that’s needed.”

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