It has defined the destination of the company in 2050, while leaving open a range of options for the management to identify the transition pathway suitable to its business model as energy policy and technology evolve. This means that BP would still invest in oil & gas assets, at least in short term, while developing low carbon ventures to support its long-term growth.
It is, in our view, a commitment comparable to some other major international oil companies, including Shell, which committed to halving its net carbon footprint by 2050 last year. We believe that it is essential for companies in the sector to come up with a uniform way to communicate their commitments, e.g. benchmarking them to the ambitions set out in the Paris Agreement.
BP’s move also further widens the gulf between the European companies, which have taken more progressive steps, including companies such as Equinor and Total with their substantial clean energy investments and Repsol with its own net zero target, and oil and gas companies in the rest of the world, which largely remain on a business-as-usual trajectory. Despite concerted investor engagement efforts through the Climate Action 100+ initiative, US supermajors including ExxonMobil and Chevron have barely shifted their core business strategies, and have yet to set long-term Paris-aligned targets.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
It is essential for companies in the oil & gas sector to come up with a uniform way to communicate their commitments
Steps we would recommend include:
A review of the internal carbon price used in project assessments, including an assessment of potential offsetting costs
An improved mechanism to veto fossil fuel investments if such additional supply does not align with the ambition set out in the Paris Agreement, a key ask in the resolution from Climate Action 100+ investors at the 2019 AGM
Identification and disclosure of which low-carbon technology pathways the company will be pursuing