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BP's Net-Zero Emissions Ambition Sparks Activist Investor Interest

What’s happening? Jeff Ubben, chairman of ValueAct Capital Management, has said publicly he is building a position in BP after it announced plans to reduce its carbon emissions. Ubben said BP's plan to cut emissions from operations and production of oil and gas to net zero by 2050 went far beyond those pursued by the company's peers. ValueAct's investment will be made via its $1bn Spring Fund, which focuses on environmental and social investing. Ubben added in order for asset managers to have an impact via their investments they have to take stakes in companies whose core operations deal with climate change. 

Why does this matter? As ESG-focused investing grows in relevance and popularity, oil and gas companies may well be questioning where they fit in. US shale gas producer Antero Resources, for example, recently warned shareholders it may not be able to access debt or equity markets to raise capital if concerns surrounding climate change persist. 

The debate about whether it’s better to divest of fossil fuels entirely, or retain a stake in order to have an influence has been a prominent question amid its rise. Ubben’s view that asset managers need to invest in businesses whose core operations impact climate change will likely find support among those favouring the latter of these options.

It’s significant ValueAct’s position is coming from an environmentally-focused fund. This may suggest the firm intends to hold BP to its targets on an ongoing basis, rather than simply awarding its new CEO for an impressive presentation.

Also significant is BP's commitment to maintaining its dividend in light of its climate-focused ambition. Many of its peers may view ESG and performance as antagonists. Committing to the stock dividend suggests BP actually sees a link between these two factors. 

In the 24 hours following its announcement, BP’s share price dipped by about 3%, although the entire European energy sector has been weak and the spread of coronavirus has hit stocks more broadly.

Not everyone has embraced BP’s targets positively, with activists criticising its ongoing oil and gas exploration operations and the fact not all Scope 3 emissions are included in its ambitions.

Further reading:

Nick Finegold is Founder & CEO of Curation Corp, an emerging and peripheral risks monitoring service.


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