Are activist investors right to call out BP’s ESG strategy?

02 February 2024
Bluebell Capital Partners has urged bp to abandon its pledges to cut gas and oil output in the latest activist investor campaign

by Alex Blair

BP must abandon its “irrational strategy” to cut oil and gas production, activist investor Bluebell Capital Partners has said, in a move touted to heighten scrutiny on the fossil fuel giant’s ESG strategies.

London-based Bluebell, which has previously targeted Glencore and BlackRock with shareholder activism campaigns, called on BP to ditch its pledge to reduce oil and gas production by 25% by 2030 compared with 2019 levels, the Financial Times reported at the end of January.

This pledge, which Bluebell said was “utterly unrealistic”, is the only hard target from an oil major to cut output, set by former chief executive Bernard Looney in 2020.

While welcomed by environmental groups, investors including Bluebell have questioned the speed at which BP is moving away from hydrocarbons compared to the rest of the energy sector.

BP’s share price has fallen behind ExxonMobil, Shell and other main competitors, and there has been further depression at BP moving away from its ESG pledges.

Will the energy transition be taken out of Big Oil’s hands?

The oil and gas sector will soon reach a crossroads where eco-friendly policies are a strategic must, according to Martina Raveni, a thematic analyst at GlobalData.

“Striking a balance between fossil fuels and renewables or decarbonisation activities might become strategic for oil and gas companies in the future to maintain their license to operate in some countries. Sticking to what they know is not enough.”

Many environmental campaigners and industry experts have called for oil and gas companies to decarbonise directly, while others say it would be more effective for the likes of BP to focus on fossil fuels but become smaller over time.

Think tank Carbon Tracker takes this stance. In its Navigating Peak Demand report, Carbon Tracker suggested that “planning for declining upstream production may be the best way for many oil and gas companies to deliver maximum value to shareholders”.

Such advice is based on evidence that the global energy transition is undeniably underway. Investment into clean energy outstripped investment into oil and gas for the first time in 2022 – and did so by an even greater margin in 2023.

Bluebell’s David vs. Goliath playbook

Bluebell’s strategy with BP falls into the second camp. Launched in November 2019, the group manages just $150m in assets, primarily funded by co-founders Giuseppe Bivona and Marco Taricco. Both have held senior positions in US investment banks including Goldman Sachs.

Bluebell has a proven track record of impactful shareholder activism, challenging the policies and C-suite executives at several of the world’s largest companies.

In 2021, the investor pressured Glencore to separate its dealings in thermal coal, the most polluting fossil fuel.

Bluebell’s letter to management, updated in June 2023 and January 2024, described the miner and commodity trader as a “non-investible company for investors who place sustainability at the heart of the investment process.”

That same year, Bluebell managed to remove Emmanuel Faber as CEO of multinational food corporation Danone, even though the activist investor owned less than $20m of Danone, which had a market cap of $45bn.

Bluebell has also attempted to oust BlackRock CEO Larry Fink over allegedly politicised sustainable investment strategies, and called on pharmaceutical giants GSK to appoint directors with more scientific experience than chief executive Emma Walmsley.

Why is activist investing on the rise?

Shareholder activism campaigns have become increasingly common – and effective – in Europe, having begun as a predominantly North American phenomenon.

It involves activist investors aiming to influence the policies of publicly traded companies by acquiring a stake.

In the energy industry, there are various cases of activist investors leveraging minority stakes to force board members to resign – and hold companies accountable to ESG pledges.

With minimal shareholdings, activist investors need the support of larger investors to succeed in their campaigns.

In 2021, hedge fund Engine No. 1 carried out arguably the most notable activist investment campaign against ExxonMobil, the world’s largest listed oil company.

Despite holding just 0.02% of Exxon’s shares, Engine No.1 managed to replace a quarter of the oil giant’s board with directors recommended for their expertise in renewable energy, technology and regulation.

Exxon has recently faced criticism for filing a lawsuit to block a vote on climate pledges brought forward by Follow This, a Dutch activist investor group.

Shell, meanwhile, is also facing an internal revolt from investors that own around 5% of its shares, after a Follow This resolution caused major disruption at the company’s AGM.

This article was first published by MEED's sister site Energy Monitor

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