Oil majors accused of using CA100+ as 'fig leaf' to disguise inaction

Channels: Carbon, Equity, Stranded Assets

Companies: Total, Climate Action 100+, EOS at Federated Hermes, BNP Paribas Asset Management, Royal Dutch Shell, BP, Actiam, Candriam, Crédit Mutuel Asset Management, Meeschaert Asset Management, Friends Provident Foundation, Reclaim Finance, Follow This, Intergovernmental Panel on Climate Change, Equinor, Church Commissioners for England

People: Mark van Baal, Lucie Pinson, Edward Mason

Oil supermajors have been accused of using joint statements with investor initiative Climate Action 100+ (CA100+) as a means to disguise limited action on emissions reductions.

The accusation followed French firm Total becoming the most recent oil major to commit to net-zero carbon emissions by 2050 through a joint announcement made with CA100+ through co-lead engagers BNP Paribas Asset Management and EOS at Federated Hermes.

Total outlined its ambition to reach net-zero carbon emissions by 2050 across its whole operations and the energy products used by its customers in Europe, encompassing Scope 1, 2 and 3 emissions.

Worldwide, Total intends to cut the carbon intensity of its energy products used by customers by 60% and announced intermediate steps of a 15% cut in carbon intensity by 2030 and a 35% reduction by 2040.

Total’s announcement followed fellow European oil supermajors also strengthening their climate pledges in recent months. Royal Dutch Shell set an ambition to be net-zero by 2050 in April and BP announced a similar ambition in February, both following engagement with investors. 

Further announcements could be forthcoming. With oil prices crashing amid the coronavirus (Covid-19) pandemic, some investors believe oil majors now see the “writing on the wall” for the industry and are looking to accelerate their transition away from fossil fuels

Nonetheless, the joint Total and CA100+ statement left many environmental campaigners and investors unimpressed.

A group of 11 institutional investors – including Actiam, Candriam, and Crédit Mutuel Asset Management – who filed a climate resolution at Total in April, continued to push for support for their own resolution.

Coordinated by Meeschaert Asset Management, the shareholder resolution asked Total to outline a medium and long term action plan to reduce its absolute greenhouse gas (GHG) emissions as opposed to simply its carbon intensity.

In a joint statement in French, the group of investors welcomed the updated ambitions from Total but pressed the firm to expand its net zero target across Scope 1, 2, and 3 emissions for the whole world rather than just Europe and “adopt a detailed action plan” on how to achieve this.

“The climate challenge does not have frontiers,” the investors said. “This first stage needs to be reinforced by an action plan outlining concrete and exhaustive objectives, including global GHG emissions of the group and notably outside of Europe.”

Consequently, the investors said they intended to maintain their resolution despite the announcement by Total.  They believe their resolution is intended to make Total “go further on the path that it wishes to take” through its updated ambition.

Friends Provident Foundation – a co-filer of the Meeschaert resolution – also described the refreshed Total ambition as “insufficient in a number of areas.”

“The interim targets apply only to the carbon intensity of products, not the company’s overall emissions, and they kick the difficult decisions into the long-grass with an intensity reduction target of just 15% by 2030,” the charity said.

Mark van Baal – founder of green investor group, Follow This, which has previously put climate change resolutions before Shell, BP and Equinor shareholders – said Total’s announcement “is not in line with the Paris Climate Agreement; and will therefore not lead to the much-needed shift in investments from fossil fuels to renewables.”

He added that when the 60% carbon intensity reduction is combined with the estimated 40% growth in energy demand, it would represent a net emission reduction of just 44% by 2050. According to the Intergovernmental Panel on Climate Change (IPCC) scenarios, however, an absolute emissions reduction of between 70% and 100% is required by 2050.

Friends Provident – which is not a member of Climate Action 100+ – also criticised the investors’ initiative for issuing the joint statement with Total.

“Whilst progress should be applauded, it is disappointing to see uncritical joint statements from Total and investors that ignore these obvious and significant flaws,” Friends Provident said. “Investors need to be wise to Total’s attempt to undermine support for our resolution at the forthcoming AGM.”

Among the 11 investors that co-filed the Meeschaert resolution, six are members of CA100+.

“Big Oil executives seize every opportunity to cite joint statements with CA100+ as a fig leaf to disguise inaction on emissions,” van Baal added.

“The CA100+ has the exact same goal as Follow This, but a different tactical approach,” he continued. “We believe that only concrete targets for all emissions will lead to the necessary shift in investments from fossil fuels to renewables.

Van Baal argued that the approach of CA100+ “builds consensus at the cost of lost transparency and urgency.”

Oil firms “have waved joint statements and a resolution with CA100+ to claim the endorsement of their largest investors,” he added. “Meanwhile, the capital investment plans of Big Oil tell the real, terrifying story. Oil majors remain determined to invest overwhelmingly in hydrocarbons in this decade. This is an unacceptable picture; CA100+ has introduced new complexity, albeit unintended.”

By supporting the measures announced by Total, Lucie Pinson – a director at French environmental think tank Reclaim Finance – said, that CA100+ co-lead engagers “BNP Paribas and Hermes EOS decided to protect their short-term interests as well as those of the biggest French polluter.”

“The decision by BNP Paribas is unacceptable but hardly surprising: BNP Paribas is the biggest French financer of fossil energy and its president sits on the board of directors at Total,” Pinson added.

Pinson said investors “must not be duped” and should vote for the Meeschaert resolution on 29 May.

Active members of the CA100+ initiative – including Church of England Pensions Board's ethics and engagement director Adam Matthews – continue to emphasise the progress that can be made through such engagement.

Edward Mason, responsible investment head at Church Commissioners for England, said it was “natural” that there was a high degree of scepticism levelled at the announcements by oil majors and that it was important that so many people continue to hold “companies’ and investors’ feet to the fire on these agreements”.

Church Commissioners for England acts as lead engager for US oil major ExxonMobil on behalf of CA100+.

“Oil companies naturally give rise to suspicion, given the business area that they're in and given the damage to the climate that their businesses have contributed to over the years,” Mason told Environmental Finance. “It is natural there’s going to be strong feelings about them amongst anyone that’s concerned about climate change.”

He argued it was “healthy” that there is a push for oil majors to provide more detail and accelerate their plans. Nonetheless, for CA100+ engagers the key initial stage is for these firms to make a commitment.

“Until you make that commitment, none of these other things can follow,” Mason said. “So that commitment is important, but it's not everything. It needs to be followed up and CA100+ engagement will continue.”

The fact that CA100+ jointly issued the statement with Total was also important, he added.

“Companies need to know that investors are with them when they're making these huge changes,” he said. “I think it's often not appreciated that there's risk for these executives in making these commitments. There's a risk that investors may not back them down the line. There may be difficult decisions to be taken and they want to know that investors are with them.”

Read Environmental Finance’s interview with Edward Mason on how the time is ripe for US asset managers to engage their domestic oil majors that are lagging behind on climate action.

Ahren Lester