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Stewardship Under Scrutiny: BP's U-Turn Shakes the Oil Giants
Let's ditch the red tape and dive into the latest drama unfolding in the oil world.
David Wighton Sunday, March 1, 2025
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Heard about BP's shocking about-face on its climate strategy? Well, buckle up because it's caused a major stir among investors, raising important questions about long-term business sustainability. Here's the lowdown.
First off, you might have heard that over a quarter of BP's shareholders didn't exactly welcome its chair, Helge Lund, back with open arms at the 2025 AGM. This stands as the largest shareholder rebellion against an energy sector chair in more than two decades. heavyweights like Legal & General have spoken out against BP's decision to axe its 2020 promise to reduce fossil fuel production by 40% by 2030. They've considered this strategy a serious risk to their clients' portfolios.
Now, let's talk money. BP's strategy shift includes slashing $5 billion from green investments (now representing only 5% of its capital expenditure) and increasing oil/gas spending to a whopping $10 billion. Despite the aim to boost profits, BP's shares saw a 3% dip over the course of one month (as of early April 2025) and have plummeted a staggering 25% year-on-year, trailing behind peers like Shell and ExxonMobil that capitalized on post-Ukraine energy demand.
BP's flip-flop has left it in a ticklish spot between climate-conscious investors and fossil-focused activists, with both factions showing disappointment:
- Green advocates think BP is overlooking long-term renewable trends.
- Fossil-friendly shareholders, such as the activist hedge fund Elliott Capital (owning a 5% stake), are pressing for short-term oil/gas profits to address BP's poor returns.
Caught between these competing stewardship priorities, BP's revised climate strategy has yet to win approval from either camp. The absence of a shareholder vote on the new strategy has further eroded trust.
Investors are now grappling with whether BP can balance transition risks (like stranded assets and regulatory shifts) with immediate financial pressures. And if this wave of dissent continues, it could force other energy companies to steer clear of similar about-faces or risk losing investor support.
- Amidst the recent controversy, investors are questioning the long-term business sustainability of BP, particularly after its surprising U-turn on its climate strategy.
- The reconsideration of BP's climate strategy, as evidenced by its decision to cut green investments and increase oil/gas spending, has sparked concerns among investors like Legal & General, who view this shift as a risk to their clients' portfolios.
- The finance world is closely watching BP's ability to navigate the competing stewardship priorities of climate-conscious investors and fossil-focused activists, both of whom have voiced disappointment over the oil giant's revised climate strategy.
- The absence of a shareholder vote on BP's new climate strategy, following its U-turn, has further undermined investor trust and may encourage other energy companies to rethink their own strategies to avoid a similar backlash.
