Does BP’s AGM signal renewed shareholder appetite for a climate fight?

The oil major’s hammering on Thursday marks the first big disagreement between investors and companies this proxy season

If sustainability teams thought they were in for a quiet AGM season this year, BP’s latest meeting may make them think twice. 

The oil major’s board suffered a series of humiliating defeats at the ballot on Thursday, including record levels of opposition to its chair, Albert Manifold.

The backlash centred on BP’s refusal to let shareholders vote on a climate resolution filed by Dutch investors, and its decision to seek permission to overturn previously-made commitments to report on its emissions. 

It also asked shareholders to approve a move to virtual-only annual meetings.  

Both of BP’s proposals garnered more than 50% opposition, while a climate resolution filed by UK and Swiss pension funds secured 26% of the vote – an unusually strong level of support for a sustainability proposal nowadays.   

Some investors were concerned enough about BP’s attempts to change its climate commitments, avoid in-person meetings and reject a shareholder proposal, that they voted against Manifold.

It was the Chair’s first official election, having taken the helm six months ago, and he faced 18% opposition. 

“I can’t think of another time in recent years when the chair of such a large company got nearly 20% opposition in their first year – they normally get the benefit of the doubt in their first election,” says Lindsey Stewart, director of institutional insights at Morningstar.   

“Shareholders are sending a strong message of unease about what’s perceived as a pushback on their rights.”

Stewart thinks BP’s meeting was idiosyncratic – that it doesn’t signal the start of a season of investor revolts – but there are at least a couple more on the horizon. 

BASF will face questions at its AGM on Thursday about its climate lobbying, for instance. 

Institutional investors in charge of a combined $1.25trn in assets will ask the German chemicals giant to align its policy advocacy with its climate goals and stop trying to weaken the EU’s Emissions Trading System.

Next month, Shell has agreed to let its shareholders vote on a climate resolution that matches the one that BP rejected. 

Mark van Baal, the founder of Follow This – the campaign group that tabled both those proposals – said the revolt at BP this week was “a warning shot ahead of Shell’s AGM”. 

According to research from advisory firm Georgeson, investors will also prioritise executive pay, artificial intelligence and cybersecurity issues at this year’s annual meetings.  

“We’re not going to have the kind of momentum we had in 2021 around sustainability at AGMs, but shareholders are demonstrating they’re still very prepared to engage on these issues, particularly when they intersect with financial materiality and corporate governance,” says Morningstar’s Stewart, adding that “companies should take note of the level of sensitivity around governance, whether it connects to sustainability, or strategy more widely”.

And, while annual meetings may be quieter than in the past, they may also prove to be more unpredictable. 

The Securities and Exchange Commission decided last year that anyone with more than 5% of shares in a US-listed company must follow its rules for activist investors if they want to influence that firm in any way. 

In practice, that means that if a large investor wants to steer a company on a particular sustainability topic, it has to enter into a much more complex administrative regime, which is almost impossible to comply with.

The result? Investors have stopped doing anything that could be construed as influencing a company – including telling them what they want.

Many have gone into ‘listen-only mode’, meaning they keep quiet during meetings, and don’t make requests or issue public statements. 

But that doesn’t necessarily stop them from voting in accordance with their overarching internal ESG policies.  

“With the changes we’ve seen in the US over the last year, big shareholders have become more reluctant to send signals to management about their expectations,” says Stewart. 

“And that increases the chance of surprises when the AGM comes along.”