Wednesday 11 August, 2021: Environmental finance group Market Forces has lodged a resolution with BHP on behalf of more than 100 shareholders, calling on the company to manage down its fossil fuel production in line with its stated support for net-zero emissions and the Paris Climate Agreement.
“BHP’s repeated claims of climate concern are completely at odds with its continued bets on fossil fuel expansion. Just last week BHP committed US$544m to a new oil venture in the Gulf of Mexico,” said Market Forces Campaigner Will van de Pol.
“If BHP was looking to insult investors who are committed to climate action, it could scarcely find a better way than splurging over half a billion dollars on an expansionary oil project near Deepwater Horizon.”
“Investors need to make clear this is utterly unacceptable.”
Recognising the unacceptable financial risks posed by global warming, investors with more than US$43 trillion in assets under management have committed to the goal of net-zero greenhouse gas emissions by 2050 or sooner, while governments representing 50% of the global economy have committed to the same goal. Many of these investors will now be called to action with this new shareholder resolution, which would ask BHP to manage climate risk in line with the goal of a net-zero emissions economy by 2050.
The International Energy Agency’s (IEA) seminal Net-Zero Emissions by 2050 Scenario (NZE2050) – modelled to provide a 50% chance of limiting global warming to 1.5°C – highlights the existential transition risks facing fossil fuel producers, concluding there is no room to expand fossil fuel production beyond current levels. It also finds “Unabated coal demand declines by 90% to just 1% of total energy use in 2050. Gas demand declines by 55%… and oil declines by 75%”.
Despite these findings, and in contradiction of BHP’s support for net-zero emissions by 2050, the company continues to pour investor capital into new fossil fuel exploration and production.
On top of the recently-sanctioned US$544m Shenzi North oil project, examples of BHP’s fossil fuel expansion plans include:
- The Ruby and Mad Dog Phase 2 petroleum development projects, which carry a combined capex budget of over US$2.4 billion.
- The Scarborough offshore gas project (26.5% stake), slated for final investment decision by the end of 2021, with a total project cost of US$5.7 billion.
- Seeking approval to extend the life of its Mt Arthur thermal coal mine by 19 years to 2045. Considering Mt Arthur’s 23Mtpa nominal capacity, this extension could see up to 437 Mt of additional production.
- Petroleum accounting for 76.2% of BHP’s FY2020 exploration expenses, despite this business segment generating <10% of total revenue that year.
“Be it coal, oil, or gas, BHP remains in expansion mode. While the company’s own analysis shows a rapid low-carbon transition makes good business sense, it is simply failing to align its strategy with this outcome. Instead, BHP is betting billions against the Paris climate goals,” said van de Pol.
BHP recently announced divestment of its Cerrejón thermal coal asset, and is looking to sell its stake in the smaller of its metallurgical coal ventures (BHP Mitsui Coal), as well as Mt Arthur. The company is also reportedly considering divesting its oil and gas assets.
As noted in the resolution supporting statement: “While divestment addresses stranded asset risk exposure, it fails to manage the reputational risk associated with avoiding responsibility for employee transition support and site rehabilitation. By providing a leading example of responsibly managing down fossil fuel assets, BHP can preserve and realise the genuine value that exists in these assets, align with global climate goals, and support its workers in the transition to a decarbonised economy.”