In an open letter sent on February 13th, Reclaim Finance asks a group of 50 large investors to radically change their climate-related engagement strategies with oil and gas companies. The non-governmental organization argues that their current engagement practices have failed to lead to the oil and gas industry aligning with a 1.5°C pathway. Large integrated oil and gas companies still have fossil fuel expansion plans, and they make limited investments in sustainable energy. Reclaim Finance calls on investors to escalate their engagement with these companies by voting against strategic routine resolutions, suspending new investments, and making public statements.
The letter was sent to Amundi, BNP Paribas Asset Management, and other key investors engaging the sector through the Climate Action 100+ initiative.
Dear Madam or Sir,
We are writing to you and to other large asset managers to share our concerns regarding the lack of meaningful progress on climate issues from the oil and gas industry, and to call on you to radically shift your engagement approach with companies operating in this sector. We ask you to adopt a clear sanctioning approach given the failure of past engagements with the sector.
The oil and gas sector has been the focus of collaborative and individual engagement initiatives by the investment community on climate issues for many years now. Since 2017, this dialogue has become more structured with the creation of the Climate Action 100+. At the same time, groups of investors have formed to file climate-related shareholder resolutions at annual general meetings.(1)
Despite these efforts, the results achieved are derisory in the context of climate emergency, as acknowledged by the Carbon Disclosure Project (CDP) and the World Benchmarking Alliance which recently stated that “the oil and gas sector has made almost no progress towards the Paris Agreement goals since 2021”. (2) While some companies have made certain commitments, these are mostly disclosure-oriented rather than action-oriented, and remain highly inadequate compared to the efforts expected to reduce emissions and limit global warming to 1.5°C.
- Of the 34 oil and gas companies targeted by the Climate Action 100+, only 9 have committed to achieving net zero greenhouse gas emissions by 2050 on all scopes, none have a short-term decarbonisation target covering all scopes, and only 2 have published a decarbonization capital expenditure plan. (3)
- While the energy transition requires a reduction in fossil fuel production, 96% of upstream oil and gas companies continue to open new fields and 63% of oil and gas companies are planning new LNG terminals, pipelines or gas-fired power plants, even though these are clear science-based redlines to limit global warming to 1.5°C. (4) The integrated companies in the sector, including oil and gas majors such as TotalEnergies, BP, Shell, Eni and Repsol, are no exception. (5)
- Despite promising rhetoric on the subject, investments by the industry in sustainable energy are minimal. The sector represents only 1.2% of total clean energy investment globally, and the amounts invested only account for 2.5% of its total capital spending. These findings led the IEA to declare that “for the moment the oil and gas industry as a whole is a marginal force in the world’s transition to a clean energy system”. (6)
- Even worse, some major companies have scaled back their climate ambitions in 2023. BP significantly decreased its oil and gas production reduction target, from 40% reduction by 2030 to only a 25% reduction. (7) Shell dropped plans to cut oil production by 2030, planning instead a stable or slightly higher production. (8) TotalEnergies now aims to increase both its oil and gas production by 2 to 3% per year until 2028. (9)
- Furthermore, limited investments in sustainable energy are even more unjustified given that the largest companies in the sector have made high, unprecedented profits in recent years. These profits were largely paid out in the form of dividends when they should have been invested in the transition. (10)
By going against climate-conscious investors’ demands, the oil and gas sector shows a strong unwillingness to change that calls into question the effectiveness of current engagement practices. It must be noted that TotalEnergies’ decision to increase its 2030 oil and gas production target was taken after an unprecedented level of 30.4% of the investors voted in favour of a climate-related shareholder resolution.
Oil and gas companies’ resistance to change should lead investors to completely overhaul their engagement practices with the industry. In particular, we believe that it’s time for climate-minded investors to suspend new investments in oil and gas companies, including the purchase of bonds, until they have committed to stop developing new upstream and midstream oil and gas projects. (11) We call on you to fully use your leverage as shareholders, which includes making public statements, go beyond voting on climate-related resolutions and vote against strategic routines votes12 to unambiguously oppose and sanction these companies until they satisfy your asks.
We look forward to your response and are open to discuss this with you at any time.
Best regards,
Lucie Pinson
Founder and Executive Director of Reclaim Finance
