ESG Viewpoint: BP sets a course for net zero
BP has committed to become net zero carbon by 2050 – we set out the steps we recommend it takes.
A major commitment to become a “net-zero operating” company by 2050 was unveiled by BP’s new CEO Bernard Looney, as he set out his ambitions for the oil supermajor. This commitment aims to address the long-standing question of whether oil & gas companies can transform themselves in response to the low-carbon energy transition.
It has defined the destination of the company in 2050, while leaving open a range of options for the management to identify the transition pathway suitable to its business model as energy policy and technology evolve. This means that BP would still invest in oil & gas assets, at least in short term, while developing low carbon ventures to support its long-term growth.
It is, in our view, a commitment comparable to some other major international oil companies, including Shell, which committed to halving its net carbon footprint by 2050 last year. We believe that it is essential for companies in the sector to come up with a uniform way to communicate their commitments, e.g. benchmarking them to the ambitions set out in the Paris Agreement.
BP’s move also further widens the gulf between the European companies, which have taken more progressive steps, including companies such as Equinor and Total with their substantial clean energy investments and Repsol with its own net zero target, and oil and gas companies in the rest of the world, which largely remain on a business-as-usual trajectory. Despite concerted investor engagement efforts through the Climate Action 100+ initiative, US supermajors including ExxonMobil and Chevron have barely shifted their core business strategies, and have yet to set long-term Paris-aligned targets.
The key question for us as investors is how BP will implement its commitment, on which the management will give more details in September 2020. We believe that achieving the goal will require a comprehensive and holistic consideration of carbon neutrality across all the aspects of BP’s operations to resist the temptation of continuing to scale its oil and gas assets for short-term gains.
Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.