Climate campaigners celebrated on Thursday as 98% of shareholders backed a resolution forcing BP to come clean about the impact that climate change will have on its operations.

BP is a company which emits about the same volume of greenhouse gases as Norway. It has advocated for a global economy-wide price on carbon, yet also scaled back its investments in renewable energy. Thanks to the resolution, it will have to be more transparent in the future about how it plans to move towards a greener business model.

The Financial Times described the vote as a “major victory” for activists, while transparency pressure group CDP called it “a game changing day”.

Yet the resolution, though unusual, was not controversial. BP itself backed the motion, and it received the overwhelming support of shareholders across the board. A similar motion, backed by Shell, will be put to vote at their AGM on 19 May.

Carbon Brief looks at whether the resolution could change BP’s approach to climate change for the better.

Disclosure

Spearheaded by a coalition of investors called Aiming for A and backed by shareholders as diverse as the Joseph Rowntree Foundation, Aviva Investors and the Jesuits in Britain, the resolution, two months in the making, is a cautious document.

Matt Davis, communications director at ShareAction , one of the groups involved in presenting the resolution, tells Carbon Brief:

“If you’re talking about 55 institutional investors, some of them are going to be naturally more progressive than others in this area. To get 98% of the vote through, I think it’s fair to say we filed resolutions that were supportive of the company, but stretching. The real question now is the rigour with which BP lives up to its commitment on this stuff.”

The resolution aims at getting BP to disclose more information about climate change in its annual reporting. This may be used by campaign groups to increase pressure on the company in the future, but will do nothing to force BP to substantially change its business model in the short term.

Indeed, at its annual general meeting, BP chairman Carl-Henric Svanberg said that the company is “not yet ready to set [emissions] targets”, adding that such a move could be “counterproductive”.

Some of the shareholder demands do not ask BP to go much beyond than what they already choose to disclose – something which the company board points out in its response to the filed resolution. It says:

“Many of the requests made in the resolution are already provided through BP’s existing disclosure processes at bp.com/sustainability.”

The first element of the resolution demands BP to report more information on how it manages its own emissions, produced by the company’s operations.

Helen Wildsmith, head of ethical and responsible of investment at CCLA, one of the investor groups behind the resolution, tells Carbon Brief:

“The first one is relatively easy because they already declare a lot of information about emissions management.”

BP has, for instance, already disclosed a large amount of information on its strategy to handle greenhouse gas emissions to CDP (formerly the Carbon Disclosure Project), attaining a ‘B’ in its carbon performance band, assessed on a scale of A-E (where ‘A’ is best).

The resolution statement says that its main interest is tracking BP’s progress towards this ‘A’ grade.

Resilience and renewables

The second element of the shareholder resolution is seen by many as the crux of the campaign, as it plays into the debate around stranded assets, and whether BP’s fossil fuel reserves could lose value in the future under various climate change mitigation scenarios, as set out by the International Energy Agency.

In particular, the shareholders are demanding information on how BP would respond under the IEA’s 450 scenario – a hypothetical future in which global temperatures are successfully limited to below the international target of 2C and atmospheric concentrations of carbon dioxide stabilised at 450 parts per million.

Currently, BP’s 2035 Energy Outlook only stress tests its business against the policy scenarios it considers most likely. It predicts that energy demand will increase by 37% between 2013 and 2035, compared to a 14% increase in the IEA’s 2C scenario in its 2014 World Energy Outlook.

The success of the resolution means that BP will now have to tell investors how its portfolio will show resilience to the stronger climate action envisaged by the IEA in its 450 scenario as part of its routine reporting from 2016.

In information disclosed to CDP, BP says that the likely scenario depicted in its 2035 Energy Outlook is a “key tool in assessing mid to long-term risks/opportunities associated with climate change”. It adds:

“This is supplemented by consideration of a wide range of scenarios and projections by other organisations, including the International Energy Agency.”

Getting BP to disclose these considerations is one of the most demanding elements of the resolution, says CCLA’s Wildsmith:

“Businesses stress test against a range of scenarios constantly. That’s part of what businesses do. The extent to which they make that public varies, and you tend to need to think through very carefully how you’re going to disclose it if you’re going to do it publicly, rather than disclosing to a board. So there’s a good deal of stretch within that, but it’s an extension of current practice.”

She adds that BP has already been transparent about its spending on renewables. The company has an $8 billion investment plan, but this ends in 2015. Campaigners would like to use the resolution to know how much BP plans to spend in future, including for carbon capture and storage, on which work has halted.

The company’s work on renewables has so far been focused on biofuels and wind energy. BP Solar was shut down in 2011 on the grounds that it did not make money.

Incentives and lobbying

The fourth part of the resolution concerns key performance indicators and incentives – in other words, how BP measures and encourages its executives to pursue a climate friendly business model.

BP already lists its key performance indicators and incentives in its Annual Report. Among its measures of success are the company’s greenhouse gas emissions and how much of its consumed reserves of oil it replaces each year.

Shareholders have said they would like to see how BP’s approach to incentives is “evolvingâ?¦ in the context of the transition to a low carbon economy.”

ShareAction’s Davis tells Carbon Brief:

“Our position is it’s a bad idea to incentivise your managers to go and drill for risky exploration in areas like the Arctic. We want to know what their bonus is and what their KPIs are around this stuff so that we can see whether the company is living up to its talk on wanting a low carbon transition.”

BP’s current incentive scheme runs up to 2017. Disclosure on if and how the company intends to reshape it could help campaigners to pressure BP into providing more encouragement to pursue climate-friendly actions after this point. In this case, disclosure could lead to action on climate change.

Finally, the resolution demands greater clarity on BP’s activities to lobby on climate regulations. Campaigners say that the company has started to be more transparent about its positions, but that further disclosure is needed, particularly on whether it agrees with BusinessEurope’s opposition to European climate policy.

BP quit the controversial climate sceptic lobby group ALEC in March, but did not link the move to its position on climate change. It has also lobbied for a price on carbon.

Implications

The success of the activist shareholders in getting the motion passed has implications for the growing campaign to spurn engagement with companies like BP and Shell. Campaigners arguing for divestment say that withdrawing funds altogether is the best way to pressure fossil fuel companies to take a more progressive stance on climate change.

Danielle Paffard, UK divestment campaigner for 350.org, tells Carbon Brief:

“When BP pledge to be more transparent about climate risk and in the same breath say that they have no intention to reduce their carbon emissions, shareholders need to ask themselves if what they are doing is strong enough.

“While BP and Shell approve shareholder resolutions on climate change, they cut renewable energy programmes and are moving full steam ahead to open up new carbon frontiers like Arctic drilling and tar sands. Holding on to your shares in these companies makes you complicit in driving the climate crisis.”

But the success of the resolution will still depend on whether BP lives up to the spirit as well as the letter of the resolution, says Davis, who adds that ShareAction sees the two positions of engagement and divestment as complementary to one another.

Ben Caldecott, who leads the stranded assets programme at Oxford University tells Carbon Brief that, despite its cautionary approach, the resolution still has the potential to make a difference. He says:

“It is a symbolic step and sets an important precedent for other companies and natural resources companies exposed to environment-related risks (such as climate change) that can strand assets. They will come under increasing shareholder to pressure to actively manage these risks and if they don’t, there will be direct and indirect costs associated with inaction.”

Shareholders will be engaging with BP in the future to ensure that the resolution means that they get the information they need to continue pressuring the company to adopt a greener approach. There is also the possibility for more resolutions to be put forward in the future.

The real success behind the resolution now will be whether BP fulfils its end of the deal.