There is trouble, it seems, in another ESG paradise.
There is trouble, it seems, in another ESG paradise. A year or so back, there was food producer Danone, where Emmanuel Faber, a CEO who had talked about toppling “the statue of Milton Friedman,” ended up being toppled himself. Don’t worry too much about Faber. Now, among other activities, he is chairman of the International Sustainability Standards Board, an organization “which is developing — in the public interest — standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets.”
“In the public interest.”
And there has been the food giant Unilever, once the fiefdom of Paul Polman, one of the most notorious of the stakeholder capitalists, whose legacy there is under attack.
And now, it seems, at least one shareholder is not too happy about what has been happening at BP.
BP is facing fresh demands to scrap “irrational” net zero commitments championed by former chief executive Bernard Looney, after an activist investor claimed they have left shareholders £40bn poorer.
The FTSE 100 oil giant was on Monday accused of pursuing an unrealistic strategy by Bluebell Capital Partners, the investor that has taken a minority stake in BP after previously taking on blue chip heavyweights Glencore and Danone.
Ah, Danone.
The Daily Telegraph:
In a 30-page letter, Bluebell called on BP to scrap its commitment to scale back its oil and gas business by a quarter this decade, halt investment in renewable energy schemes and rewrite its net zero targets to clarify they will be achieved “in line with society”.
Bluebell argued that the targets will artificially constrain BP and leave it at a disadvantage compared to rivals such as Shell and ExxonMobil, which have made no such commitments of their own.
It added that BP’s investment in renewables such as solar and wind are failing to generate strong enough returns.
The activist is also demanding that BP returns an extra $16bn (£12.6bn) to shareholders this decade, and urged the oil giant to sack a board director with links to fund giant Blackrock, which it branded “a world champion of ESG inconsistency and hypocrisy”.
Blackrock has been one of the most vocal supporters of so-called environmental, social and governance investment principles, but has faced criticism over claims that it has prioritised progressive views over investor returns.
The Daily Telegraph:
Bluebell said BP’s true worth was “at least 50pc more” than its stock market value, which stood at about £80bn on Monday, but had been dragged down by the “ill-conceived” strategy.
Giuseppe Bivona, partner and chief executive at Bluebell, said he spent the day speaking to BP shareholders, as he warned that too many companies were making unattainable green commitments to appear politically correct. . . .
“We’re not saying they should not get to net zero by 2050. We are saying do it in a way which is better for shareholders and for the social cause and for the environment.
“And in the short term, don’t cut your own production, because you are just doing a favour to the other [oil] companies.”
Mr Bivona said BP should stay out of renewable power sources such as wind and solar where it had too little specialist experience, and added that BP Lightsource, its solar unit, should be sold outright.
He added: “The conclusion on renewable power is, quite frankly, that you [BP] have no skills, you took an impairment, it’s not your business. . . .
Mr Bivona hinted that BP was one of several companies Bluebell had in its sights, accusing too many boardrooms of putting political correctness before sound business decisions.
“I think you will find a bit of this at many companies,” he added. “The strategy set by BP was more to please public opinion than anything else.
That last point may both true and too simplistic. While BP may (I’m guessing) have been advised by some of the rentseekers drawn to the ESG ecosystem, to quote George Orwell (in a different context), “like bluebottles to a dead cat,” we should not forget that BP’s C-suite is almost certainly populated by representatives of the same sanctimonious and greedy managerial caste that nowadays fills the ranks of large investment managers, and shares both their ambitions and ideology.
And so it is no surprise that a BP spokesman is quoted as saying that:
“We have met with most of our major shareholders recently and continue to receive support for our strategy.
“We continue to make significant progress, remain focused on delivery, and are confident the strategy will grow the value of BP and deliver sustainable long-term value for shareholders.”
It’s probably true that many of BP’s major shareholders are happy with the company’s strategy, but then, like BP’s own management, they are playing games with other people’s money. Note too the emphasis placed by the spokesman on “sustainability” and “long-term value.” The first is a reliable marker of humbug, the second is a perennial excuse for underperformance.
In all probability, BP should sell off its renewable businesses (given — we are always being told — what a marvelous opportunity such businesses are, there will be plenty of buyers) and concentrate on fossil fuels, maximizing return by focusing on doing what it knows best. And if its management believes that the energy “transition” means that it should be investing less in new production, it should return surplus capital to its shareholders. They can then decide for themselves how they might want to invest in the exciting green future.
Or not.