change, not only from environmental campaigners but from institutional investors and politicians. However, at this stage it is unclear whether BP’s net zero plan is ‘greenwashing’, a phrase to describe addressing environmental concerns but not following up with real action, or a genuine commitment to change. That question may be answered more fully when the company hosts an investor day in September but in this article we will discuss the potential implications of the net zero pledge, in particular what it might mean for the company’s dividend, how the pledge might be achieved and where the company is starting from. WHAT DOES IT ALL MEAN? So what did BP mean when it said it wanted to be ‘net zero’ by 2050? In plain English it hopes to make no addition to the amount of greenhouse gases in the world’s atmosphere through either its operations or the oil and gas it produces. It is also aiming to halve the carbon intensity of its products by the same date (or sooner). The ‘or sooner’ bit may become increasingly relevant as BP could face pressure to move more quickly on this issue. BP’s pledge to cancel out the emissions from the oil and gas it produces is perhaps most eye-catching. In a Q&A session in front of campaigners, journalists and investors, Looney said the ‘tools in the toolbox’ for achieving this aim would include carbon capture, hydrogen and natural climate solutions. Carbon capture and storage (CCS) involves trapping carbon in caverns or porous spaces underground and then transporting to locations where it can be stored or used. A CASE OF DÉJÀ VU? REHASHING ‘BEYOND PETROLEUM’ In July 2000 BP announced a PR campaign entitled ‘Beyond Petroleum’ ditching its traditional shield-based logo and replacing it with a new sunburst design. Tangible investment in genuinely moving beyond oil and gas was subsequently limited. It fulfilled a 2005 pledge to spend $8bn on renewables by 2013 but failed to set a new target and notably scrapped ‘Alternative Energy’ as a standalone business in 2009.
WHY SHOULD BP LEAD THE RENEWABLES CHARGE?
A biofuel field owned by BP’s Tropical BioEnergia subsidiary
Given the toxic legacy of BP’s fossil fuel assets, why should it, rather than a company unencumbered by such a legacy, be part of the transition towards renewables? According to Nick Boyle, the founder of solar business Lightsource, the answer is that oil and gas companies have been powering the world for 100 years. BP recently increased its stake in Lightsource to 50%. ‘Oil and gas companies have the experience of building large engineering projects in remote places, knowledge of the energy markets and huge trading capability as well as the necessary financial wherewithal,’ he says. Steve Wreford, portfolio manager of Lazard Global Thematic (B241MZ1), also believes BP is a natural fit for the renewables space and doesn’t believe its current structure will hinder efforts to transform into a business fit for the next generation. ‘I look for companies with a solution to emissions rather than part of the problem,’ he says. ‘There are a select number of companies who can manage the transition from a world of fossil fuels to a world of renewables and emissions-light, which is about 20 to 25 years away. Some of them are renewable companies but not all of them. ‘We invest in BP which is busy rolling out its renewables platform. It still owns lots of oil fields but it can manage the transition. ‘People think of BP as an oil company but the life span of its proven reserves is 10 years. In other words, BP could be a totally different company by 2030 – it could be ‘Beyond Petroleum’ finally.’
20 February 2020 | SHARES |
17