In Australia, Too, Shareholders Demand Climate Transparency from Fossil Fuel Companies

November 14, 2017 | 9:24 am
Kathy Mulvey
Accountability Campaign Director, Climate & Energy Program

[Update December 19, 2017, 1:16pm] BHP Billiton Limited issued its promised report on the material differences between the company’s positions on climate and energy policy and the advocacy positions on climate and energy policy taken by industry associations to which BHP belongs. Based on its review, the company has decided to withdraw from the World Coal Association and to reconsider its membership in the US Chamber of Commerce. BHP will formally communicate with the Minerals Council of Australia (MCA) over the inconsistencies between its position and those of the MCA, request that the MCA refrain from policy activity or advocacy in those area, and review its membership in the MCA if the association has not heeded that request within a year.

BHP’s report and the actions the company has taken based on it are a significant step forward for transparency and accountability of corporate lobbying. UCS and our supporters will be urging other major fossil fuel companies to match BHP’s disclosures and to ensure that the climate-related positions of their trade associations and industry groups are aligned with their own.

This week, an Anglo-Australian company’s annual meeting could send a strong signal for companies’ climate risk disclosure around the world. BHP Billiton Limited, a multinational mining and petroleum conglomerate, will hold its Annual General Meeting (AGM) in Melbourne, Australia. Shareholders are calling for more complete disclosure of the company’s direct and indirect lobbying spending on climate and energy—and for BHP to end its membership in industry groups whose positions are inconsistent with its own. Such disclosure would be a big deal.

We know companies often outsource their lobbying to industry groups, but often there is no transparency about which groups they support or how these funds are being spent, allowing companies to maintain a climate-friendly public image while blocking climate action behind the scenes. Although the Union of Concerned Scientists (UCS) has not engaged directly with BHP on climate issues, we have made similar asks to other major fossil energy companies in our Climate Accountability Scorecard. Here are five things I’ll be watching as BHP meets with its shareholders this week.

1. Advances in climate attribution science

Cumulative emissions from 1854 to 2010 traced to historic fossil fuel production by the largest investor-owned and state-owned oil, gas, and coal producers, in percent of global industrial CO2 and methane emissions since 1751.

Decisions by major fossil energy companies to maintain their carbon-intensive business models despite the known harmful effects of their products have had quantifiable impacts on our climate in recent decades. As a leading producer of coal, oil, and natural gas (among other commodities), BHP could face questions from investors about advances in the field of climate attribution science.

According to research by Richard Heede of the Climate Accountability Institute, BHP ranked #19 in industrial carbon pollution over the period 1854 – 2010.

A recent peer-reviewed study led by my UCS colleague Brenda Ekwurzel ranked BHP in the top 20 in terms of its contributions to the increase in global average temperature and sea level rise from 1980 to 2010—a time when fossil fuel companies were aware that their products were causing global warming.

Recent 1980–2010 emissions traced to top 20 investor-owned and majority state-owned industrial carbon producers, and their contributions to the rise in global mean surface temperature  (GMST).

BHP is among the 50 investor-owned carbon producers responsible for approximately 10% of the global average temperature increase and about 4% of sea level rise during that time period.

Today, BHP accepts climate science, stating on its website that “We accept the Intergovernmental Panel on Climate Change (IPCC) assessment of climate change science, which has found that warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable.” The company welcomed the Paris Climate Agreement, and has conducted scenario analysis about the potential impacts on its portfolio of keeping the increase in global temperatures well below 2° Celsius.

However, like other major fossil energy companies, BHP presents a false choice between addressing climate change and advancing economic development and energy access, and assumes that no significant changes in its business strategies are needed in a carbon-constrained world.

2. Direct and indirect lobbying on climate change

Despite its stated positions on climate change, BHP maintains membership in trade associations and other industry groups that spread disinformation on climate science and/or seek to block climate action. (My colleague Genna Reed recently highlighted this industry tactic, among others, as part of The Disinformation Playbook).

The UK-based charity InfluenceMap gives BHP a score of D-minus in terms of its direct influence on climate policy and its relationships with trade associations like the World Coal Association and the Minerals Council of Australia (MCA)—the Australian counterpart of the National Mining Association in the US. A September 2017 InfluenceMap report, “Corporate Carbon Policy Footprint,” included BHP among the 50 companies that have the most influence on climate policy globally (among the world’s 250 largest listed industrial companies)—and found BHP to be one of 35 companies actively opposing climate policy.

In 2015, BHP CEO Andrew Mackenzie spoke to the US Chamber of Commerce, an umbrella business association known for taking controversial positions on climate change. Few of the US Chamber’s member companies publicly agree with its positions—which include refusing as recently as 2015 to acknowledge that global warming is human-caused. With such strong connections to industry groups that obstruct climate action, BHP is likely to have plenty to disclose in terms of its indirect lobbying, if shareholders demand it.

3. A shareholder resolution

Some of BHP’s shareholders are concerned about inconsistencies between BHP’s stated positions on climate change and those taken by trade associations of which it is a member. On behalf of 120 BHP shareholders, the Australasian Centre for Corporate Responsibility submitted a resolution calling for the company to:

  • disclose payments for direct and indirect lobbying on climate and energy policy;
  • assess whether advocacy positions taken by industry groups on specific Australian climate and energy policies are consistent with the company’s stated positions and its economic interests;
  • terminate its membership in industry bodies “where a pattern of manifest inconsistency is demonstrated” over the past five years.

Despite the recommendation of BHP’s Board that shareholders vote against the resolution, representatives of CalPERS, the Church of England, and HSBC voiced support for the resolution at BHP’s London AGM last month. The outcome of the vote won’t be known until after this week’s AGM in Melbourne.

There is precedent for the action requested by BHP shareholders. In announcing its decision to leave the American Legislative Exchange Council (ALEC) in 2015, Royal Dutch Shell said that the group’s stance on climate change “is clearly inconsistent with our own.”

Alignment between company positions and those of affiliated industry groups is increasingly considered a matter of good corporate governance. UCS’s Climate Accountability Scorecard called on major fossil energy companies to use their leverage to end the spread of climate disinformation by industry groups, publicly distance themselves from groups’ positions on climate science and policy with which they disagree, and publicly sever ties with groups if unable to influence their climate-denying positions. Shareholder resolutions requesting annual reporting on direct and indirect lobbying activities by Chevron, ConocoPhillips, and ExxonMobil won the support of around one-quarter of each company’s shareholders earlier this year. With growing support for such resolutions, I imagine BHP is getting nervous.

4. A preemptive pledge

In an effort to defuse support for the shareholder resolution, BHP has stated that by the end of the year, it will publish “a list of the material differences between the positions we hold on climate and energy policy, and the advocacy positions on climate and energy policy taken by industry associations to which BHP belongs.”

BHP also apparently played a role in forcing out the head of the MCA, signaling the company’s unhappiness with the trade association’s promotion of coal and opposition to clean energy policies.

Public acknowledgment of inconsistencies between BHP’s positions and those taken by industry groups it supports would be a step in the right direction—but it would beg the question of why the company is using shareholder money to fund groups that lobby against its own agenda.

Moreover, BHP’s current disclosures regarding trade associations should raise eyebrows (if not red flags). In its climate change questionnaire, CDP (formerly the Carbon Disclosure Project) asks companies to provide details about trade associations that are likely to take positions on climate change legislation—including whether the group’s position is consistent with the company’s position, and how the company attempts to influence the group’s position. In its CDP submission, BHP inexplicably reports that each of the climate positions of each of its trade associations—including MCA, the World Coal Association, and the American Petroleum Institute—is “consistent” with its own.

In light of BHP’s CDP report, proponents of the shareholder resolution must be wondering whether BHP’s promised list of material differences will be a blank webpage.

5. Shareholder rights and social license

It is not easy for shareholders in Australian companies to put forth resolutions for consideration at AGMs. The votes of BHP shareholders on the lobbying resolution will only be valid if they first approve a resolution amending the company’s constitution to allow non-binding shareholder resolutions. BHP’s Board also opposes this resolution.

BlackRock has indicated that it favors strengthening shareholder rights in Australia—under certain conditions. The support of BlackRock, the world’s largest asset manager, is enormously significant. This past May, BlackRock, along with Vanguard and Fidelity, helped deliver a decisive 62% majority of ExxonMobil shareholders in favor of a proposal calling for the company to report annually on how it will ensure that its business remains resilient in the face of climate change policies and technological advances designed to limit global temperature increase to well below 2°C.

The ExxonMobil shareholder vote demonstrates why the owners of Australian companies should have greater say on environmental, social, and governance issues. But not surprisingly, this exercise of shareholder power has sparked a backlash. The Financial CHOICE Act aims to make it much more difficult for shareholders in US companies to file resolutions, and the US Chamber of Commerce (remember them?) has issued a dangerous set of recommendations to “reform” the shareholder proposal process.

At last month’s London AGM, BHP Chair Ken MacKenzie pointed to social license to operate as one of five focus areas for the company: “Leadership with our social license can create a strategic advantage for BHP, and by extension, value for shareholders. Public acceptance and trust are an imperative for BHP. Without it, we have nothing.”

BHP has an opportunity to demonstrate leadership on climate change and earn public trust by setting a high standard of transparency and ensuring that its direct and indirect lobbying are aligned with its acceptance of climate science and its stated support for the Paris Climate Agreement goals. I will be watching to see whether the company moves in this direction at its AGM this week—and continuing to engage with major fossil energy companies over steps they should take to be more transparent and consistent in their advocacy on climate issues.