BP Doubles Profits While Dialling Back Climate Targets

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    Stockholm (NordSIP) – The latest in a line of multinational energy companies announcing record profits for 2022 has added a twist by dialling back its climate targets.  Today, February 7th 2023 oil giant BP announced a doubling of its 2021 profits to USD 27.7 billion for 2022.

    BP currently states on its corporate website that: “By 2030, we aim to be a different kind of energy company.  We’re decarbonising and diversifying our business and we’re accelerating our net zero ambition – our aim is to be net zero by 2050 or sooner across operations, production and sales.”  Nevertheless, in announcing its 2022 results, the company also reduced the emissions reduction target for its oil and gas business.  Having previously aimed for a 35-40% reduction by 2030 compared to 2019 levels, BP will now target a lesser 20-30% fall in emissions.

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    Moving the climate goal posts

    The practice by some firms of adjusting previously set sustainability targets when it becomes clear that they will not be met in time has been described by some commentators as “greenrinsing.”  BP insists that while it is still committed to its stated ambition of becoming an “integrated energy company,” the Covid-19 pandemic and Ukraine war have compelled it to alter its priorities.  Chief Executive Bernard Looney argues that “after the past three years […] the world wants and needs energy that is secure and affordable as well as lower carbon – all three together, what’s known as the energy trilemma.”

    USD 8 billion for new oil and gas production

    This perceived “trilemma” means that the group has now dedicated equal portions of an estimated USD 16 billion capital expenditure plan for 2023 to fossil fuels and transition-focused businesses such as biofuels, EV charging infrastructure, renewable energy and hydrogen.  In a case of “if you can’t beat them – join them,” this renewed focus on new fossil fuel investment may be a reaction to BP’s returns having fallen behind its main rivals, none of which have followed its lead in setting explicit targets to reduce oil and gas production.  BP CEO Looney cites external pressures and a global need for energy security as the principal reasons for the policy shift: “we need continuing near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands and to make sure the transition is an orderly one.”

    Large portions of the record profits announced by the major oil companies are being reinvested in fossil fuels or distributed as dividends to shareholders.  Unless they are compelled to do otherwise, the firms are free to take this course, but many environmental organisations are calling for the excess profits to be reinvested in an accelerated low-carbon transition to tackle the climate crisis.  There are also calls for increased “windfall” taxes on the energy companies to provide short-term financial relief for the ongoing social cost of living crisis.


    Image courtesy of Bernd Schray from Pixabay
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.
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