DISCUSSION Church of England disinvestment – good stewardship or a ploy for atonement?

by Alex Maitland _______20th May 2015

On 29th of April the board of the Church of England approved a £12m disinvestment in tar sands oil and thermal coal, the heaviest polluting fossil fuels.[1]
But why not all fossil fuels?

Putting their disinvestment into context, the church invests over £192m in Shell and BP alone, which makes their £12m disinvestment (from companies that make more than 10% of their revenue from thermal coal and tar sands) seem almost trivial.[2]

The church claims that constructive investor engagement with oil and gas companies like BP is the reason behind its decision not to disinvest from all fossil fuels. And they claim it produces results; in February BP endorsed a resolution put forward by investors, and led by the church, to change the way they report on the impact of climate change.[3]

This seems like a good example of investor stewardship at work. Long-term investors lobbying the board to hold them to account is key to creating positive change in companies. Disinvesting may send a strong message to the company’s leadership. However I am somewhat sceptical about how much of a victory this resolution is and as such, the effectiveness of the the investor activism which is preventing the Church of England from disinvesting from all fossil fuels.

The resolution commits BP to increased transparency on how they report on climate change but does nothing to set targets on curbing emissions, something which their chairman claims would be “counterproductive”. [4]

The BP board even questions the influence the resolution will have, considering that “many of the requests made in the resolution are already provided through BP’s existing disclosure processes at bp.com/sustainability.” [5]

Increased transparency and better reporting is certainly an enabling factor for positive change, and if nothing else will give climate change  campaigners more ammunition for their advocacy. However it is unlikely to make a significant difference to the way BP does business in the short term. The fact that BP announced last month that they are abandoning green energy projects worth billions to focus on fossil fuels[6] brings into question their commitment to a low-carbon economy.

I’m not sure if this resolution is a “major victory” or “a game changing day” as the investors claim.

Even more worrying are the questions the Guardian has raised about the “extent of activists’ collaboration with oil giants” alleging that in the case of Statoil (who are adopting similar resolutions to BP) it was the company “which first made contact with the activists, not the other way round” and that “interviews with activist shareholders repeatedly raised questions about the extent to which the shareholder resolutions had been contrived for presentational effect, and whether later endorsements from company boards had been stage-managed.”[7]

So is the Church of England being a responsible steward and force for good by not disinvesting from all fossil fuels? Will their role as an activist shareholder encourage oil companies to act in a more socially responsible way?

The sceptic in me wants to say that, for whatever reason, there is a reluctance to make a £192 million disinvestment and that their limited disinvestment and overhyped shareholder activism is nothing more than a PR stunt…or perhaps a ploy for atonement.

The realist in me knows that the only way we can secure a low carbon economy is by working with oil and gas companies rather than against them. Increased transparency is just one of many demands that investors will need to make in their contribution to combating climate change.

The salesman in me knows that sometimes the best way to get what you want is to get your foot in the door with something small and as you build up the relationship slowly crank up the ask.

[1] Clark P., ‘Church of England blacklists coal and tar sands investments’, 30 April 2015, FT.com, http://www.ft.com/cms/s/0/7ef8522a-ef54-11e4-a6d2-00144feab7de.html?siteedition=uk#axzz3ZoicA7hK

[2] VaughanA., ‘Church of England ends investments in heavily polluting fossil fuels’, 30 April 2015, theguardian.com, http://www.theguardian.com/environment/2015/apr/30/church-of-england-ends-investments-in-heavily-polluting-fossil-fuels

[3] Bowers S., ‘BP’s ‘activist resolution’ was a triumph for environmentalists – or was it?’, 28 April 2015, theguardian.com, http://www.theguardian.com/environment/2015/apr/28/bps-activist-resolution-triumph-for-environmentalists-or-was-it

[4] BP Sustainability Report 2014, http://www.bp.com/content/dam/bp/pdf/sustainability/group-reports/Sustainability_Report_2014.pdf, accessed 08/05/2015

[5] ibid

[6] Macalister T. ‘BP dropped green energy projects worth billions to focus on fossil fuels’, 16th April, theguardian.com, http://www.theguardian.com/environment/2015/apr/16/bp-dropped-green-energy-projects-worth-billions-to-focus-on-fossil-fuels

[7] Bowers S., ‘BP’s ‘activist resolution’ was a triumph for environmentalists – or was it?’, 28 April 2015, theguardian.com, http://www.theguardian.com/environment/2015/apr/28/bps-activist-resolution-triumph-for-environmentalists-or-was-it

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