So at the moment BP are busy filling up the Gulf with their leaking oil. One wonders if this an unfortunate accident or the result of a culture change in the company. The ethical funds have in the past loved this company but now that support is draining faster than the oil from their pipes.
Some ethical funds use a best of sector approach to offer investors a less risky way of investing ethically. Whilst John Browne was CEO of BP the company was the oil company of choice for those funds that included oil in their portfolios. After all their web site confirmed their green credentials:
“In 2006 we adopted a set of environmental requirements for all new projects. The goal is to ensure potential issues like waste disposal, emissions reduction and discharges into water are thought through before a project gets underway and carefully monitored from then until the project’s end”
However things have appeared to change now that Tony Hayward (of “BP is about men turning valves” fame) Tony is an out and out oil man.
He has shifted the group away from the “Beyond Petroleum” agenda. Controversially, he U-turned on Browne’s policy and made an investment in the Canadian Tar Sands in December 2007. This has been massively controversial, and triggered formal engagement in the form of a special resolution at the 2010 AGM,
The recent history of the company does not make good reading for anyone concerned about the impact of oil companies on either the communities in which they operate, the environment or their own work force.
One has to wonder if the company’s recent run of difficulties have anything to do with the move away from a genuine commitment to sustainability in both its search for new energies and its ability to work long term in a community.
Even during John Brown’s leadership BP had started to have a worrying record but his commitment to sustainable energy and refusing to exploit tar sands meant they stayed within the remit of the ethical investment community.
An F&C spokesman said “We exclude BP from Stewardship and Ethical Bond for a range of reasons, but the company’s past record in safety (the Texas City fire) is one of these. The recent accident indicates we probably made the right decision.”
Tony Hayward has led the company away from a key environmental marker – to refuse to exploit tar sand oil. This is a process that environmentalists say is extremely damaging both to the local environment and to the effects of global warming being a high energy use.
Investors were so concerned about the extreme environmental impacts and high capital intensity of such projects. The company considers its in situ tar sands assets to be capable of delivery within strict environmental limits.
However, a major conversation on tar sands has been sparked within the UK and a lengthy debate on this issue took place at the company’s recent AGM. 15% of shareholders refused to support the managements view on this activity. If the company were to listen to this significant voice then one might hold out hope that they are beginning to change but…..
So little confidence is there in BP now that King and Shaxon (a leading firm of ethical stockbrokers) said:
“In December 2009 we sold all client holdings in BP that we could”
The last five years have seen an investment in sustainable energy – some £2.5 million mainly in advanced biofuels, their wind business in the US, solar power, and carbon capture and storage – however put in context of a turnover of some £158 million it becomes clear that this commitment is somewhat peripheral and seems to be declining. Tony Hayward closed the BP Alternative Energy’s separate London headquarters in June 2009.
Under Hayward, BP subsidiaries are said to be encouraged to pursue silent running delivering core business without seeking external publicity for its positive moves with quite the same gusto as displayed under Lord Browne. One has to wonder why.
Is it significant that their fines from the US authorities have been the highest in 2009 than at any time in the last few years? 2009 was the worst result except 2007 even discounting the large fine for the Texas City Refinery in five years.
Overall, the view of Best of Sector has shifted for many of these reasons; Rathbones Greenbank Investment Manager said “We prefer the likes of Statoil, or BG who have a much bigger exposure to natural gas, a key bridging fuel to the low carbon economy.”
One wonders how any so called ethical or socially responsible fund can continue to support BP. It’s about real transparency as Julian Parrot from the Ethical Investors Association says “The key issue for fund managers is transparency about why certain stocks are held and what actions might be taken in the event of cases, like BP, where there is an apparent change in business policy.””
Things grow best when the roots are fed by good nutrients. The nutrients of any good business are based sustainable business models. One wonders if the current situation isn’t caused by a corporate shit in BP that has forgotten this basic fact,
