Woodside Energy facing investor unrest as concern over ‘failed’ climate policies grows

Woodside Energy facing investor unrest as concern over ‘failed’ climate policies grows | Business | The Guardian

Australia’s biggest oil and gas company, Woodside Energy, will face investor unrest over its climate policies at Friday’s annual general meeting, with some unconvinced that they are either properly designed or achievable.

Despite emissions pledges and the tying of executive bonuses to environmental outcomes, the shareholder advocacy group, Australasian Centre for Corporate Responsibility (ACCR), is one of several organisations urging investors to show their discontent with Woodside’s climate policies at Friday’s meeting.

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While the commitments from fossil fuel companies would typically be welcomed by eco-conscious investors, the ACCR is recommending a vote against the re-election of director Ian Macfarlane, a former federal resources minister and long-serving member of Woodside’s sustainability committee.

Harriet Kater, ACCR climate lead for Australia, said the board had “repeatedly failed to meet shareholder expectations with regard to its climate strategy”.

It is a view shared by one of Europe’s largest asset managers, Legal & General Investment Management (LGIM), which is also opposing the re-election of Macfarlane.

LGIM cites “concerns around the company’s lack of commitment to aligning with the Paris objectives and net zero” for its position.

Net zero refers to an international treaty to limit global warming by achieving a balance between the carbon emitted into the atmosphere, and the carbon removed from it by 2050.

Much of the concern about Woodside’s policies, echoed by other institutional investors, including superannuation funds, is tied to the company’s refusal to set scope 3 targets, which refer to emissions produced by its customers. This would typically refer to emissions from burning Woodside-produced oil and gas.

Scope 1 and 2 are emissions produced by the company in extracting resources, which are far smaller for an oil and gas company than scope 3.

“For a fossil fuel extraction company to have a credible climate plan, it has to address scope 3. If your product is carbon, you can’t pretend that’s someone else’s problem,” Kater said.

Last year, 49% of shareholders voted against Woodside’s climate report, representing the highest level of dissent directed at an oil and gas company that had put its environmental plans before investors last year.

Its climate plans will be put to a non-binding vote at next year’s AGM, which means agitators are using a vote against Macfarlane and the company’s remuneration report this Friday as a more immediate avenue to express disquiet.

Woodside said in a statement it had been responding to the keen interest shown by shareholders in its climate strategy.

“Woodside will continue to proactively engage with shareholders on its reporting and management of climate-related risks and opportunities,” it said.

It has previously expressed concern over setting scope 3 targets, citing difficulties in calculating emissions from customers.

Its climate plan has a target of investing US$5bn in new energy products, with hydrogen and ammonia used as examples, and it said it wants to collaborate with customers on decarbonisation.

The amount earmarked for new energy, however, is dwarfed by the money being spent on its expanding oil and gas operations which are projects that its chief executive, Meg O’Neill, says is necessary for energy security and decarbonisation.
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She said at a National Press Club address last week that even those who drove an electric vehicle, or rode a bike, that day relied on plastics derived from oil and gas.

“Same with the toothbrush you used this morning, and the packaging that kept your Weet-Bix fresh,” she said.

Climate activist group Market Forces, which is pressuring Woodside to increase climate reporting obligations, forecasts that its oil and gas production plans will result in a 40% increase in total emissions from 2022 to 2027.

Woodside has enjoyed a very profitable period. Oil prices, which are closely tied to gas prices, surged during the Russian invasion of Ukraine, boosting profits.

Woodside also recently completed a merger with BHP’s petroleum division, significantly increasing cashflow.

The Australian Shareholders’ Association said that while it wants companies to adequately address risks of decarbonisation, and to communicate these risks to shareholders, it is supporting Woodside’s director nominations and remuneration report.

Woodside is not the only carbon-intensive company tussling with some of its own shareholders over climate policies.

In 2020, the country’s largest domestic emitter of greenhouse gases, AGL, was the first major Australian company to connect executive bonuses to net zero goals.

But the size of the metric, a financial incentive for executives to meet certain “carbon transition” objectives, was then reduced amid investor anger over AGL’s performance and use of non-financial measurements as rewards.

Shareholders who endure long periods of underperformance, as is the case with AGL investors, tend to shun remuneration structures that are not tightly linked to a recovery in the share price.

This is occurring at the same time as major investors are pushing the energy retailer to move faster out of coal, and profit from a growing portfolio of wind, solar and battery assets.