A new approach to holding the major oil companies to account will see the West Yorkshire Pension Fund, together with a cohort of other UK and European pension funds, demand BP and Shell explain their business plans in a world of declining demand for fossil fuels.
The UK’s £19 billion ($25 billion) West Yorkshire Pension Fund (WYPF), a local government pension fund for the region’s public sector employees, is trying a different approach to its engagement with oil majors BP and Shell at this spring’s AGMs.
Together with a cohort of other UK and European pension funds – including the Swiss federal pension fund CHF42.5 billion ($54 billion) PUBLICA and Scotland’s £10.3 billion ($14 billion) Lothian Pension Fund – West Yorkshire has co-authored a resolution with the prominent Amsterdam-based climate activist group Follow This.
The resolution changes tack from demanding detailed carbon emission reductions in line with Paris-aligned targets. Instead, it requests the companies explain their business plans in a world of declining demand for fossil fuels in a resolution focused on financial performance and shareholder value creation, , head of ESG at WYPF, tells Top1000funds.com.
A “simple and precise” question asks BP and Shell to reveal viable and future-proof business models that take into account the anticipated decline in oil and gas demand projected by the International Energy Agency. The resolution requests that the companies reveal their capital expenditure on greenfield and brownfield sites and forecasted sales of oil and gas over the next 10 years, for example.
In 2020, when oil demand fell, BP and Shell cut their dividends by 50 per cent and 66 per cent, respectively.
“This resolution is fundamentally important. It asks the companies to articulate a viable business model that will allow them to succeed long-term. Politics and ideology have nothing to do with it – it’s about stranded assets as the world pivots away from oil. We thought that the new energy companies would be the old energy companies, but they are not embracing the transition, and we want to know what their strategy is going forward,” says Hulme.
One particular area of concern is Shell’s LNG strategy.
A resolution last year succeeded in asking the company to explain its LNG business model in more depth, but in a “delaying tactic” the company still hasn’t published more details about a strategy based on supplying and trading natural gas driven by demand from Asian economies, he says.
“They appear to have given up on the original plan, but what is the new one? Have they run this idea into the ground, and are now working on something else?” he questions.
Under listing rules, if a shareholder resolution receives 20 per cent of a vote, companies must engage and report back.
West Yorkshire currently invests around £200 million in Shell and £100 million in BP. Hulme says the pension fund’s internal equities team have a long history of engagement with the two companies, and its portfolio managers have good access rooted in long-term relationships.
The pension fund was supportive of the early moves both companies made towards the transition, setting CO2 reduction targets and investing in clean energy. But changes of leadership at the top of both BP and Shell, and the pivot away from the transition, meant shareholders like West Yorkshire felt their influence at the companies fade.
“Shareholders like us, keen on the transition, have become the minority. New plans to move into renewables went by the wayside and we are frustrated by the direction of travel and want to engage,” he says.
The latest resolution from Follow This also marks the activist group re-applying pressure on oil groups following a pause in filing shareholder resolutions last year due to a lack of investor appetite. In another set back, in 2024 the organisation was sued by Exxon which sought to block a resolution demanding the oil group do more to cut its greenhouse gas emissions.
“Follow This had to back off. They are a small organisation,” says Hulme.
He is undeterred by anti-ESG trends in the US and recent efforts by the Trump administration to limit investors’ ability to work with proxy advisors like Glass Lewis.
“We are a UK organisation based in West Yorkshire with different priorities and concerns,” he concludes.
