Newton's response to the shareholder resolution which was filed at BP's annual general meeting 2010 on Canadian oil sands
April 2010
Resolution 25 - Shareholder resolution
"That in order to address our concerns for the long term success of the Company arising from the risks associated with the Sunrise SAGD Project, we as shareholders of the Company direct that the Audit Committee or a Risk Committee of the Board commissions and reviews a report setting out the assumptions made by the Company in deciding to proceed with the Sunrise Project regarding future carbon prices, oil price volatility, demand for oil, anticipated regulation of greenhouse gas emissions and legal and reputational risks arising from local environmental damage and impairment of traditional livelihoods. The findings of the report and review should be reported to investors in the Business Review section of the Company's Annual Report presented to the Annual General Meeting in 2011."
Notice of BP Annual General Meeting 2010
Newton's response
Newton's energy supply investment theme recognises that the world is short of energy supply options. There is a strong likelihood that energy prices, particularly transportation fuels, will increase. In order to ensure a continued supply of energy and to avoid a greater shift towards the use of coal within the energy mix, the world will need to embrace the development of less carbon intensive supply sources, including different oil extraction opportunities.
Newton recognises that investments in oil extraction involve associated environmental, social and economic risks, particularly with regard to a company's reputation. Newton believes in roactive engagement with the developers of the Canadian oil sands. It is essential that Newton understands these risks and ensures that it does not expose its clients to risk that is not commensurate with the potential reward.
In response to the shareholder resolution being filed at BP's 2010 AGM, Newton met with FairPensions, a non-government organisation, which is co-ordinating the filing of the resolution. This provided Newton with the opportunity to understand the rationale for the filers' requests.
Newton also had extensive meetings with the company, including BP Canada's president, its chief executive and other senior members of staff to discuss the forthcoming shareholder resolution and the company's oil sands operations.
Following its analysis and engagement, Newton has decided to support management by voting against the resolution at the company's AGM. The rationale for this decision is outlined below:
- Newton believes that the relevant data for understanding the potential environmental impact of these projects, and the mitigation measures undertaken, is now publicly available
- BP has produced comprehensive data on its Sunrise project, including information on the price of carbon, the price of oil, water use, land use, local communities and associated market risks
- The company has well established policies and processes in place to conduct comprehensive environmental and social assessments, which are standard to all BP's project planning. Newton believes these policies and processes to be of a high quality
- The company has committed to producing a Canadian sustainability report in 2011, which will provide investors with continued oversight of BP's Canadian operations
- As worded, the resolution requests that the company discloses the commercial considerations that BP used in evaluating the projects. Newton believes that the disclosure of commercially, and potentially politically sensitive, information may not be in the interests of shareholders.
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In the US, this document is issued by Newton Capital Management Limited. The opinions expressed in this presentation are those of Newton Capital Management Limited and should not be construed as investment advice. ‘Newton' refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited, Newton Capital Management LLC and Newton Fund Managers (CI) Limited. Except for Newton Capital Management LLC and Newton Capital Management Limited, none of the other Newton companies offer services in the U.S.. Newton Capital Management Limited is an investment management firm authorized and regulated in the United Kingdom by the Financial Services Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Registered in England no: 2675952. Newton Capital Management Limited is registered in the United States as an investment adviser under the Investment Advisers Act of 1940. Newton Capital Management LLC provides marketing services in the U.S. for Newton Capital Management Limited.
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