The nation’s biggest oil and gas company is in an uncomfortable position.
And not – as one shareholder tried to raise at its annual general meeting this week – because it sponsors the Dockers rather than the Eagles in a week the Fremantle side lost derby bragging rights.
Woodside made its money, $US1.7 billion net profit after tax last financial year, primarily by taking oil and gas out of the ground and selling it to customers around the globe.
While the transition to net zero by 2050 will require some changes, it’s planning to “thrive through the energy transition” by selling gas as a “transition fuel”.
That’s how it explains its current approach, which includes developing its massive Scarborough project off Western Australia’s Pilbara coast.
Woodside estimated the project will release 878 million tonnes of carbon dioxide over its lifetime, at the same time the International Energy Agency is warning no new coal mines or oil and gas wells can be developed to reach the world’s climate goals.
The company has committed to reach net zero by 2050, is slowly reducing its emissions, and has taken feedback onboard to set a goal around contributing to helping its customers shrink their carbon output too.
But a majority of its shareholders now believe it’s not moving quickly enough – and it’s created an unlikely marriage, which is already on the rocks.
Climate plan rejected
It didn’t take long for the rejection of the company’s climate action plan by 58.4 per cent of shareholders earlier this week to be claimed as a win by those who had been pushing for that result.
Greenpeace Australia Pacific acting CEO Kate Smolski was quick to label the loss a “massive blow to Woodside’s credibility”.
And in many ways, it was. Will van de Pol, CEO of climate activist group Market Forces, which had been pushing for the rejection, said it was a “new world record” for a vote against a company’s climate plans.
The result was made possible by the partnership of activist groups, like Greenpeace, and large investors and proxy advisers, which both have reason to want action on climate change.
For the activists, it’s their reason for existing.
For those other companies, they can see the rising community demand for action on climate change and want to keep the public supporting their work, which means exercising influence over the industries they invest in.
One of those companies is Australian Super, which held a 4.52 per cent stake in Woodside at the end of June last year – one of the larger holdings in its portfolio.
“After a lot of consideration we’ve decided that we still have some ongoing concerns about Woodside’s plan to be net zero by 2050, so based on that we’ve decided to vote against [the climate plan] and we will continue our discussions with the company,” the company’s head of Australian equities Shaun Manuell told a parliamentary inquiry into greenwashing earlier this week.
Investor activism won’t cause ‘significant disruption’
The problem though, is that vote was non-binding. Important in sending a message to the company’s leadership, sure, but without any influence of its own.
The key vote that could have done that was on Richard Goyder’s reappointment to the board.
He was dealt a blow, with a 16.6 per cent vote against, which Market Forces puts in the bottom 2.5 per cent of director re-election votes for ASX 50 companies in the last decade.
But he kept his job and will see out what he has indicated will be his last time around as chair.
This is where the marriage of convenience fell apart.
Climate activists want leaders of companies like Woodside to feel some consequence for what they say the company is inflicting on the world.
Investors have a slightly different view.
“Their form of activism is to send messages, sometimes quite strong messages, but not to cause significant disruption,” Tim Bowley, a researcher in Monash University’s Faculty of Law who’s focused on shareholder activism.
It’s a delicate balance. Do too much and you risk destabilising the company and losing money for your clients. Do too little and risk community backlash.
Asset managers shirking responsibilities
Australian Super was among the investors to vote against the climate plan while still backing Mr Goyder.
“Generally, we are comfortable with the position that the chair has taken in terms of engagement with us and the general position of the company over the last 12 to 18 months,” Mr Manuell said at the inquiry.
Mr van de Pol said investors who took that approach were on the wrong side of the line, valuing stability and returns over action, which he said amounted to greenwashing.
“There are a lot of investors, both Australian super funds and big international asset managers, that are not living up to their claims of active ownership and claims of alignment with global climate goals, and they need to be held to account for those failings,” he said.
Concerned enough to call for change, but not enough to radically reshape the company.
“They need to produce satisfactory investment performance and so that imposes a constraint on just how aggressive they can be … because if you push too hard and fast you could end up destroying value,” Dr Bowley explained.
Time the enemy
Mr van de Pol said that meant Market Forces would be having more conversations and putting more pressure on companies to change how they are walking the tightrope.
Woodside is also planning more conversations to try and avoid a third consecutive embarrassment on its climate plan, whenever it’s next put to a vote, even if there are already signs of the limits that might be put on those plans.
“The world wants reliable energy, they want cheap energy, they want green energy, and they want all of those three things tomorrow,” Woodside CEO Meg O’Neill said after the rejection.
“And the pathway to get from where we are today to where the world would like to be is a pathway that is going to take time.”
While that is all happening, Dr Bowley expects directors of companies in similar positions to Woodside to be thinking about their own climate action.
“The big investors in Woodside are invested across many of the other large Australian companies [and] the directors of these companies know that if they fall out of favour with big investors because of what they’ve done in one company, that could affect their positions to the extent they hold directorships in other companies,” he said.
“So this kind of influencing influence-wielding can be effective, it will just take more time to play out.”
Time, though, is a resource climate activists don’t believe the world has much of to spare, especially with news this week Western Australia’s emissions had increased compared to 2005 levels, casting further doubt on the state’s path to net zero.
That pressure gives groups like Market Forces and Greenpeace a good reason to continue their, at times, unhappy marriage with big investors to push for greater change.
It’s pressure that shows no sign of letting up for Woodside, which is still making massive amounts of money – and returned $2.6 billion to shareholders last year.
All from the very approach a majority of its investors aren’t happy with, and which groups like Market Forces argue is risky and will deliver shrinking returns in the long-term.
Maybe it would be easier to reach agreement on which football team to back.
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