BHP asks for praise, as key institutions demand it quit coal lobby groups

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BHP says shareholders should be praising its efforts, rather than demanding it quit pro-coal lobby groups.

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BHP chairman Ken MacKenzie has told shareholders that they “should be applauding the company” for its commitment to acting on climate change, as nearly one-third of company shareholders voted in support of a resolution calling for the company to suspend its membership of pro-coal lobby groups.

Australia’s largest company has faced increased pressure from both environmental campaigners and shareholder advocacy groups to re-examine its investments in coal and oil projects, as global moves towards decarbonisation grow.

BHP currently has interests in coal mines across New South Wales, Queensland and Colombia, as well as investments in numerous petroleum production facilities around the world.

Two shareholder resolutions were put forward by shareholder advocates the Australasian Centre for Corporate Responsibility (ACCR), with the first motion seeking to extend the ability of shareholders to express opinions at annual meetings or request information from directors about the way they are exercising their duties.

The second resolution sought to compel the company to suspend its memberships of industry organisations that oppose action being taken on climate change, and as well as any industry associations that advocate for policies inconsistent with the goals of the Paris Agreement on climate change.

This motion, that would likely have compelled BHP to suspend its membership of the Minerals Council of Australia, received support from 29.58% of shareholder proxy votes, including key institutions that represent a total of $12 trillion of funds under management. The final result was 27.07%

This is a hugely positive result for the shareholder advocate group ACCR and represents a substantial increase in support for BHP to end its membership of pro-coal lobby groups. A similar motion put to the company AGM in 2017 received around 10% support.

The strong result follows another shareholder advocacy group, Market Forces, was singled out by Attorney-General Christian Porter as a target in the Morrison Government’s push to outlaw secondary boycott campaigns.

The first motion, granting increased powers to shareholders to probe the company board also failed, receiving 9.54% of shareholder proxy votes.

The second resolution was contingent on the first resolution being approved, but both resolutions were opposed by the BHP board. However, the resolutions won the support of superannuation companies, including Vision Super and the Australian Council of Superannuation Investors.

“The lobbying of industry groups like the Minerals Council of Australia and their related entity, Coal21, is undermining sensible, bipartisan public policy on energy and climate change,” Acting Vision Super CEO Michael Wyrsch said

“BHP is a major funder of these industry associations that are lobbying against sensible climate policy, and its suspension of these memberships would send a strong signal to these associations that pro-coal lobbying needs to stop.”

BHP has faced ongoing criticism of its membership of associations like the Minerals Council of Australia and the Business Council of Australia, who have often fronted campaigns on behalf of the fossil fuel sector and opposed the imposition of strong climate change policies.

In 2018, BHP ceased its membership of the World Coal Association following the ongoing criticism, and the company has committed to reviewing its ongoing membership of industry associations.

BHP Chairperson Ken Mackenzie defended the progress the company has made towards reducing its contributions to climate change, telling the AGM that the company ‘should be applauded’ for its work to date.

“I don’t think any shareholders out there are challenging our climate change credentials, I think we’re well acknowledged as a leader in our sector,” BHP Chair Ken Mackenzie said.

“We’re going to conduct our industry association review. We’re going to do that by the end of this calendar year. As we always do, we will be transparent, we will publish the outcomes of that review, and then we’ll act and if there is misalignment.”

“If there is this alignment between our policies and those of our industry associations, then will act. We exited an organization in 2017 and work with two others to change their policies to align them with our own.” Ken Mackenzie added.

Equivalent shareholder motions that were lodged the British listed BHP entity, receiving the support of around 22 per cent of British shareholders at its London AGM held in October.

The BHP board faced several questions about the future of the Mt Arthur coal mine in Musswellbrook, the largest coal mine in the Hunter Valley region and which supplies coal to the Liddell and Bayswater power stations, and sends about two-thirds of its production for export.

BHP currently operates the Mt Arthur coal mine, but shareholders and workers in the region see the risk that global moves towards decarbonisation of the energy system will put the future of the mine at risk.

While BHP CEO Andrew Mackenzie acknowledged that demand for thermal coal would decline in coming decades, he was confident that the Mt Arthur mine would remain viable for the foreseeable future.

“Coal will continue for multi-decades, but I am sure it will continue to contribute less and less to the energy mix,” CEO Andrew Mackenzie said.

“Our forecasts show that sometime around the late 2030s, if we’re on route to a 1.5 or 2-degree world, that [coal] demand will start to decline markedly. But, the most efficient and the most productive mines will be the ones that disappear last and that includes the Mt Arthur mine.”

CEO Andrew Mckenzie was unable to provide an update on BHP’s contracts for its electricity use, saying that negotiations for its Australian electricity consumption are still in progress and remained commercially sensitive. Last month, BHP secured new contracts for the electricity supplies to its operations in Chile, shifting its electricity purchases to 100% renewable energy supplies.

BHP has committed to undertake a review of the company’s associated scope-3 emissions, the emissions that result from the burning of coal produced and sold by the company while conceding it has no intention to mandate that its customers change their business practices.

Earlier this year, BHP committed to invest $400 million in sustainability measures and to reduce the environmental footprint of the company’s supply chain, in an echo of a commitment made 10 years earlier that showed little results.

“Our approach to social value is also seen as a critical precondition to creating shareholder value. To be clear, our social value agenda is directly linked to our business case.” Chair Ken Mckenzie said.

“In this regard, we see our $400 million climate investment program as a business-critical investment to reduce emissions at our operations and throughout our supply chain.”

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