At the start of 2020, Bernard Looney had a clear goal as BP's incoming chief executive: to convince the world to look at the oil company differently. For a while, he did exactly that.
At a glitzy, high-concept London campaign launch, the BP boss set out 10 new objectives for the company, the most significant of which is for BP to become a net zero energy company by 2050.
Within months, he reinforced the rebranding with a pledge to cut the company's oil and gas production by 40% from 2019 levels by the end of the decade.
At the time, his strategy also won the approval of Greenpeace – something few oil executives can boast. But in early 2023, BP reduced its 40% cut to 25% as oil prices rose after the war in Ukraine, doubling the company's profits. Within months, its evergreen chief executive was ousted from the company amid revelations about undisclosed relationships with colleagues. His green plans followed suit.
BP last week announced plans to abandon its restrictions on fossil fuel production in favor of targeting several new investments in the Middle East and the Gulf of Mexico.
The news angered climate campaigners but surprised very few. BP's green retreat has been one of the industry's most embarrassing – from a grandiose green agenda to a new focus on fossil fuels – but the retreat from environmental, social and governance (ESG) standards is gaining momentum among the world's biggest companies and investors.
The term ESG was first coined by the UN in 2004 under the title Who Cares Wins. It provided a model for companies and investors to implement the ideals of responsible investment in their spending plans.
By 2015, the idea of ESG had evolved from a talking point to a set of measurable and measurable standards. But in recent years, companies and investors in the U.S. and Europe have become confused about requirements to disclose their ESG credentials, and have backed away from obligations themselves to protect their profits.
BP's oil industry rival Shell signaled earlier this year that it may slow the pace of its emissions cuts this decade, setting out a new plan to reduce the carbon intensity of the energy it sells by 15-20% by the end of the decade, compared with its previous target of 20%.
Shell has backed away from a pledge to rapidly increase its use of “advanced recycling”. Plastic breaks down polymers into smaller molecules that can be made into synthetic fuels or new plastics. It had promised to use 1 million tonnes of this recycled plastic in its global petrochemicals plants, but later admitted the plan was “unfeasible”.
Oil companies aren't alone in downplaying their green promises. Volkswagen has quietly abandoned a voluntary target to cut CO2₂ emissions from passenger cars and light commercial vehicles by 30% between 2015 and 2025 in favor of making the same cuts between 2018 and 2030.
And Unilever – the conglomerate that owns brands including Hellman's Mayonnaise and Vaseline and is widely credited with pioneering the ESG movement – signaled that earlier this year. Amid a growing backlash from investors and politicians to abandon or water down a string of ESG commitments.
“This is a very worrying trend,” said Lewis Johnston, policy director at responsible investment firm ShareAction. “In general, we have seen a concerted and organized backlash against certain principles of responsible investment. It's a very different philosophy of creating long-term value.”
As recently as 2021, the world's largest investors considered ESG principles to be key hallmarks of sound investing. American investment firms BlackRock and Vanguard voted in favor of almost half of all shareholder ESG resolutions proposed in 2021. But since then they have dramatically withdrawn their support following a severe political backlash.
Florida Gov. Ron DeSantis, legislators in Texas and other critics of ESG raised the stakes as they collectively pulled billions of dollars in state funding from BlackRock in late 2022.
Investment panel support for ESG activities subsequently declined. In the 12 months to the end of June 2024, BlackRock has confirmed that it supported only 20 of the 493 environmental and social proposals put forward by shareholders at the annual meetings of the companies it invests in. This is just 4% of ESG projects compared to 47% three years ago.
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Vanguard did not support any of the 400 environmental or social stakeholder proposals it considered during the 2024 US proxy shareholder season, saying they were “over-recommended”, unnecessary or not associated with material financial risks.
Gemma Woodward, head of responsible investment at UK wealth management firm Quilter Cheviot, highlighted the energy crisis sparked by Russia's invasion of Ukraine as a tipping point in the anti-ESG trend.
“We've seen a real turnaround in the market where value has become fashionable again, so we've seen an 'easing of the pedal' of interest. [ESG],” she said. “I'm very concerned, frankly … I think the problem we have is that we don't have a universal standard.”
However, BP and Shell still looked “pretty good” compared to oil companies in the US, where there was an even bigger backlash against ESG, Woodward said. US banks JP Morgan and State Street dropped out of the Climate Action 100+ investor group this year.
“It's definitely more serious in America,” Johnston said. “But we're not immune to it in the UK or in Europe.”
Last summer, the EU confirmed plans to reduce the final rules for corporate ESG disclosures through European sustainability reporting standards. The move comes after European Commission chief Ursula van der Leyen vowed to cut red tape across the EU administration's work to counter complaints from big companies about the mounting costs of environmental rules.
Under the new rules, companies will have more flexibility to decide what information is “material,” so some disclosures will be voluntary rather than mandatory. The ambition was described by HSBC analysts at the time as a “setback” in ambition and strength, but it was a step towards convergence in global sustainability reporting.
Johnston stressed that climate change reporting should not be treated as another raft of yet more burdensome reporting rules. Instead, he said, it's about making sure companies are aware of both the risks and opportunities in adapting to the climate crisis.
“Must [climate] “Transformation programs are a means of empowering institutions, stabilizing the financial system as a whole, and aligning it and the real economy with change as we know it,” said Johnston.
“So I think it's completely wrong to look at this as another regulatory burden, because it really isn't … it's about imposing discipline and making sure companies prepare for what needs to be done, which again is responsible stewardship. “
