Almost half of all shareholders at Santos AGM back stronger emissions target

Oil and gas giant Santos faces increased pressure over its stance on climate change after nearly half its shareholders backed resolutions that it should strengthen emissions targets and review its membership of fossil fuel lobby groups.

Ethical investor group the Australasian Centre for Corporate Responsibility said the level of support for a shareholder-led climate resolution was unprecedented, and showed large institutional investors had “woken up to the damage a growing gas industry is wreaking on the planet”.

The centre moved two resolutions. Firstly, that Santos set targets aligned to the goals of the Paris agreement for its direct emissions and the indirect “scope 3” emissions released by consumers of its products, and secondly that it review its industry association memberships. The motions received 43% and 46% support at Santos’ annual general meeting , was held online on Friday due to the coronavirus pandemic.

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Both resolutions were backed by several large proxy advisers and superannuation funds, but opposed by two Chinese shareholders, ENN Ecological Holdings and Hony Capital, that control about 30% of shares.

The resolutions were not officially put to the meeting after a push to change the constitution to allow advisory resolutions was unsuccessful, but were acknowledged by Santos’ chairman, Keith Spence, who read out the vote results.

The centre’s Dan Gocher said it showed there was strong support for fossil fuel companies to set targets to limit not just their own emissions, but those that result from their goods. He said many of Santos’ peers, including BP, BHP and Royal Dutch Shell, had committed to scope 3 targets.

“These results show how much of a laggard Santos is on climate change,” Gocher said.

“The onus is now on institutional investors to ensure that their vote is not ignored. Santos should immediately move to implement the review and disclosure measures recommended in the two resolutions.”

Spence told the meeting that while the resolutions had been rejected, it was clear that climate change was an important issue to our shareholders.

“It’s something that is personally important to me as well,” he said.

“Our company is already taking industry-leading action towards emissions reduction, and we will continue to engage constructively with shareholders on climate change, and work towards our shared aspiration of net zero emissions by 2050 over the coming year.”

Santos has a target of cutting emissions by more than 5% by 2025 and an aspirational goal of net zero emissions by 2050, but aims to lift gas production by 60% over the next five years.

Gocher said it was untenable for Spence to maintain his opposition to setting a target for scope 3 emissions “given the clear signal sent by his shareholders”.

Emma Herd, chief executive of the Investor Group on Climate Change, said oil and gas companies had been told for years that investors expected them to address climate change in line with the Paris agreement.

“The question now for Australian companies like Santos and Woodside is whether they are matching their European counterparts, who increasingly recognise that a strategy for a diversified business beyond pure fossil fuel extraction is required to reduce climate risk and provide long-term value for investors,” she said.