ESG Materiality: Case Studies

Engaging with socially responsible investors in extreme circumstances...when ESG materiality shakes the foundations of a giant

BP's Deepwater Horizon oil spill, 2010

We all remember the pictures of this environmental disaster:

In June 2010 BP set up a $20 billion fund to compensate victims of the oil spill. To July 2011, the fund has paid $4.7 billion to 198,475 claimants. In all, the fund has nearly 1 million claims and continues to receive thousands of claims each week (source: Wikipedia). More details

BP was until this accident happen a classic ESG "best in class" stock among Oil & Gas stocks, with a strong program in sustainability...we all remember their BP Beyond Petroleum programme...

But the key question from an Investor Relations point of view is, how to react to an event of this magnitude and use it as a basis to project a credible, coherent and honest message to stakeholders that demonstrates that the company is really committed to preventing such environmental catastrophes going forward?

The answer from the company was clear. BP's IR team went to meet SRI investors, those that possibly could have felt more disappointed with the events in the Gulf of Mexico, in London and New York. While understandably it will take some time to restore investors confidence, this exercise of transparency and seeking proactively feedback can only be praised.

These are the details of their proactive IR strategy towards SRI investors in the wake of the Deepwater Horizon accident:

BP held in 2011 an investor roadshow to seek feedback on sustainability reporting; held webcasts on oil sands, alternative energy and operating in sensitive environments; conducted investor sessions in New York and London with BP's chairman and members of the executive team; and produced newsletters and updates on how the company has been progressing recommendations from the report of our internal investigation of the Deepwater Horizon accident. The company also talked to investors one on one and through ad hoc briefings on specific issues.

Non-financial topics covered in recent discussions with these investor groups have included:

• Safety and risk management.
• Contractor management.
• Governance.
• Changes BP is making as a result of the Gulf of Mexico oil spill.
• Technology in BP.
• Sustainability issues relating to the transition to a low-carbon economy, our preparedness for the UK Bribery Act and other societal issues such as human rights.