Following reports that BP chief executive Murray Auchincloss is set to slow the group’s investment in renewable energy, a leading industry analyst has warned that such a move could backfire on the business.
Russ Mould, investment director at AJ Bell, was commenting following a Reuters report that suggested that Auchincloss, who replaced Bernard Looney as CEO recently, was imposing a hiring freeze at the company, as well as pausing new offshore wind projects.
Reuters quoted a number of sources at BP, who declined to be named, in its report.
Energy transition
“The motivation for taking the route of a slower energy transition might be to secure a better valuation from the market, more in line with US peers, which have not made the same kind of environmental commitments,” Mould said. “In doing so, Auchincloss is following the path forged by his counterpart at Shell, Wael Sawan.
“These decisions could go down well with investors in the short term but they could store up longer-term problems for the business.
“By walking back its environmental pledges, BP risks the ire of campaigners, the wider public and, more seriously, politicians and regulators.”
‘Radical action’
Mould noted that Auchincloss’ appointment presented him with the opportunity to “make a more aggressive move” towards net-zero commitments, following the positive response Looney had received from the strategy when it was announced in early 2020.
However, “poor recent share price performance had also put him under some pressure to take radical action with a diminished BP at risk of falling prey to a larger predator,” he added.
A reported hiring freeze is also likely to present issues, given the recruitment challenges facing the energy sector at present, Mould noted.
“A hiring freeze now could make it more difficult to fill jobs when BP needs to in the future and, having muddied any green credentials, BP may struggle to attract new, younger talent given this demographic tends to be more concerned about the impact of climate change,” he said.
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