ACCR Shareholder Resolution to Oil Search Ltd to adopt Say on Climate reporting

The Australasian Centre for Corporate Responsibility (ACCR) has filed a Shareholder Resolution to Oil Search Ltd (ASX: OSH) asking for an annual vote on the adoption of a Climate Report consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Climate Action 100+ Net-Zero Company Benchmark as developed by institutional investors.

This page contains the resolution and its supporting statement, and will be updated with links to news and additional briefings about this engagement.

Special resolution

Shareholders resolve that the following clause be inserted into our company’s Constitution, either as a new clause 20.4 or wherever the Board determines it is better situated:

20.4 Annual vote on adoption of climate report

1. Each year commencing 2022, no later than the date at which the company disseminates to shareholders its notice of meeting, pursuant to clause 25, for its annual general meeting, the company will publish a report consistent with the recommendations of the Financial Stability Board of the G20’s Task Force on Climate-related Financial Disclosures, and where relevant, the Climate Action 100+ Net-Zero Company Benchmark (Climate Report). At a minimum, the Climate Report will include:

   • a) the company’s greenhouse gas emissions (Emissions) in accordance with recommended disclosure (b) of the Task Force on Climate-related Financial Disclosure Metrics and Targets Recommendation, and
   • b) the company’s proposed strategy to reduce its Emissions, detailing short, medium and long-term targets for reductions in the company’s Emissions.

2. At each annual general meeting, a resolution that the Climate Report be adopted must be put to a vote. The vote on the resolution is advisory and does not bind the directors.

Supporting statement

The management of climate risk by major companies has portfolio-wide and economy-wide implications. The proponent of this resolution, the Australasian Centre for Corporate Responsibility (ACCR) believes that the mechanism this resolution seeks to establish—an annual report on our Company’s climate transition plans and strategies against relevant international frameworks (Climate Report) and a vote thereon—will benefit the Company and its shareholders, as well as global climate change objectives.

Our Company supports “efforts to move towards implementing an effective global climate agreement…that supports a global warming trajectory of 2°C”,^[1] and recognises that “it is impossible to decouple climate change from our Corporate Strategy”^[2]. As governments take action to limit greenhouse gas (GHG) emissions, climate change will represent a material risk to our Company for the foreseeable future.

PNG legal context

PNG law does not currently compel the disclosures sought in the Climate Report, and the prospect of law reform which would compel such disclosures is unlikely in PNG. This resolution is designed to ensure that, in the absence of law reform, immediate investor demand for information to be disclosed in a timely and consistent fashion is met, so that a structured conversation between our Company and its shareholders can take place. ACCR intends to make similar requisitions at a number of Australian-listed companies in 2021.

Information sought in the Climate Report

Due to the rapid transition taking place in the energy sector, it is imperative that shareholders are provided with the necessary information required to make informed judgements about the future earnings and value of our Company. The information sought in the Climate Report, which this resolution seeks to elicit on an annual basis, is an important means of assuring shareholders that the Company is managing effectively the physical and transition risks associated with climate change.

The Recommendations of the Task Force for Climate-related Financial Disclosure (TCFD) provide an internationally recognised framework for climate risk disclosure. In addition, the Climate Action 100+ (a coalition of more than 500 investors with over $52 trillion in assets under management) Net-Zero Company Benchmark outlines metrics that create accountability for companies, and transparency and comparability for shareholders on GHG emissions, GHG targets, improved climate governance, and climate-related financial disclosures. The resolution centres around these two credible global standards, with guidance on minimum expectations and appropriate flexibility for our Company to exceed them.

Our Company last published a report addressing each of the key pillars of the TCFD in its 2017 Climate Change Resilience Report.^[3] Our Company’s existing climate-related disclosures are insufficient and disjointed, spread across the Annual Report, Social Responsibility Report and website. Investors require clearer, more consistent information in order to properly assess our Company’s approach to climate risk management.

Our Company disclosed its total operated greenhouse gas (GHG) emissions (Scope 1+2) for the last ten years in its 2020 Annual Report.^[4] However, it does not disclose its equity share emissions, which are likely to be significantly higher than its operated emissions, as ExxonMobil is the operator of PNG LNG. Our company discloses its Scope 3 emissions (from the use of product sold) for the last three years on its website.^[5] For the purposes of satisfying the request for a Climate Report, emissions should also be reported by asset, with accompanying commentary explaining annual performance and long-term trends.

In 2020, our Company committed to reduce its GHG intensity by more than 30% across its operated assets by 2030.^[6] It has not set absolute emissions reduction targets, nor committed to a date to reach net zero emissions. Our Company plans to invest in “growth projects aligned with the objectives of the Paris Agreement”,^[7] primarily through development of Papua LNG and the Pikka oil field in Alaska. Development of these projects will come at the expense of emissions reductions before 2030.

To date, our Company has not committed to reducing its Scope 3 emissions (from the use of product sold), and continues to rely on the prospect of North Asian markets “supporting gas/LNG as a core transition and base load fuel” as coal-fired power generation is phased out.^[8]

Other than committing to make “targeted investments of appropriate scale into renewable energy and carbon offsets”,^[9] and “integrate renewable and batteries into its operations”,^[10] our Company has not disclosed a plan or strategy to decarbonise its operations over any timeframe. This lack of planning is in stark contrast to its global peers, and should be of great concern to shareholders.

An annual vote on the Climate Report will simply provide shareholders with a non-binding advisory vote on our Company’s performance and strategies to reduce emissions. This is in the long-term interests of all shareholders.

ACCR urges shareholders to vote for this proposal.