Briefing note

Investor briefing: Shareholder Resolution to Santos Ltd to adopt Say on Climate reporting

AGM date and location: 15 April 2021, Adelaide, Australia.

Contact: Dan Gocher, Director of Climate and Environment

Other key links: Resolutions and Supporting Statements.


ACCR has engaged with Santos on its approach to climate risk management since 2017 and we last met with Santos executives in early 2021.

At Santos’ 2020 AGM, ACCR filed two shareholder resolutions that received an unprecedented level of support. The first—calling for Paris-aligned targets—was supported by 43.39% of shareholders. The second—calling for a review of Santos’ direct and indirect lobbying—was supported by 46.35% of shareholders.

Special Resolution on Annual Climate Report Vote

Shareholders request the company 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).

Shareholders request that 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.

Santos’ commitments

Santos’ climate commitments are as follows:[1]

  • To reduce Scope 1 and 2 emissions by 5% in the Cooper Basin and Queensland by 2025 (2017 baseline)
  • To reduce Scope 1 and 2 equity share emissions by 26-30% by 2030 (2020 baseline)
  • Net zero Scope 1 and 2 equity share emissions by 2040
  • Actively work with customers to reduce their Scope 1 and 2 emissions by >1 MtCO2e per year by 2030

Santos clearly states that its planned growth projects will increase its emissions between 2020 and 2025.[2]

Santos has not set targets for its Scope 3 emissions (the most material being use of product sold), but it has committed to work with customers to reduce their emissions.[3] However, this commitment appears to be based on fuel switching, i.e. from coal- to gas-fired power generation.

In 2020, Santos published its first review of industry associations. Despite assessing groups on their recognition of climate science and support for the objective of limiting global temperature rise to less than 2°C, it seemed to be based on policy positions rather than advocacy.[4] Santos omitted any reference to the Australian government’s proposed “gas-fired recovery” from the pandemic, despite heavy lobbying for the proposal by the Australian Petroleum Production and Exploration Association (APPEA) throughout 2020,[5] a policy at odds with the Paris Agreement which would directly benefit Santos.

Santos’ expansion plans

Santos plans to increase production from 89 mmboe to 120 mmboe by 2025-26,[6] through the development of major growth projects including Barossa (FID targeted 1H 2021), Dorado Phase 1 (FID targeted 1H 2022) and Narrabri (FID targeted 1H 2023).

In 2019-20, Santos’ equity share Scope 1 and 2 emissions were 4.1 million tonnes CO2e, an increase of 6% from 2019.[7] Its equity share Scope 3 emissions were 32.9 MtCO2e, an increase of 18% from 2019,[8] due to record production of 89 mmboe, an increase of 18% above 2019.[9]

Santos’ projected production growth of 35% by 2025-26 would increase its Scope 3 emissions to nearly 33 MtCO2e (see below).

In 2020, Santos recognised net impairments of US$895 million (before tax) mainly related to “revised oil price assumptions”,[10] brought on by the COVID-19 pandemic.

Santos estimates total capital expenditure (capex) on its major growth projects of US$3.6 billion on Barossa, US$2 billion on Dorado Phase 1 and ~US$650 million on Narrabri Phase 1.[11]

Santos estimates total capex for the Moomba carbon capture and storage (CCS) project at US$125-155 million.[12]

Climate Action 100+ Net-Zero Company Benchmark

ACCR has assessed Santos’ existing disclosures against the Climate Action 100+ Net-Zero Company Benchmark Indicators below.

Disclosure IndicatorSantos commitment/disclosureACCR assessment
1. Net-zero GHG emissions by 2050 or soonerNet zero equity share emissions by 2040Excludes Scope 3 emissions
2. Long-term (2036-2050) GHG reduction target(s)Net zero equity share emissions by 2040Excludes Scope 3 emissions
3. Medium-term (2026-2035) GHG reduction target(s)To reduce Scope 1 and 2 equity share emissions by 26-30% by 2030Excludes Scope 3 emissions
Depends heavily on carbon offsets
Not Paris-aligned
4. Short-term (up to 2025) GHG reduction target(s)To reduce Scope 1 and 2 emissions by 5% in the Cooper Basin and Queensland by 2025Excludes Scope 3 emissions
Does not apply to all Scope 1+2 emissions
Depends heavily on carbon offsets
Not Paris-aligned
5. Decarbonisation strategyLNG export growth
Operational efficiency
Moomba CCS
Coal-to-gas fuel switching is does not reduce Santos’ Scope 3 emissions
Production growth to 2025 comes at the expense of short-term emissions reduction
Initial phase of CCS will capture just 4.4% of Santos’ total annual carbon emissions
6. Capital allocation alignmentPlanned capex of US$125-155m on Moomba CCSExpenditure on CCS is overshadowed by planned capex of ~US$6.25 billion (without targeted equity reduction) on new oil and gas projects
7. Climate policy engagementAssessed industry associations on support for Paris Agreement in 2020Direct lobbying remains opaque
Industry association review focused on policy rather than advocacy
8. Climate governanceExecutive committee responsible for climate risk management
Material sustainability issues included in executives’ remuneration
Accountability for climate rests with board sustainability committee
Incentives for emissions reduction is outweighed by incentives for production and reserves growth
Lack of climate competence on board
9. Just transitionn/an/a
10. TCFD disclosureAddressed each of the key pillars of the TCFD across its 2020 Annual Report and its 2021 Climate Change ReportScenario analysis is insufficiently rigorous, requires assessment against NZE2050 and further granularity of results.
Source: Santos Ltd, ACCR

Say on Climate

In short, the ‘Say on Climate’ framework requires:

  1. Annual disclosure of emissions
  2. A plan to manage those emissions
  3. An AGM vote on this plan

ACCR believes that this framework will benefit Santos and its shareholders.
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+ Net-Zero Company Benchmark provides metrics that create accountability for companies, and transparency and comparability for investors. The resolution centres around these two credible global standards, with guidance on minimum expectations and appropriate flexibility for Santos to exceed them.

Santos currently discloses its Scope 1 and 2 emissions for the previous seven reporting periods, and its Scope 3 emissions for the last four reporting periods in its Climate Change Report.[13] For the purposes of satisfying the resolution, emissions should also be reported by asset (equity and operational), with accompanying commentary explaining annual performance and long-term trends.

Santos’ planned development of the Barossa, Dorado and Narrabri fields will significantly increase its emissions, and come at the expense of emissions reductions before 2030. Furthermore, Santos will rely heavily on land-based offsets to meet its 2030 target.

The impact of Santos’ conversion of oil and gas wells to solar and battery-powered microgrids would be better understood if emissions were disclosed by asset and/or geography.

While Santos has disclosed significant detail on its Moomba CCS project, if approved, it would capture just 1.7 MtCO2e per annum, or 4.4% of Santos’ total annual carbon emissions (Scope 1+2+3).

Importantly, analysts have queried the insufficient volume of CO2 currently produced at Moomba, to which CEO Kevin Gallagher replied “I don't know how that works, but people want to talk to us about importing CO2 into the Cooper Basin if we can permanently store it.”[14] Further disclosure would be required for shareholders to assess the feasibility of this strategy.

Santos is aiming to produce blue hydrogen “at less than the Australian Government target of A$2/kg well before 2030”.[15] This is based on the assumption that “an export pipeline for hydrogen is built”,[16] which is incredibly uncertain. Santos should disclose alternative pathways if export markets for hydrogen are too slow to develop, or don’t develop at all.

Board response

The Santos board claims that Say on Climate would “allow groups of shareholders to use the general meeting process as a public platform to pursue single issues or their individual interests.”[17]

  • ACCR response: The board understates the importance of climate risk management by classing it as a single issue or individual interest. The transition risks from climate change pose existential threats to the Company.

The board also claims that the proposed resolution “could impact on the governance of the Company, even if it was advisory only” and could jeopardise Directors’ ability to make decisions.[18]

  • ACCR response: An annual Say on Climate would consolidate and focus engagement with shareholders, providing Directors with clear expectations and a regular assessment of Santos’ decarbonisation strategy.


An annual Say on Climate will provide shareholders with a non-binding advisory vote on Santos’ plan to reduce emissions and its performance against that plan. Say on Climate is in the long-term interests of all shareholders.

Note on Special Resolution

The Australian Corporations Act 2001 (Cth) (the Act), as interpreted by courts, is not conducive to the right of shareholders to place ordinary resolutions on the agenda of the annual general meeting (AGM) of any listed company. While s249N of the Act sets out a general right of 100 shareholders or those with at least 5% of the votes that may be cast at an AGM propose resolutions for discussion at the company AGM, courts have interpreted this provision to restrict these rights to the proposal of special resolutions, i.e., resolutions amending the company constitution (ACCR v CBA [2015] FCA 785; affirmed in ACCR v CBA [2016] FCAFC 80).

The solution to this problem, in practical terms, is for a group of members meeting the statutory threshold to propose one special resolution to amend the company constitution in order to permit the proposal of ordinary resolutions by members, followed by an ordinary resolution (or resolutions) on the issues of substantive engagement. This is the accepted ‘Australian way’ of proposing shareholder resolutions.

A special resolution requires 75% support to be legally effective, and no resolution of this kind has ever succeeded in Australia. In this legal environment, it is all but assured that contingent, ordinary resolutions proposed by members will have no legal force. ACCR, however, uses this method to compel non-binding votes of shareholders. A large vote on an ordinary resolution to an Australian-listed company can be highly persuasive, but is never binding on the company.

Further, ACCR’s preferred special resolution drafting limits the scope of permissible ordinary resolutions to advisory resolutions related to “an issue of material relevance to the company or the company's business as identified by the company.”

In combination, the restrictive Australian legal environment under the Act, and the conservative method proposed by ACCR, are extremely deferential to the management powers of a company board (as per s198A of the Act). Shareholders should have no concern that any resolution proposed by ACCR will legally compel the activities of any company board, nor limit any board's capacity to make decisions in the best interests of a company.

In this context, we encourage institutional investors to use the opportunity to vote on non-binding Australian shareholder resolutions to send a signal (without binding effect) to boards and management, in line with ambitious readings of their policies. This makes the situation in Australia the same as that in the US where similar shareholder proposals are advisory. In the UK both directive and advisory proposals are possible.

  1. Santos Ltd, Climate Change Report 2021, February 2021 ↩︎

  2. ibid. ↩︎

  3. ibid. ↩︎

  4. Santos Ltd, Industry Association Review, October 2020 ↩︎

  5. APPEA, ‘Government recognises gas in economic recovery plan’, September 2020 ↩︎

  6. Santos Ltd, Investor Day Briefing, December 2020 ↩︎

  7. Santos Ltd, Climate Change Report 2021, February 2021 ↩︎

  8. ibid. ↩︎

  9. Santos Ltd, Annual Report 2020, February 2021 ↩︎

  10. ibid. ↩︎

  11. Santos Ltd, Investor Day Briefing, December 2020 ↩︎

  12. ibid. ↩︎

  13. Santos Ltd, Climate Change Report 2021, February 2021 ↩︎

  14. Angela Macdonald-Smith, ‘Santos may import carbon dioxide waste to Moomba’, Australian Financial Review, December 2020 ↩︎

  15. Santos Ltd, Climate Change Report 2021, February 2021 ↩︎

  16. ibid. ↩︎

  17. Santos Ltd, Notice of Annual General Meeting 2021, March 2021 ↩︎

  18. ibid. ↩︎