Why are Legal & General investing in risky, dirty oil?

Like many pension providers, Legal & General has a great deal of our pension funds invested in oil. In fact, it's the one of the largest investors in BP so it has enormous influence over how the oil giant operates.

Companies like BP are currently looking for oil in extreme and inaccessible places, drilling deep under Arctic seas or ripping up the Canadian landscape in search of tar sands. But these dangerous ventures are extremely risky and that means it’s also a risky investment for your pension.

The oil companies are working on a business plan that ignores the necessary reductions in carbon emissions that we must make in coming years. So if their plan isn’t sustainable for the planet, it’s also not going to sustain our retirement.

Write to Kevin Gregory, chief executive of Legal & General, and ask him to question BP's relentless pursuit of oil. That way we’ll be able to retire in a clean and healthy environment with pensions that value the quality of life we will have, not just quantity of profits.

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Mr Kevin Gregory Chief Executive Legal & General

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Dear Mr Gregory,

In the wake of the recent oil spill in the Gulf of Mexico, I am urging you to take a lead in promoting financial and environmental responsibility in companies like BP.

As one of BP’s biggest institutional shareholders in the UK, you are in a position to use your influence to ensure that BP and other oil companies do not continue to put our economy, communities or the environment at risk.

BP downplayed the risk of a spill at Deepwater Horizon and was, by its own admission, totally unprepared to deal with the consequences. There are worrying signs that BP and other oil companies may prove similarly unprepared to deal with the human, environmental and financial challenges that climate change and regulations to tackle it will increasingly present, and are not preparing for the necessary transition to a low carbon economy.

Such a transition will require an explosive pace of industrial transformation to transform our use of energy. Despite making public statements about the importance of tackling climate change, there is little evidence that oil companies are actually working towards that required transformation, instead pursuing strategies which are in direct contradiction with transitioning to a low carbon economy.

For example, BP’s chairman at this year’s AGM justified the company’s investment in carbon intensive oil sands on the basis of future projected energy demand which assumes no such transition takes place and which experts say would result in catastrophic climate change. This strategy increases the risk to BP’s own operations, long term risks to shareholders and the likelihood of catastrophic impacts on the environment and communities and economies around the world.

Given oil companies’ reluctance to take action, co-ordinated investor/corporate dialogue is necessary to ensure a smooth transition to a low carbon economy. I would like Legal & General to adopt a leadership role in engaging with oil companies such as BP to ensure that they transparently demonstrates that they are prepared for the transition to a low carbon economy.

For example, Legal & General could co-ordinate a public collaborative investor initiative to engage with BP and other oil companies to ensure that oil companies are developing business strategies which are consistent with achieving the internationally agreed goal to limit global temperature increase to two degrees. The Pharma Futures initiative provides a good precedent for the energy sector to follow.

I am encouraged by Legal & General’s recognition of the importance of “addressing appropriate market, social, economic and environmental risks and opportunities and integrate them into the core decision making process of our businesses” and note that L&G has committed to “promote responsible ESG (Environmental, Social and Governance) business practices in the companies in which we invest to create long term value for investors.”

In light of this commitment and the urgency of addressing the environmental, social and financial challenges of climate change, I hope that Legal & General will adopt a leadership role among investors on these issues.

I look forward to your reply.

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Why are Legal & General investing in risky, dirty oil?

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