Oil companies say they support climate action (which would curtail use of their products) while also telling their investors not to worry. It's an apparent contradiction. Are the companies lying?

Let's look at @BP_plc's new shareholder report. [THREAD]

https://bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-annual-report-and-form-20f-financial-statements-2019.pdf

BP quickly acknowledges that "Climate change and the transition to a lower carbon economy ... could have an adverse effect on our business ... and could lead to constraints on production and supply and access to new reserves and a decline in demand for certain products." [p. 70]

But the company also assures its shareholders it's got things under control. In 2019, it says, its audit committee "regularly considered climate change risk affecting the whole business." [p. 91] Basically: don't worry.

If we dig deeper, we see BP brought in Deloitte to test its assumptions. The auditors noted that "BP’s oil and gas price assumptions have a significant impact on ... valuations performed across the portfolio" including property, plants, equipment, and other assets. [p. 135]

But the auditors also warned "The transition to a lower carbon global economy may potentially lead to a lower oil and gas price scenario in the future due to declining demand," and thus "There is a risk that management’s oil and gas price assumptions are not reasonable." [p. 135]

In other words, BP's present value depends materially on how the future energy transition plays out. The more quickly clean energy replaces fossil fuels, the more oil prices will decline due to decreased demand and the more BP's present value (and share value) suffers.

But again we're assured "Management took into account .. the social, political and environmental actions that will be taken to meet the goals of the Paris climate change agreement" [p 135] It *sounds* like BP has climate-proofed itself & is on a sustainable trajectory. But is it?

Buried on p. 136 of BP's 350-page annual report, amidst all the assurances & talk of sustainability, is this:

"BP's price assumptions ... are not consistent with the world being on a path to achieving the Paris 2°C Goal"

That might be the most important sentence in the report.

How does that square with BP's assurances that it takes climate into account? Well, the report says that none of the 3rd party forecasters the company consulted "described their 'Paris 2°C Goal' scenarios as their 'best case', 'central case' or 'most likely' estimate." [p. 136]

Think about that. BP loudly announces it's taking climate into account & brands itself as a sustainable investment. Then quietly in one sentence on one page it admits its financials are based on the assumption that its products will cause catastrophic global warming.

Not only that, but BP & the other oil majors spend $200 million/yr obstructing climate policy, helping to ensure that catastrophic global warming remains the "most likely" outcome. And they spend another $200 million/yr branding themselves as sustainable.

https://influencemap.org/report/How-Big-Oil-Continues-to-Oppose-the-Paris-Agreement-38212275958aa21196dae3b76220bddc

BP is quietly admitting to its shareholders that it plans for its products to cause climate catastrophe and that the value of the company & its shares is based on that plan.

BP is admitting that to support the Paris agreement & invest in the company are contradictory positions.

Here's another tidbit. The report acknowledges that "Climate change-related litigation brought against BP .. may lead to an outflow of funds requiring provision in the current year." [p. 134] But when it comes to financials, the company makes no provision [p 135]. It has no idea.

Two of the biggest threats to a polluting industry are regulation & litigation. BP tells shareholders not to worry, then:

- Assumes regulation won't come to pass, world burns
- Ignores litigation

I'm not sure who should be more worried: BP's shareholders...or everyone else.