BP troubles put ESG in the slimelight

The multinational company’s failure to prevent and manage one of the worst ever oil spills has seen its share price collapse and posed a threat to its ongoing quarterly dividend.

The company has also been downgraded six levels by Fitch Ratings, from AA to BBB, as a result of the environmental disaster.

With BP accounting for £7.2bn of the £56.9bn paid in dividends to UK pension funds last year – equivalent to £1 in every £8 – questions have been asked over whether investors should have paid more attention to ESG issues.

“UK pension funds’ scrutiny of companies’ exposure to environmental and social risk is inadequate,” said Duncan Exley, director of campaigns at FairPensions. “The BP Gulf spill is a stark example, but the problem is much wider.”

FairPensions has called on the government to tighten existing regulations governing pension funds, requiring them to disclose what ESG issues are taken into account in their investment policy, how that policy is implemented and how funds exercise their shareholder rights.

Exley added: “We are urging the government to implement simple, cost-free measures to help protect our retirement savings – and we need your help to make it happen.”

The last time BP cut its dividend was in 1992.