Woodside faces tough balancing act after investor revolt over climate

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Hello and welcome to Energy Source, coming to you today from Sydney, Australia and New York.

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The tax changes come at a tricky time for EV adoption, as declining profit margins and slower growth cause carmakers such as Tesla to pump the brakes on their electrification plans. Will this slow the transition to EVs? Write to energy.source@ft.com and let us know what you think.

In today’s newsletter we take a look at the investment climate Down Under, where Australian oil and gas operator Woodside is coming under mounting pressure over its climate strategy.

Thanks for reading — Jamie

Woodside struggles to balance E&P and ESG

“The world is not prepared to live without energy.” That’s according to Jakob Stausholm, chief executive of Rio Tinto, who was addressing the mining company’s shareholders at its annual meeting in Brisbane last week.

Rio Tinto is one of the world’s largest producers of copper, iron ore and aluminium but Stausholm spent a fair chunk of his time on stage talking about deals it has struck this year to buy renewable power from the Bungaban wind energy farm and the Upper Calliope solar farms to supply its operations in the state of Queensland. “We’re no longer just setting targets,” Stausholm said of the deals that will both support the development of renewable energy in Australia while also showing how it plans to deliver on its decarbonisation plan.

And when asked about Rio Tinto’s commitment to achieve net zero by 2050, he responded that the company was “not in coal, not in oil and gas”. It was a telling comment for Australian shareholders.

The miner’s annual meeting was in stark contrast to a four-hour session a week earlier on Australia’s other coast. In Perth, Woodside Energy — which is in oil and gas — suffered a bloody nose at its 70th annual shareholder meeting.

Woodside, Australia’s largest energy company with operations stretching from Alaska to Africa to the north-west coast of Australia, put its Climate Transition Action Plan to a shareholder vote at the meeting. It suffered a record defeat with 58.4 per cent rejecting it, the largest vote against a climate plan by an Australian company. The board faced a retinue of activist investors and protesters questioning the basis of its emissions calculations, and how it had any hope of meeting its “aspiration” to hit net zero by 2050 when it was still investing in new gas exploration and production.

At one point a group of protesters began singing their own rendition of the Crowded House song “Don’t Dream It’s Over” aimed at the board (“Stop now, stop now, Woodside it’s over . . . You know you won’t win”). It was the latest in a series of disruptions directed at the Woodside board that has turned ugly over the past year following the targeting of chief executive Meg O’Neill’s house by activists.

Woodside has continued to defend its climate plan, which proposes investing $5bn in alternative energy sources such as hydrogen to abate its emissions. But the vote against it was higher than two years ago, when 49 per cent rejected the plan.

That suggests it is losing the war to balance its commitments to investors looking for the sort of growth and returns that energy companies delivered in 2022, with those who argue that much more needs to be done to reach net zero.

Kevin Morrison, energy finance analyst with the Institute for Energy Economics and Financial Analysis, said it was a “big mark” against Woodside’s plan, which he said was “more of a smokescreen to keep business as usual”. He expects that the company will need to change course on climate. “They cannot continue to ignore nearly 60 per cent of their investors,” he said.

O’Neill warned investors at the meeting that Woodside refused to set climate goals it couldn’t keep and noted that some of its peers had already walked away from targets. The company is not alone. Shell is facing a call ahead of its annual meeting this month from a bloc of investors wanting more action on climate change.

The world may not be prepared to live without energy but those public businesses still in coal, oil and gas may need to strike a better balance between production and decarbonisation during AGM season if their climate credentials don’t improve. (Nic Fildes)

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.