Activist investor targets Santos over ‘unacceptable’ environmental performance
Australian oil and gas company Santos has come under fire from an activist shareholder over its ESG approach.
Oil and gas company Santos, which operates across Australia and in Papua New Guinea, has been accused by an activist shareholder of having an “unacceptable environmental and safety record” that has contributed to underperformance in its share price.
An email sent to the Santos board by activist investor Snowcap on March 9 suggested that the company’s upstream growth strategy is “misguided and driven by executive incentives”, which are not aligned with the interests of its shareholders.
Activist group Market Forces, meanwhile, has filed a shareholder statement asking investors to vote against Santos’s remuneration at its April 6 annual meeting, according to Reuters. Market Forces did not reply to a request for comment.
On its website, the group accuses the explorer of “pursuing massive expansion plans consistent with the failure of the Paris Agreement”.
Santos is ‘ignoring transition risk’
Santos announced a new clean energy “purpose” in November 2022, reiterating its intention to achieve net zero emissions by 2040.
According to its latest climate change report, published on February 28, the company has met its 2025 emission reduction targets, which included lowering emissions from its Cooper Basin and Queensland activities by 5 per cent.
However, according to Snowcap, the company’s apparent share price underperformance — which, according to Snowcap, makes it the lowest-returning exploration and production peer over one-year, two-year and 10-year timelines — is partly attributable to its “unacceptable environmental and safety record”.
Snowcap says that Santos has not taken climate action seriously, “setting tokenistic, short-term emissions targets, while simultaneously planning to increase production output by up to 30 per cent”.
It pointed to a legal action that is currently being pursued over its climate target action plan, over alleged greenwashing. In August 2021, the Australasian Centre for Corporate Responsibility filed legal action in the federal court disputing Santos’s assertion that natural gas provides “clean energy”, and challenging the credibility of its pathway to net zero by 2040.
In August 2022, the Environmental Defenders Office — on behalf of the ACCR — filed to expand its case to include alleged greenwashing in Santos’s ”2020 Investor day” briefing and ”2021 Climate change report”.
According to Snowcap, Santos’s Scope 1 and 2 emissions intensity is one of the highest in the industry, while in 2021, its total injury rate was more than four times the average for oil and gas.
The company highlighted Santos’s ranking by Bloomberg New Energy Finance on its transition readiness, which placed it 36th out of 41 global oil and gas businesses.
Snowcap called on Santos to improve its environmental and safety performance, as well as refresh its governance and reposition executive incentives in a list of demands for reforming the company.
Santos declined to comment.