Pru, why was BHP a target?
Simply because of its size and global operations, BHP has a high exposure to what was being termed as “stranded assets.” We were looking to encourage greater disclosure on how boards were managing the issue, in particular future capital expenditures. BHP was one of the companies that was more receptive to shareholder concerns than many others. This is reflected in the continual improvements in disclosure of policies, but more importantly, in actions by the company. When it came to issues such as climate change BHP was not focused only on what was required to be disclosed but wanted to meet the expectations of investors.
There is no doubt the corporate community was slow to respond to growing shareholder concerns on climate change. BHP at the time was one of the few companies to make the chairman available for discussions on the issue.
Jane, can you talk about some of the challenges in responding to an issue as complex as this?
Responding to a global issue with fast-paced and growing momentum was difficult. We could not predict where the campaign on climate change would go, nor the impact on the company. BHP is driven by its values, its charter and its purpose and we knew this would be our base from which to navigate. And that is what we did. We put our best foot forward about who BHP was, what we stood for, the implications of the global dependence on the resources we produce, and why we could be trusted to run a sustainable coal business.
It wasn’t easy. The company, under the leadership of newly appointed CEO Andrew Mackenzie, embarked on comprehensive strategic modeling of the impacts of climate change on its portfolio of business. That work in its early stages was shared with investors and governance advisers. It enhanced deeper understanding and awareness in BHP of actions necessary to manage climate change and changed asset planning and management.
Of course, the issue of climate change wasn’t going to be “solved” but the joint approach of board and management succeeded in terms of showing how the company was responding on a long-term basis. The impacts and opportunities of climate change were embedded as part of mainstream strategy within BHP. The nomination of the climate change activist to the BHP Board (in 2013 and again in 2014) was not successful. Investors chose to support the Board and greater integration of climate change considerations into the strategic decision making of the company.
Jane, can you tell us about the decision to let your Board and management lead the engagement with investors?
There wasn’t really a decision to make. This is the same approach the Chairman has chosen for many years, one that is strongly supported by the CEO and management.
However, the confluence of events that led to investors and governance advisers pressing hard for responses from BHP broadened the investor engagement process. This was done working in parallel with the CEO to ensure the strategic implications were understood throughout the organization.
As it turned out, it was the right approach for the long-term success of BHP. Proactive investor engagement with the highest level of board and executive leadership on significant strategic and reputational matters is the best way to ensure that both the company and investors hear what each other has to say.
In this case, strong engagement and mutual trust with investors helped BHP successfully navigate what had the potential to be very challenging.