To lead the energy transition, or to follow?
Why capping its renewables losses was the bigger BP AGM win.
BP shareholders delivered what the FT called a “heavy defeat.” But the bigger win was to cap BP’s renewables losses to $5.4 billion rather than losing many more billions. BP’s Q1 numbers showed underlying profit more than doubling to $3.2 billion. The company is now generating cash, not bleeding it.
Follow This, the Dutch-led campaign group, asked BP to disclose how it would create shareholder value in a world of falling oil and gas demand. It will ask Shell shareholders to also vote on this question. I respect the Follow This leader Mark van Baal. Mark advocates for urgent renewables investment. Renewable electricity is a major solution to an impending climate crisis, but timing is everything. Shareholders also have to assess what happens to energy companies that move too far, too fast.
Ørsted, the world’s biggest offshore wind developer outside China, is the closest thing to a pure bet on the activist strategy demanded from BP. Since 2023, Ørsted has written off more than $6 billion on cancelled US projects. The model made sense when borrowing was cheap. It fell apart when it wasn’t.
BP changed its mission to Beyond Petroleum in 2000, before it suffered the tragedy of Deepwater Horizon in 2010, and later quietly dropped its greenwashing messages. It then sought a green halo in 2020 when its aptly named CEO Looney made new undeliverable ESG promises. European supermajors have learned hard lessons about transition timing vs. commerciality.
BP wrote off $5.4 billion on low-carbon investments in 2025, primarily Lightsource and Archaea. Shell took a $1.6 billion hit on Atlantic Shores wind farm and its Rotterdam biofuels plant. Equinor lost around $1 billion on US wind farms. TotalEnergies took a $700 million loss on offshore wind. Add Ørsted, and these companies lost over $14 billion on these projects since 2023. Are these the projects that shareholders want?
I often met institutional investors when I worked at Shell. I’d explain how Shell’s emissions targets were designed to reflect the realistic range of independent IPCC scenarios. The world demands hydrocarbons for decades. That is why Shell just agreed to buy Canada’s ARC Resources Ltd, its biggest deal in over a decade, adding 370,000 boe/d. But this also adds top quartile, lower carbon intensity barrels, and gas for lower carbon LNG Canada.
Credit to Murray Auchincloss, the previous BP CEO, who pivoted to cut renewables spend from $5 billion a year to $1.5–2 billion. The new CEO Meg O’Neill, who took the helm this month, inherited $22 billion in debt and a target of $14–18 billion by 2027. At the original spend, BP would have faced an emergency cash crunch.
A resilient energy strategy cannot go too far, too fast. It also cannot dismiss climate risk, as Follow This shareholders are right to insist. Boards need to lead, rather than follow: energy transition must serve all stakeholders.
INSIGHTS
The same institutional investors backing Follow This also demand quarterly returns. The tension is not between ESG and profits. It is that transition investment is long-cycle capital in a short-cycle market. Wind farms, green hydrogen, CCS infrastructure are 20 to 30 year assets. The markets that finance them operate on quarterly reporting cycles and fund manager performance windows of three to five years. Institutional investors must be prepared to collectively share the risk of energy transition investments as a separate capital allocation category. Catalytic capital investments, which patiently stimulate new energies supply and create offtake demand, must be judged initially on different time horizons and returns. Investors need to stop asking for two incompatible things at once. No AGM resolution fixes that.
What we also witness is the hangover from two intersecting peaks: the overreach of ESG as an investment doctrine, and the era of near-zero interest rates. Both peaked around 2020 and have now hit a reality buffer. Projects that made financial sense at 1% cost of capital do not make sense at 5%. Strategies built on the assumption that ESG mandates would only tighten have seen political reversal in several major markets. Write-downs are the consequence of strategy using narrow scenarios and sensitivities.
Prudent scenario thinking is not a planning luxury. It separates strategies that survive a changing world. As I explain in the note linked above: no energy transition has ever unfolded as planned. Nuclear was going to make electricity too cheap to meter. The US shale revolution wasn’t in any credible forecast. Solar left every official projection looking timid within years of publication. The current energy transition is no different. The unexpected is to be expected.
Energy transition is a once-in-a-generation opportunity. But energy must remain affordable, secure and sustainable. Those three imperatives are not in conflict by nature. They come into conflict when the strategy is built around only one of them.
Energy transition leader or fast-follower are both risk positions. Both require an upside thesis and a pre-planned response to downside. Think of it as juggling a bull strategic position and a bear strategic position. The bull leg captures the opportunity if transition accelerates: policy tightens, capital costs fall, new markets open. The bear leg is the pre-planned exit, triggers for reallocation before losses compound. Winners are held with a trailing stop that locks in gains as the position moves in your favour. Losers are exited quickly, at a signal set before investment.
Ørsted had a bull thesis. Offshore wind was the right technology in the right decade. What it did not have was a credible bear leg: no pre-planned response to rising rates, US policy reversal, or deteriorating project economics. The positions were held long after the stop signal had fired. That is not a failure of vision; it is a failure of risk management discipline. The companies that will lead energy transition are not those that moved first or those that waited. They are the ones that moved with intent, protected the downside, and knew in advance what would change their mind.
The right answer to “lead or follow?” is “it depends”. It depends on which country, which technology, which market, which regulatory environment, and the prevailing capital cycle. Ørsted leads on offshore wind outside China because Denmark’s policy environment and financing conditions made it commercially viable. The Danish government still owns 50.1% of the company. I would expect another national energy company, Saudi Aramco, to defend hydrocarbons given its reserve position, its low production costs, and a home market that is not going to price carbon at levels that make oil extraction uneconomic any time soon. Both companies are making strategically coherent decisions from where they stand.
The United States is a different geography again. It is a net oil and gas exporter, and Chevron and ExxonMobil are disciplined on liquid hydrocarbon returns. But both have to play catch-up on LNG. The opportunity was visible but they were slow to act. Exxon’s encounter with Engine No. 1 in 2021 is another illustrative case study. The activist fund secured three board seats after a campaign centred on climate risk and long-term financial exposure. Being right about near-term liquid hydrocarbon demand did not protect Exxon from a governance failure rooted in not taking energy transition scenarios seriously enough. Balance works both ways. It can switch again.
European supermajors overreached on transition and are now correcting. US majors face their own reckoning: on LNG positioning, on stakeholder expectations they underestimated, and when their portfolios are tested in a world where policy does eventually tighten. For companies in between, which is most of the listed energy sector, the answer is not to pick one lane. Hold multiple scenarios at once, iterate each position against genuine risk analysis, and be open to the evidence as it arrives.
That discipline is harder than either leading or following. It is also the only approach that is resilient to the uncertainty involved.
Excellent thesis. You accurately identify the structural friction: a profound duration mismatch between long-cycle transition assets and short-cycle equity market incentives. Funding 30-year infrastructure (wind, hydrogen, CCS) using quarterly reporting metrics and 3-to-5-year fund manager performance windows creates an unsustainable cost-of-capital paradox. When the macroeconomic environment shifted from zero-bound interest rates to a 5% baseline, the compressed risk premiums exposed the structural vulnerability of pure-play models like Ørsted.