BP and Shell Dish Out Bonanza Payouts to Shareholders as Climate Crisis Rages

“Big Oil is Paying Out Years of Dividends in One Day”, ran one Bloomberg headline last year, as rising energy prices continued to cripple consumers.

In November, the financial news organisation Barron’s noted that “Oil Companies Lift Their Dividends as Cash Rolls In”, while a few months later, Reuters reported “Bumper profits fuel surge in dividends, buybacks at oil firms”. 

The bonanza continued as a number of oil firms recorded profits for the last quarter of 2022. 

And in February 2023, Forbes led with the headline “We’ve Struck Oil: 3 Energy Plays Yielding Up To 11% in Dividends.” 

Oil company dividends should be, according to market logic, negatively influenced by several factors, including the shifting energy balance towards renewables, increasing regulatory pressure to reduce emissions, and the rise of divestment campaigns. 

Indeed these shifts towards a low-carbon economy led many to expect a decline in demand for fossil fuels, with investors expected to become increasingly concerned about the long-term sustainability of oil companies. 

However, oil companies continue to make record cash payouts to their shareholders, the campaign group Corporate Watch says in a new report.

The Carbon Cash Machine identifies the major beneficiaries of the UK’s largest fossil fuel companies, BP and Shell. It analyses their cash earnings from shares since the Paris Agreement on climate change, and juxtaposes their “corporate spin on environmental targets” with facts and figures on their fossil fuel investments.

Together with the Centre for Climate Crime and Climate Justice, at Queen Mary University of London, they have revealed a dramatic rise in cash earnings of shareholders in Britain’s big two oil companies since the Paris Agreement was signed in December 2015.

As record temperatures soar and food prices continue to rise as a result of climate change, BP and Shell shareholders are raking in their highest-ever levels of cash earnings, according to the report.

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It found that shareholders in BP and Shell have earned a total of £131 billion in dividends and share buybacks combined. BP account for £43bn and Shell £88bn.

Annual earnings for BP shareholders have also more than tripled (rising 240%), while annual earnings for Shell shareholders have almost tripled (rising by 194%).

And the top eight shareholders have significantly expanded holdings in BP and Shell; those 8 companies have raked in a total of £28.7bn in cash earnings from both BP and Shell.

The report also analyses the ESG (Environmental, social, and corporate governance) strategies of those top eight shareholders in BP and Shell and raises major questions about the failure of fossil fuel divestment strategies and market solutions to climate change.

£131bn – the total of share buybacks and dividends since 2015 – could fund solar panel installation for approximately nine million houses. Less than a fifth of the figure could cover the costs of the 40 new hospitals the government has pledged. And just a tenth of the total could meet the shortfall in UK social care provision.

As a signatory of the Paris Climate Agreement, the UK has agreed to reach Net Zero by 2050. 

Co-author of the report, David Whyte, who is Director of the Centre for Climate Crime and Climate Justice, said: “As the world burns, shareholders are getting record cash pay-outs from their fossil fuel investments.  This report shows that we will not be able to stem the flow of oil unless we stem the flow of cash to rich investors.” 

And Fréa of Corporate Watch said “The eyewatering £113bn in pay outs since the Paris Agreement would be a game changer if it was spent on renewables.  We would be able to revolutionise domestic power supplies and ensure real energy security.”

Another spokesperson for the group added: “The biggest shareholders in BP and Shell have tripled their earning power since the Paris Agreement. Media outlets need to stop giving column inches to their greenwash, because if there was ever any belief that they were making positive change for the climate, this report thoroughly dispels that.” 

Corporate Watch is a research and campaign group that helps people “stand up against corporations and capitalism”. They investigate exploitative firms and those accused of trashing the climate and rights. The Centre for Climate Crime and Justice produces research on the most pressing environmental issues.

BP claims it wants to reach net zero by 2050 or sooner, with clear targets and aims for emissions reductions for both the near-term (2025) and medium-term (2030). It claims its operational greenhouse gas emissions have declined 41% since 2019, and emissions associated with our oil and gas production by 15%.

The firm says it wants an “orderly” energy transition, growing investment into the energy transition and at the same time continuing to invest in hydrocarbons. Around 70% of its investment is in fossil fuels, but the company says it wants its green energy investment to reach over 40% in 2025 and 50% ($7-9 billion) by 2030.

BP also claims its distributions to shareholders are now at around 70% of the level it had been pre-pandemic.

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Earlier this month, the legal campaign group Good Law Project revealed that Theresa Villiers MP held more than £70,000 of shares in the fossil fuel giant Shell while she was Environment Secretary, and never declared them.

Rishi Sunak and his family have also been linked to the fossil fuel industry through his wife Akshata Murty’s stake in the transnational IT services firm Infosys, one of whose top clients is oil giant Shell. 

Last month the UK’s leading progressive thinktank, IPPR, responded to the announcement that Shell has made £3.9 billion ($5.1 billion) in profits in the last quarter (Apr-Jun). Shell have also announced a new round of share buybacks, transferring £2.3 billion ($3 billion) to shareholders, following on from £13.8 billion ($17.35 billion) of buybacks in 2022. In Q2 of 2023 Shell’s total transfers to shareholders (i.e. its dividends and its share buybacks) of £4.3 billion ($5.6 billion) actually exceeded its total profits. 

Dr George Dibb, head of the Centre for Economic Justice at IPPR, said: “Shell has proven its commitment to putting profits and shareholders over our planet. It continues to make huge amounts of money off the back of the war in Ukraine and high energy prices. 

“Meanwhile, incredibly, Shell is now paying more out to its shareholders in dividends and buybacks than it makes in profit, clearly prioritising these transfers over investing a net zero future. If fossil fuel firms refuse to invest in decarbonisation then it’s right for the UK government, like the USA and Canada, to tax share buybacks to support greater public investment in the transition to net zero.” 

It came as a report published by IPPR and Common Wealth argued that share buybacks are a direct cash transfer away from households struggling to pay bills, via energy company profits, to already-wealthy shareholders.

The Corporate Watch findings are based on a unique analysis of financial data generated by the S&P Capital IQ database. The Carbon Cash Machine report is available here.