BP Jumps Off the Sinking ESG Ship

BP learned the hard way that trendy political messaging is no substitute for sound business practices.

In the summer of 2020, Fortune applauded oil giant BP for thinking “outside the barrel.” The company, which once had the word petroleum in its name and, at the time, was producing 1.1 million barrels of oil per day, had unveiled a plan “to move BP into clean energy and out of oil” as part of its goal of reaching “net zero” emissions by 2050.

“We believe the world needs a rapid and orderly energy transition,” then-CEO Bernard Looney said.

Those words are ancient history. At a shareholder meeting last month, BP’s new CEO, Murray Achincloss, sang a starkly different tune, promising to expand oil and gas investment by 20% and increase production to 2.5 million barrels per day.

“This is a reset BP, with an unwavering focus on growing long-term shareholder value,” Auchincloss told investors.

These are no doubt welcome words to BP shareholders, who have been paying the price for the company’s reckless crusade into renewable fuels initiated during the 2020 oil market collapse.

While virtually all oil companies struggled during the chaotic pandemic period that saw oil prices turn negative, most have since recovered. BP, whose strategy included pledges of a tenfold increase in “green” spending and a 40% decrease in oil and gas volume production, is a different story. While BP’s revenues rebounded in 2022 after decade lows in 2020 and 2021, 2023 saw revenues fall to $210 billion, about $80 billion off its pre-pandemic pace.

Looney’s messy split from the company that year did not stop the bleeding. In 2024, the British oil giant’s revenues fell further to $195 billion. Needless to say, BP’s plunging revenues did little to help its struggling stock. In December 2024, while other oil and gas companies such as Chevron and Exxon Mobil saw their stock reach near all-time highs, shares of BP fell to $28, roughly half its price from a decade and a half earlier.

Bloomberg columnist Javier Blas, coauthor of The World for Sale, put it well:

“For the last five years, [BP] has squandered its shareholders’ money,” he wrote.

BP’s struggles are not a mystery. By prioritizing environmental, social, and governance policies over the interests of shareholders, BP took its eye off the ball. Joining brands such as Bud Light, BP embraced the fad of stakeholder capitalism, which saw the interests of consumers and shareholders sidelined in favor of trendy diversity and environmental initiatives.

Sure, the strategy pleased the ESG overlords. Even as BP’s profits and revenues plunged, its ESG score soared. However, its decision to prioritize renewable energies over oil and natural gas likely cost the company billions of dollars.

According to reports, Auchincloss admitted to investors that BP’s faith in green energy was “misplaced,” adding that fossil fuels would be necessary for humans “for decades to come.”

By pledging an “unwavering focus” on creating value for shareholders, BP admitted its renewable crusade was a failure and exposed the rotten core of ESG.

While you’ll still find people who defend ESG investing, there’s a reason it has been slowly dying since 2023: Its performance stinks.

BlackRock, the world’s largest asset manager, didn’t sideline its ESG exchange-traded fund because it was doing well. It lost 22% in a single year and was consistently outperformed. Today, Larry Fink, the company’s CEO who was instrumental in building the financial infrastructure of ESG, is scrambling to sever his company from ESG and diversity, equity, and inclusion.

ESG investing is bound to suffer because it’s inherently anti-capitalistic. So-called “woke capitalism” prioritizes politics over sound business practices and self-interest, the engine of prosperity. BP’s shareholders are paying the price of its executives falling for the mantra that companies best serve their financial interests by doing “good” politically or socially.

They are hardly alone. Countless shareholders and pensions have been harmed by corporations that fell for the idea that prioritizing social and environmental values would result in greater returns for investors. Some pensioners are even taking legal action, including lawsuits against Target and American Airlines.

BP, like Bud Light, Target, and many other corporations, would do well to remember that its raison d’etre is not to change the world or serve a social cause. Its primary responsibility is to serve its customers and shareholders. BP’s course correction is another reminder that businesses thrive not by chasing ideological trends but by delivering value to their customers and shareholders. Anything less is just a costly detour.

This article originally appeared in the Washington Examiner.