1. Home
  2. Sustainability
  3. Data and how we report
  4. Task Force on Climate-related Financial Disclosures

Task Force on Climate-related Financial Disclosures

We support the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which was established by the Financial Stability Board with the aim of improving the reporting of climate-related risks and opportunities
We announced in 2020 that we intend to work constructively with the TCFD, ‎and others, to develop good practices and standards for transparency. Our ‎latest reporting provides information supporting the TCFD’s recommended ‎disclosures.‎

Governance

TCFD recommendation‎:

Disclose the organization’s governance ‎around climate-related issues and opportunities

From 1 January 2021, bp implemented a new, simplified system of ‎sustainability governance encompassing the board, its associated committees ‎and the leadership team. This structure will enhance oversight of bp’s new ‎sustainability frame, which focuses on three areas: net zero, people and planet. ‎‎The remit of the board and its committees under our new governance ‎framework is set out on page 88 of bp’s Annual Report and Form 20-F 2020.


Terms of reference for the board and its committees are available at ‎bp.com/governance.

a. Describe the board’s oversight of climate- related risks and opportunities

The role of the board is to promote bp’s sustainable success for the benefit of ‎its members, generating value for shareholders while having regard to the ‎interests of our other stakeholders, the impact of our operations on  the ‎communities where we operate and the environment. In performing this role, ‎the board is responsible for oversight of the overall conduct of the group’s ‎business, which extends to  setting our strategy and approach to the energy ‎transition.


The board and its associated committees, including the safety and ‎sustainability, audit, people and governance and remuneration committees, ‎where appropriate, have oversight of climate-related matters, which include ‎climate risks and opportunities. They are updated on these matters frequently, ‎a process which is managed by our company secretary’s office, which works ‎closely with teams in bp to develop materials that assist the board or ‎committee to discharge its responsibilities, including those related to climate.


In 2020 these processes included formal analysis of bp’s net zero ambition and ‎aims, briefings with subject matter experts, reviews of regulatory ‎correspondence regarding prior year climate disclosures, virtual site visits and ‎the preparation and consideration of corporate reporting documents and AGM ‎materials.‎


During 2020, climate matters were included on the agenda at every board ‎meeting. Agendas are now structured along four distinct pillars: strategy, ‎performance, people and governance.‎

 

  • The safety and sustainability committee’s remit was extended from the beginning of ‎‎2020 to provide oversight of the effectiveness of the implementation of bp’s ‎sustainability frame. This includes reviewing that appropriate progress is being made ‎against our net zero, people and planet aims. The committee will continue to cover ‎existing sustainability-related activities, including the oversight of operational ‎sustainability risks.‎
  • The role of the audit committee is to monitor the effectiveness of bp’s financial ‎reporting, systems of internal control and risk management, and the integrity of bp’s ‎external and internal audit processes. In fulfilling this purpose, the committee has ‎oversight of financial disclosure, including TCFD reporting.‎
  • The role of the remuneration committee is to recommend to the board the ‎remuneration policy for executive directors and the leadership team. It also reviews ‎workforce remuneration and monitors related policies, satisfying itself that ‎incentives and rewards are aligned to bp’s strategy, culture and long-term ‎sustainable success. This includes climate-related matters.‎
  • The role of the people and governance committee (formerly the nomination and ‎governance committee) is to oversee a diverse succession pipeline and to review ‎workforce policies and practices, monitoring their consistency with bp’s purpose, ‎strategy and values. This helps ensure that we have the right people to deliver our ‎strategy and net zero ambition.‎

 

Pursuing a strategy consistent with the Paris goals ‎

 

Strategy has been the core focus of every board meeting since the beginning of ‎‎2019. Throughout 2020 the board worked closely with the leadership team in ‎developing our new strategy. In August 2020 the chairman outlined the key ‎judgements the board had applied to their decision making regarding bp’s ‎strategy, financial frame and investor proposition. As a result, the board ‎considers that the strategy allows us to be flexible to adapt to market changes ‎and scenarios to remain consistent with the Paris goals.‎

 

The role of the board in evaluating material capex consistency with Paris


The board assesses the impact of portfolio changes, such as strategic ‎acquisitions and the allocation of capital. It also considers specific investment ‎cases which have been approved by the resource commitment meeting, see ‎page 29 of the bp Annual Report and Form-20F 2020‎.

b. Describe management’s role in assessing and managing climate-related ‎risks and opportunities

The assessment and management of climate-related matters is embedded ‎across bp at various levels and delegated authority flows down from the board, ‎see page 29.‎


From 1 January 2021, a new executive level governance forum, the group ‎sustainability committee, will provide internal oversight of bp’s progress ‎against the aims and objectives  in the sustainability frame, including net zero.


This group is chaired by the EVP strategy & sustainability (S&S) and comprises ‎members of the bp leadership team. The group sustainability committee plans ‎to meet on a quarterly basis to review progress within entities against the ‎sustainability frame and decide on critical strategic positions related to ‎sustainability that present risks or opportunities to delivery. The EVP S&S will ‎report to the main board and committees as required.


The group operational risk committee will continue to provide oversight of ‎safety and operational risk management performance for the group, where ‎appropriate, which includes sustainability-related risks such as modern slavery ‎and severe weather.


Climate-related matters were discussed at  each of the leadership team ‎meetings in 2020, including the development of bp’s net zero ambition and ‎aims ahead of discussion with  the board.‎


The leadership team is supported by bp’s senior-level leadership and their ‎respective teams, with dedicated business and functional expertise focused on ‎climate-related matters. This includes our health, safety, environment  and ‎carbon, strategy and sustainability and group policy and economics teams.‎


Alignment between group, business and functional leaders is fostered through ‎cross-functional bodies.‎

Strategy

‎ TCFD recommendation‎

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s business, strategy and financial planning where such information is material

Our strategy to become bp’s an Integrated Energy Company, and our net zero ambition and aims are set out on pages 2-3, 15 and 49 of the bp Annual Report and Form 20-F 2020.

a. Describe the climate-related risk and opportunities that the organization has identified over the short, medium, and long term

In developing our strategy, the board and leadership team consider a wide ‎range of opportunities and risks across three discrete time horizons:‎

 

  • Short term (to 2025): the next five years are defined by detailed business and ‎financial plans, which are performance managed in delivery of our 2025 targets.‎
  • Medium term (to 2030): looking out 10 years enables us to think beyond the short-‎term to consider signposts and milestones towards the longer-term scenarios, ‎enabling us to adjust course if required.‎
  • Long term (to 2050): recognizing the wide range of uncertainties, we use a scenario ‎planning approach to help us explore possible pathways for the energy transition ‎over the next 30 years, as the world moves towards net zero. This includes ‎consideration of changes in policy, societal preferences, economic growth and ‎technological progress. For more detail on our approach and how it informs our ‎strategy, see page 11.‎
b. The impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning

In the bp Energy Outlook 2020 we describe the potential implications of climate ‎change and the energy transition on both primary energy demand and the ‎energy system, through three long-term scenarios: Rapid, Net Zero and ‎Business-as-usual.


These are summarized on page 11 and further analysis by country and region, ‎energy sector and fuel type can be found in the bp Energy Outlook, available at ‎bp.com/energyoutlook.‎


The transition to a lower carbon economy presents both risks and significant ‎business opportunities for bp. Climate-related physical and transition risks are ‎managed and reported as part of our group-wide risk management process ‎described on pages 64-66.‎


Climate-related risks and opportunities associated with the energy transition ‎were taken into consideration alongside other inputs in developing our new ‎ambition, aims and strategy. For more information about how our new ‎organizational model and financial reporting segments see pages 36-38. For ‎more on our new financial frame see page 22.

c.‎ The resilience of the organization’s strategy, taking into consideration different ‎climate-related scenarios, including a 2°C or lower scenario

We believe our strategy is resilient to the range of energy transition pathways ‎and scenarios including Paris, see page 11.‎


For more information on our financial resilience, including our revised long-‎term price assumptions and impairment testing, see page 28. For information ‎on the resilience of our individual investments, including our governance ‎structure and investment process, see page 29.‎


Our strategy is validated annually by the board to ensure it remains relevant ‎and resilient, as part of our standard governance processes. Elements of the ‎strategy may be refreshed earlier if there are significant changes in  external or ‎internal environment.‎

Risk management

‎ TCFD recommendation‎

Disclose how the organization identifies, assesses and manages climate-‎related risks

bp’s risk management system is designed to address all ‎types of risks including our principal risks and uncertainties. Read more on page 64 and 67 of bp’s Annual Report and Form 20-F 2020.

a. Describe the organization’s processes for identifying and assessing climate-related risks

As part of our risk management system, our operating businesses, ‎integrators and enablers (see page 36) are responsible for identifying, ‎assessing, managing, and monitoring risks associated with their business area. ‎Risks are assessed in line with bp’s risk management policy and this includes ‎an impact and likelihood assessment which supports relative prioritization.‎


Climate-related risks are classified in alignment with TCFD’s description of ‎physical and transition risks:‎


Physical risks – risks related to the physical impacts of climate change including ‎event-driven risks such as changes in the severity and/or frequency of extreme ‎weather events.‎

 

Transition risks – risks related to the transition to a lower carbon economy including  ‎

 

policy and legal, technology, markets and reputational risks.‎


The potential material impacts of such climate-related risks are described in ‎Risk factors on page 67 of ‎bp’s Annual Report and Form 20-F 2020‎.

b. ‎Describe the organization’s processes for managing climate-related risks

Risks which may be identified include potential effects on operations at asset ‎level, performance at business level and developments at regional level from ‎extreme weather or the transition to a lower carbon economy.‎


As part of our annual planning process we review the group’s principal risks ‎and uncertainties. Climate change and the transition to a lower carbon ‎economy has been identified as a principal risk, see page 68. This covers ‎various aspects of how risks associated with the energy transition could ‎manifest. Similarly, physical climate-related risks such as extreme weather are ‎covered in our principal risks related to  safety and operations.‎

c.‎ Describe how processes for identifying, assessing and managing climate-related risks ‎are integrated into the organization’s overall risk management

Our processes for identifying, assessing, managing and monitoring climate-‎related risks are integrated into bp’s risk management policy and the associated ‎risk management procedures.‎


Examples of how physical and transition climate-related risks are identified, ‎assessed  and managed:‎

 

  • In the North Sea and Gulf of Mexico, regions more prone to severe weather ‎conditions, our offshore facilities monitor meteorological and oceanographic ‎conditions through collection of measurements at these facilities. These data ‎are collated and periodically compared against the Basis of Design for the ‎facility. If significant differences are observed, then this may trigger an update ‎to the Basis of Design, prompting action to re-assess risks such as structural ‎integrity and station-keeping and if necessary, implement additional risk ‎mitigations. Updates may also occur as a result of other new knowledge, ‎analysis methods and data.‎
  • Transition risks are typically identified and managed by business, regional or ‎central teams. For example, our strategy & sustainability team has identified ‎risks relating to evolving policies across different regions. They work with bp’s ‎leadership as well as with both central and regional legal teams, ‎communications & advocacy and external advisors to manage and monitor ‎these risks.‎

Metrics and targets

‎ TCFD recommendation‎

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material

We present the principal group-wide metrics and targets used to assess and ‎manage climate-related risks and opportunities below. This also addresses the ‎CA100+ resolution requirement to disclose the company’s principal metrics and ‎relevant targets or goals consistent with the Paris goals. We consider this to ‎cover the principal metrics used at group level to help monitor progress on ‎delivery of our strategic consistency with the Paris goals – including our net ‎zero aims.

 

Footnote: In 2019 the board recommended that shareholders support a special resolution requisitioned by Climate Action 100+ (CA100+) on climate change disclosures. The CA100+ resolution passed with more than 99% of the vote. This is the second year we have included responses throughout the annual report. We have adopted a similar approach to the bp Annual Report and Form 20-F 2019.

TCFD index table

Our expanded TCFD disclosures can be found on the following pages

Find more information in bp’s 2020 Annual Report

Governance

Disclose the organization’s governance around climate-related issues and opportunities.

a) Describe the board’s oversight of climate-related risks and opportunities.

Page 52.

b) Describe the management’s role in assessing and managing climate-related risks and opportunities.

Page 53.

Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s business, strategy and financial planning where such information is material.

a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

Pursuing a strategy that is consistent with the Paris goals, pages 2-27.

Strategy – page 54.

Risk factors, pages 67-70.

b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.

Risk factors, pages 67-70 – description of principal risks.

Strategy – page 54.

c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

Our strategy, page 15.

Pursuing a strategy that is consistent with the Paris goals, pages 26-27.

Strategy – page 54.

Risk management

Disclose how the organization identifies, assesses and manages climate-related risks.

a) Describe the organization’s processes for identifying and assessing climate-related risks.

Risk management – pages 54-55.

How we manage risk, pages 64-66.

Risk factors – page 67.

b) Describe the organization’s processes for managing climate-related risks.

Risk management, pages 54-55.

How we manage risk, pages 64-66.

c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organization’s overall risk management.

Risk management, pages 54-55.

How we manage risk, pages 64-66.

Risk factors – pages 67-70.

Metrics and targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.

Our strategic focus areas and metrics, pages 18 and 19.

Our group-wide principal metrics and relevant targets – page 55.

b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions, and the related risks.

GHG emissions data – pages 49-50.

c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

Our net zero targets and aims at a glance – pages 49-51.