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Gulf Oil Spill: is your pension in Deepwater?
... BP's ‘Deepwater Horizon' off-shore oil drilling platform caught fire and sank, killing 11 men. The resulting oil spill has now spread to cover an area of several thousand square kilometres and is thought to be the largest in US history, with devastating environmental and social consequences.
Since the explosion, BP's share value has fallen by around £44 billion (1/3 of its value), and the direct costs to BP of the response and clean-up operation are already well in excess of $1bn. As yet the full costs of litigation, fines and environmental clean-up are unknown, described by BP only as "sizeable".
Along with the millions affected along the Gulf Coast, ordinary pension savers in this country too are now suffering the consequences: BP is an enormously important stock for British pension funds, and with BP under pressure to scrap its next quarterly dividend and facing the possibility of a takeover if the share price continues to fall, there is real concern for the impact on people's retirement savings.
More could have been done to foresee and prevent this catastrophe. BP has a track record of neglecting environmental and safety risks, and ultimately paying the price: the 2005 Texas City oil refinery explosion cost it $137m in fines alone. Last year, BP successfully gained an exemption for the Deepwater Horizon operation from US legislation requiring an environmental impact analysis.
Despite these warning signs, few investors exercised their rights as shareholders to demand that the company address those risks. This demonstrates a clear need for investors to take steps to guard against such risks in the future.
Although most major UK pension funds have a policy commitment to consider environmental and social risks, many fail to put this into practice. ShareAction is calling on the government to tighten up the regulations for pension funds, requiring them to state not just their policy, but how they act on environmental and social risks.