BP, a multinational oil & gas company, has reportedly announced the reduction of its shareholders’ dividend, a part of its strategy to reach net-zero carbon footprint by 2050.

In order to reduce the carbon footprint, the company needs to make high investments in a range of green or renewable energy alternatives. The target has been set amid the prevailing economic disruptions posed by the COVID-19 pandemic that has led to a significant drop in oil prices. The pandemic also has put the company at high risk of holding more stranded assets.

BP’s announcement to cut the dividend will serve as a survival measure in the ongoing crisis and help reach the net-zero target. The dividend was cut for the 1st time in a decade ago since the Deepwater Horizon oil spill. However, the payout to the shareholders was reduced only by half, despite the initial announcement by Shell indicating a cut by 2/3rd of the total sum.

Prior to the crisis, the oil & gas company had a strong track record of offering pension funds to shareholders, along with a reliable income stream. It also announced its aim to use a large number of its surplus to buy back stocks. The coronavirus lockdown has been adversely impacting several oil companies. For instance, at the beginning of 2020, Brent crude oil was traded at $70 per barrel. However, the price has been declining as the demand dropped and the restrictions on air travel were implemented, eventually trading the oil at a price of $20 per barrel.

The short-term issues of BP will, however, provide an opportunity to gain an advantage on the 20-year pledge to change BP’s meaning to Beyond Petroleum. Its investment in low-carbon energy will increase by 10x to $5 billion per year by 2030. It has also been estimated that over the next decade, the generating capacity of green energy will increase by 20x, whereas the oil & gas production will be reduced by 40%.

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