BP and Glencore have been warned about the risk of investor law suits following statements from the companies on future fossil fuel demand that is at odds with expert analysis, Client Earth has said.

In official reporting documents the two companies have published scenarios for future commodity demand that is “optimistic when compared to competitors’ forecasts”.

According to ClientEarth, this suggests a risk of evidence materialising which demonstrates that the companies’ management were reckless as to the truth or accuracy statements relating to these scenarios. It noted that if this happens, and investors have suffered loss as a result of relying on the statement, investors can sue.

Commenting, ClientEarth senior lawyer Alice Garton noted that fossil fuel majors are “facing unprecedented disruption to their business models”.

“By continuing to offer bullish forecasts, BP and Glencore could be setting themselves up for future problems. We wrote these letters to warn the two companies of the potential for future claims but also to encourage investors to engage with the companies and encourage them to move away from self-serving scenarios when reporting on likely future trends for their business.”

Client Earth said that BP's statement about its ‘base case’ being "the most likely path for energy to 2035" does not tally with multiple independent analyses of future oil demand - including some of BP's industry peers. It appears in the company’s annual report.

It is not wrong for BP to include its ‘base case’ scenario in its forecasts of future demand but claiming it is the most likely could create a serious headache for the company. ClientEarth argued. BP’s ‘base case’ says demand for oil and other liquids is expected to increase from 95 Mb/d in 2015 to 110 Mb/d in 2035. In contrast, Shell's CFO Simon Henry has revealed that the company believes oil demand could peak between five and 15 years from now.

In ClientEarth’s opinion, Glencore’s annual report risks future investor action because it relies on assumptions about the future for coal markets that have been challenged by independent expert analysis and does not address significant market trends that may depress coal demand. This could provide investors with a misleading impression of the business’ future viability.

Garton added: “It matters to all of us that fossil fuel companies are realistic about the risks facing their business models. If BP and Glencore persist with bullish forecasts, and these are found to be fraudulent in the future, the only ones who will profit are the class action lawyers”.

In response to the claims, a Glencore spokesperson said: "Glencore recognises that climate change and related public policy developments are a material global issue which impact our business, creating both challenges as well as opportunities. We acknowledge that there are diverging views on the world’s likely climate change responses and therefore we consider a range of climate change scenarios in our publications.

“In our most recent publication, Climate Change Considerations for our Business 2017, consistent with our obligations under ‘Aiming for A’, we have evaluated each commodity business to assess its attractiveness and resilience against each climate scenario. We will continue to monitor policy developments and review our scenarios and impact assessments on an annual basis, taking into account any material changes to actual or proposed policies and look forward to ongoing dialogue with our investors and other stakeholders on this important issue."

Pensions Age is awaiting a response from BP.

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