Illustration; Source: Shell

27 shareholders heap more pressure on Shell to take ‘credible’ climate action

UK-headquartered energy giant Shell is facing additional pressure from 27 investors, who manage more than €3.9 trillion in assets, to pursue decarbonization with more vigor. These shareholders have joined hands with Follow This, a green shareholder group, to co-file a climate resolution, urging the oil major to curb its greenhouse gas (GHG) emissions footprint in line with the Paris Agreement goals.

Illustration; Source: Shell

The climate resolution, filled by 27 investors – including Europe’s largest investor Amundi – who collectively own around 5% of Shell’s stock, is asking the UK energy giant to align its medium-term emissions reduction targets with the Paris Agreement. Last year, 20% of shareholders voted in favor of Follow This’ climate resolution.

Mark van Baal, founder of Follow This, commented: “We expect votes to increase as more investors follow their leading peers by voting for change at Shell, which is the bare minimum they can do. Large shareholders hold the key to tackling the climate crisis with their votes at shareholders’ meetings. Shell will only change if more shareholders vote for change. The resolution is designed to give Shell a shareholder mandate to drive the energy transition.”

After consultation with large investors, the climate resolution was revised, but its essence, related to Paris-aligned emissions reduction targets, remained the same. However, there are still some significant changes compared to the version from 2023.

“This extraordinary step shows how dedicated these investors are to tackling the climate crisis at its source. This escalation of 27 leading investors puts the call for emissions reductions by energy companies front and center for all institutional investors,” added van Baal.

In the most recent climate resolution text, the 2030 target was replaced by ‘medium-term targets’ while the supporting statement was completely rewritten to reflect investor requests for a more agnostic text that is solely focused on emissions.

Matt Crossman, Stewardship Director at Rathbones Group, remarked: “With 2023 being the warmest year on record, and COP28 signaling ‘the beginning of the end of the fossil fuel era’ we are more aware than ever that climate change will create winners and losers. We hope to create incentives for senior management to align business strategies with net zero scenarios that will help the world thrive.”

The global climate movements have forced governments to place fossil fuels at the center of COP28 climate talks. While most see the achievement of the latest COP outcome as historic, this does not stop many of them from pointing out that the final text is still a watered-down version with multiple loopholes compared to what the science demands to stay on net zero course and reach the Paris Agreement goals.

Those who want to put an end to the coal, oil, and gas era claim that COP28 made several allowances for fossil fuel industry spins, such as natural gas and LNG being labeled as transition fuels, coupled with a lack of binding commitments and finance required to keep these fuels in the ground.

COP28 ended with the call to transition away from coal, oil, and gas, leaving all the cards in nations’ hands to make this happen by pursuing either a gradual shift to clean energy or even a clean break if that is what a particular country wants to do.

As a result, climate campaigners are gearing up to turn their collective power from demanding a phase-out of fossil fuels into creating a mechanism to make it a reality, bringing about what they consider to be a fast, fair, and financially covered transition.

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The group of 27 co-filing investors, which have thrown their support behind the Follow This climate resolution encompasses shareholders from Belgium, France, the Netherlands, the UK, the U.S., Sweden, and Switzerland. AP4, one of these 27 investors recently highlighted that it was realizing “the need for fossil fuel in the short-term horizon” and that it was supportive of “the idea of integrated energy companies transitioning their business models.”

The list of investors entails Amundi (€1.973 trillion in assets), Scottish Widows (€200 billion), Candriam (€140 billion), Rathbones Group (€100 billion), Groupama AM (€95 billion), Edmond de Rothschild Asset Management (EDRAM) (€71 billion), Degroof Petercam Asset Management (DPAM) (€51 billion), Brunel Pension Partnership (€44 billion), AP3 (€44 billion), AP4 (€43 billion), NEST (€40 billion), Pension Protection Fund (€38 billion), Greater Manchester Pension Fund (€37 billion), London CIV (€16 billion), Pro BTP Finance (€13 billion), Mandarine Gestion (€4 billion), Ethos Foundation (€4 billion assets under advice), Emmi-Vorsargestiftung (€1 billion), and Ethos Foundation, which represents five of its pension fund members.

In addition, Follow This believes that four more investors may make public announcements later. The total number of shares in the filing documents was 114 million shares (3.4%) as some investors co-filed with a portion of their shares. Follow This claims that Shell did not improve its climate targets in 2023, adding that the new CEO appeared to be “reversing course on climate action.”

Pension Protection Fund underlined: “By co-filing the Follow This resolution, we want to send a clear message to the Shell board on the importance of setting and achieving Paris-aligned reduction targets. Shell has a real opportunity to drive meaningful change in society, and we want to work together to help reduce the overall global emissions by almost half this decade.”

Follow This explains that shareholders support the company, by an advisory vote, to align its medium-term emissions reduction targets, covering the greenhouse gas emissions of the use of its energy products (Scope 3), with the goal of the Paris Agreement to limit global warming to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C. However, the strategy for achieving these targets is entirely up to the board. 

Diandra Soobiah, Head of Responsible Investment at NEST, stated: “We urge Shell to set a credible Scope 3 absolute emissions target. This would demonstrate leadership, show Shell is serious about transitioning its business, and play a role in generating real-world change.”

A lawsuit against Shell’s board of directors was thrown out of court last year, preventing ClientEarth, an environmental law charity, from pursuing derivative action over the alleged failure of the oil major’s board to put in place the right decarbonization and net zero tools to move the energy transition engine into high gear in line with the Paris Agreement.

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The UK-headquartered player is actively pursuing more oil and gas alongside low-carbon and renewable energy, which is in line with the company’s plans to spend around $40 billion on its Integrated Gas and Upstream businesses while investing $10-15 billion from 2023 to 2025 to support the development of low-carbon energy solutions.

As Shell believes that LNG will play “an even bigger role” in the energy system of the future than it plays today, the firm intends to spend about $13 billion a year during this decade on oil and gas with a focus on LNG, which adds up to potentially over $100 billion in total by 2030.