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Eco investors turn up the heat on Shell over climate target

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·4 min read
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<span>Photograph: Guy Bell/Rex</span>
Photograph: Guy Bell/Rex

Shell is braced for its largest climate rebellion this week as shareholders face the choice between backing the oil giant’s carbon-cutting plans or siding with an activist investor who is calling for tougher emissions targets.

With its annual meeting planned for Tuesday, the Anglo-Dutch company has called on its investors to vote against a shareholder resolution from campaign group Follow This in favour of its own plans to reduce its emissions to “net zero” by 2050.

The milestone battle will take place after BP saw support among its shareholders for the Follow This campaign double in a similar vote last week. The activists were ultimately defeated, but won 21.1% of shareholder support, up from just over 8% when Follow This put forward a resolution in 2019.

Without near-term targets, we will have vague commitments that don’t do anything

Chris Hohn, hedge fund activist

Although climate resolutions are often non-binding, the rising shareholder support for campaigners calling for greater climate action underscores the growing investor pressure on major oil companies to reduce their carbon emissions.

At least two major investors, Dutch pension fund Aegon and UK investment firm RWC Partners, are preparing to back Follow This in calling for tougher targets at Shell. British hedge fund billionaire Chris Hohn and the shareholder advisory group Pirc have also urged investors to side with the activist group.

Shell has described the rival climate resolution as redundant because its own strategy “comprehensively details its energy transition strategy”. It has recommended that shareholders vote against the Follow This resolution and “focus attention instead on the more detailed proposal from Shell, which will help move the company forwards”.

Shell plans to cut the overall “carbon intensity” of the energy it produces by 20% by 2030 and by 45% in 2035, before reaching an absolute emissions cut of 100% by 2050. The shorter-term targets will include a modest decrease in oil production, made by selling oil fields or allowing reserves to decline naturally, and an expansion of its gas business.

Increasing the proportion of gas to oil in Shell’s portfolio should cut the average emissions of the energy it sells, but Follow This says Shell’s absolute emissions could fall by as little as 10% over the next 10 years. This would see it fall well short of the goals set out in the Paris climate agreement – in which nearly 200 countries have agreed to limit global temperature increases to well below 2C, which is considered crucial to avoid an irreversible climate crisis.

Mark Van Baal, the founder of Amsterdam-based Follow This, said oil companies had put forward “fantastic promises” to become carbon neutral by 2050 but had shown little evidence of plans to reduce emissions over the short and medium term.

He said: “They have a narrative that says ‘we’ll be net zero by 2050 so now give us space to implement a new strategy for the next 10 years.’ But whether these plans will reduce emissions in the near term is unclear.”

He has called for oil companies to show evidence that they can reduce their emissions by between 25% and 45% by 2030 through a “substantial shift in investment” away from fossil fuels and towards clean energy options. Shell plans to spend between $19bn and $22bn a year over the short term, of which $2bn to $3bn has been earmarked for renewables.

Follow This, which represents more than 6,000 shareholders in oil and gas companies, has put forward resolutions for tougher targets at BP, Shell and French oil company Total.

Hohn, a hedge fund activist investor who founded the investor campaign group Say on Climate, urged Shell’s shareholders to vote in favour of Follow This to send a “clear message” to oil companies.

“Without near-term targets, we’re not going to get anywhere. We’ll have vague commitments that don’t do anything,” he said.

Shell has won support from shareholder advisory groups including Glass Lewis and ISS, and investors including the Church of England pension fund. Adam Matthew, from the Church of England Pensions Board, said the fund was willing to give Shell the benefit of the doubt on its climate action, but expected it to be accountable for delivering on its existing climate pledges.

“This most certainly is not a once-only vote on Shell’s energy transition strategy,” he said.