Monday 24 May 2021 11:48 am

Legal & General Investment Management joins Shell's shareholder rebellion

One of London’s oldest fund managers, Legal & General Investment Management (LGIM), has been revealed to have joined the shareholder rebellion today against Shell’s climate strategy last week, according to reports.

Saying that the energy giant’s plans lacked credibility and the ambition needed to tackle climate change, LGIM voted against Shell’s climate transition targets, the Guardian reported.

The Legal & General asset manager, which manages over £1.2tn of assets, joined the shareholder rebellion spearheaded by activist group Follow This in demanding faster progress.

“We remain concerned that the strength of interim targets (up to 2035) and disclosed plans for oil and gas production fall short of the level of ambition required for the company to credibly claim alignment with a 1.5C pathway,” the asset manager said.

Although the Anglo-Dutch company won 88.74 per cent support, nearly one-third of voters supported the activist resolution, which Shell’s board urged shareholders to boycott.

Shareholder support for Follow This’ proposal more than doubled this year, rising from 14.4 per cent last year to 30 per cent – with new heavyweight supports like LGIM.

The result marks the mounting pressure on Shell and means the energy giant will have to consult and report on shareholder opinions within six months of the advisory, non-binding pledge.

“This is really a very strong signal to the board of Shell that their current targets are not sufficient to reach the [aims of the] Paris climate agreement. That is what investors one by one are realising,” founder of Follow This, Mark van Baal, said.

“We know from Shell’s previous response to resolutions, that management cannot ignore investors’ concerns. The company will have to revise its targets once again,” the founder said last week.

Follow This’ proposal, which has traditionally been backed by Dutch pension fund PFZW, also gained backing from 58 per cent of shareholders in ConocoPhillips on 11 May and 80 per cent of shareholders in Phillips66 the next day.

LGIM has been increasingly vocal about the climate crisis, with its chief executive Michelle Scrimgeour, saying in March that the pandemic has “underscored the importance of tackling looming threats – like that of a climate catastrophe – before it is too late.”

Paris Agreement

The proposal seeks to align targets with the 2015 Paris Agreement – to limit global temperature increases to below two degrees Celsius.

When the strategy was first released in February, Shell said it will support the agreement by cutting the overall carbon intensity of energy it produces by 20 per cent by 2030, by 45 per cent in 2035 and 100 per cent by 2050.

However, Follow This said Shell’s absolute emissions could fall by as little as 10 per cent over the next decade. Meanwhile, LGIM said that “while on this occasion” it backed the activist group, it had reservations about Follow This’s objective.

Avoidant of using shareholder power to turn oil and gas firms into renewable energy companies, the asset manager said a strategy of “managed decline” was an equally viable option.

“We will seek to fully understand the reason why shareholders voted as they did, particularly those who voted both ‘For’ Shell’s strategy and ‘For’ the Shareholder Resolution and will formally report back to investors within six months,” Shell chief executive, Ben van Beurden, said.