Shareholders to vote on Shell’s climate plans at upcoming AGM amid activist pressure

Shareholders will vote on Shell’s climate transition strategy at the energy giant’s annual general meeting (AGM) next week, with the fossil fuel trader facing pressure from activists to ramp up its targets.

The energy giant is calling on shareholders to approve its transition plans, by voting through Resolution 20.

Shell is committed to reducing net carbon intensity by 20 per cent before the end of the decade, alongside reach net zero carbon emissions across operations by 2050.

However, its plans have faced sustained criticism from activist investors such as Dutch group Follow This, which has filed a competing motion – Resolution 21 – that calls for the group to pledge to more stringent short, medium and long-term emissions targets.

Follow This has warned shareholders Shell’s current transition plans are not aligned with the Paris Agreement, which pledges to limit global temperature rises to below two degrees from pre-industrial levels.

It has also warned without interim targets, then it will be cost prohibitive and damaging for the business to reach its climate targets.

The group’s stake in the energy giant is less than one per cent, but City A.M. understands its position is backed by multiple Dutch institutional investors.

Meanwhile, Royal London Asset Management (RLAM), which holds a £1.2bn stake in the energy giant, has opted to abstain on Shell’s motion.

The group has not clarified how it will vote on Follow This’ counter motion, but has argued there is a lack of certainty over whether the energy giant’s current plans are aligned with the goals of the Paris Agreement.

Carlota Garcia-Manas, head of engagement and climate lead at RLAM said: “Shell’s climate plan is heavily reliant on nature-based offsets and divestments. It also includes strategies to continue new oil and gas frontier exploration between now and 2025. We would prefer the company to stop all exploration imminently in line with the most recent IEA and IPCC reports.”

Separately, Odey Asset Management has urged Shell to drop its appeal against a Dutch legal ruling, and has instead suggested the energy giant should fund an independent body to audit the emissions of every oil and gas company.

Shell lost a landmark case in The Hague last year, with the court demanding the energy giant cut its carbon emissions 45 per cent by the end of the decade from 2019 levels.

The London-based hedged fund has around $70m worth of shares in the energy company.

Shell has revealed if more than 20 per cent of shareholders vote against Resolution 20, it will engage with dissenting voices over the plans.

Earlier this week, two climate-focused Dutch pension fund managers were named to lead climate negotiations with Shell after the AGM.

MN and PGGM would both take the role on behalf of the Climate Action 100+ (CA100+), an investor group consisting of $68tn in assets which has helped shaped Shell’s climate policy.

PGGM revealed on its website that it was going to support the Follow This activist resolutions at oil and gas companies’ shareholder meetings this spring.

Shell warns against activist resolution

At an ESG event a fortnight ago, chief executive Ben van Beurden has urged shareholders to vote against Resolution 21.

He argued Follow This’ proposal goes “much further than even the most progressive pathways to net zero in our sector.”

The energy boss argues the proposals go beyond the routes proposed by both the Intergovernmental Panel on Climate Change (IPPC) and the International Energy Agency (IEA), while requiring Shell to reach targets in isolation.

van Beurden said: “IPCC and IEA pathways include actions by all parts of society. Follow This suggests we should reach these targets on our own, which is unrealistic for Shell as a single company to achieve.”

He also criticised the Follow This resolution for depending too much on bolstering renewables in the short-term, which would require Shell to “abandon” customers and “shrink” its business.

Energy giant faces under pressure amid windfall tax demands

The AGM follows Shell announcing record quarterly profits this year, amid spiralling oil and gas prices, increasing its shareholder buyback to $8.5bn.

The strong performance was powered by soaring oil and gas prices, reflecting the continued importance of fossil fuels to its business, despite its stated transition goals.

This has reignited calls from the Labour Party for a windfall tax to provide more support for struggling households amid soaring energy bills.

The cabinet remains split over the policy, with Chancellor Rishi Sunak reportedly open to the idea of a levy linked to levels of investment in the UK’s energy sector.

Downing Street is desperate to reduce the country’s reliance on overseas suppliers following Russia’s invasion of Ukraine, and has pledged to ramp up nuclear power, renewables and North Sea oil and trading as part of its energy security strategy, which was unveiled last month.

Shell has pledged to spend £25bn on the UK energy sector by the end of the decade, with a focus on low and zero carbon energy to fund the country’s renewable transition.

This follows the firm ditching its The Hague headquarters last year and moving to London, scrapping its dual-share structure and Royal Dutch title.