Shell shareholders vote against climate activists' net-zero plans
Royal Dutch Shell received overwhelming backing for its own energy transition strategy at its AGM today (18 May), but a shareholder resolution that would have forced accelerated climate action did not pass.
At the energy giant’s virtual meeting, 99.74% of shareholders supported its own energy transition strategy, announced back in February. The strategy, Shell claims, is aligned with reaching net-zero by 2050.
Shell’s plan targets a 65% reduction in emissions from the end-use of energy products by customers by mid-century, with forest creation and carbon credit purchases offsetting remaining emissions. Reducing oil and gas production forms a key facet of the plan; the firm is aiming to reduce the production of what it calls “traditional fuels” by 55% by 2030 as it scales business operations in renewable electricity, biofuels, electric vehicle charging, hydrogen and carbon capture and storage (CCS).
Unlike many other high emitting corporates, Shell has also committed to update the strategy every three years, in line with emerging climate science and with technology developments in mind.
Addressing the AGM, Shell’s chief executive Ben Van Beurden called the strategy “comprehensive”, “rigorous” and “ambitious”. Indeed, the plans have fared well in recent rankings of climate plans across the fossil fuel sector by green groups in recent times.
However, some campaigners and investors in Shell had hoped to pass stronger measures to bolster the long-term climate target. A resolution at the AGM, tabled by campaign group Follow This, would have required shell to prove that absolute emissions reductions over the coming decades are aligned with the Paris Agreement.
Specifically, the group wanted Shell to prove that it would reduce absolute emissions by 25-45% by 2030, “substantially shifting investment” away from oil and gas. Shell is still planning to allocate at least 75% of its spending to fossil fuels this decade.
“[Oil firms] 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 ten years’ - but whether these plans will reduce emissions in the near term is unclear,” Follow This founder Mark Van Baal said.
Follow This’s resolution ultimately failed to pass. While its work has been backed by more than 6,000 shareholders across the energy sector, including Shell backers Aegon and RWC Partners, it was supported by just 30.47% of voters at the Shell AGM.
In a statement following the vote, the Church of England Pension Board, which led the investor talks with Shell on its strategy, warned the energy major not to get complacent on climate action in light of the vote.
The statement urges Shell to develop its own short and medium-term targets for absolute emissions and to be more transparent on how its spending aligns with its long-term net-zero goal – without over-reliance on offsetting and CCS. Such moves should be completed by 2023, the statement urges.
It reads: “As a Pensions Board we have today supported the Energy Transition Strategy, not because we believe it is perfect, but it is the first phase of Shell’s transition over this crucial decade. We do so knowing and expecting it will change significantly as the company adjusts to what works and what needs to change.
“But we are also clear that unless there is full alignment by the conclusion of the first phase of Climate Action 100+ in 2023, and in accordance with the commitments we have made to our own Pension Fund Members and the Church of England’s General Synod, we will disinvest our holding in Shell as we have done in other carbon-emitting companies. We believe engagement with Shell to date has delivered tangible progress from the response of the Company but still needs to go further.”
Financial and environmental
In related news, research out this week from Accenture revealed that the oil and gas companies most focused on net-zero transition over the next three years expect to grow their revenues at twice the rate of companies least committed to transition. The difference is between a 7% minimum margin growth and a rate of 3%.
The research is based on a survey of more than 200 executives, spanning 179 global oil and gas companies. Results were used to provide a general snapshot of climate pledges and alternative energy investments, enabling a ranking of the businesses of climate action.
Promisingly, 97% of survey respondents said that environmental performance is a priority for their business, with one-third naming it as the top priority. Two-thirds of respondents said their business will “either fundamentally change or radically reinvent” by the end of 2024. However, there are still some laggards. Almost one in ten businesses are not planning any significant changes to business models.
Accenture argues that the net-zero transition is not just a moral or legal imperative for the sector, but the only way in which it can maintain financial growth. More than one-third (37% of the survey respondents expect margin improvements of 20% or more from their low-carbon businesses in the next three years. And, within the same period, brands classed as climate leaders are expecting to grow revenues by at least 11%, compared with just 6% for those classed as laggards.
“Competition from new energy sources, environmental accountability, talent scarcity, investor apathy and the COVID-19 pandemic have led most oil and gas companies to realize the need to transform to ensure profitability, embrace sustainability and maintain their relevance,” Accenture senior managing director Muqsit Ashraf said.
“What’s required isn’t just piecemeal transformation but wholesale business reinvention, which is anchored in a new approach that we call our ‘5C’ model.”
‘5C’ refers to competitiveness, connectivity, carbon neutrality, customer experience and culture.