Shell links $10bn credit facility to low-carbon progress
Royal Dutch Shell is linking the interest and fees paid on its new $10bn (£7.5bn) revolving credit facility to progress against its carbon targets.
The move is the first of its kind in the history of the oil and gas major and comes after Shell began linking the pay of its 150 most senior executives with progress against its carbon targets, following pressure from investors.
Announced on Friday (13 December), the new revolving credit facility replaces Shell’s prior $8.84bn (£6.62bn) facility and is being provided by a syndicate of 25 banks, of which Barclays and Bank of America will act as joint co-ordinators.
Fees and interest rates paid on the facility will be linked to Shell’s progress against its first three-year emissions reduction target. Effective as of 1 January 2019, the commitment is to deliver a 2-3% reduction of the company’s overall carbon footprint against a 2016 baseline.
The aim covers Shell’s direct and indirect emissions, accounting for its extraction processes and emissions generated through consumer use of its products, as well as its operations.
“This is an innovative deal which also demonstrates Shell’s broad-based commitment to reducing the net carbon footprint of the energy products we sell,” Shell’s group treasurer Russell O’Brien said. “We appreciate the strong support and commitment from our relationship banks.”
Before Shell’s existing short-term carbon target expires, the company has said it will set a more ambitious target through to 2023, before setting increasingly tougher targets every three to five years thereafter. Such aims will build on the firm’s existing long-term goals of reducing the carbon footprint of its energy products by 20% by 2035, rising to 50% by 2050.
Shell claims that its long-term targets are consistent with the 2C pathway outlined in the Paris Agreement.
However, while the company has received praise for setting targets covering indirect emissions and investing heavily in technologies such as electric vehicle charging, virtual power plants and hydrogen, it is facing criticism for its decision to re-invest in North Sea projects for the first time in six years – a move that will increase its UK oil production by a third.
Moreover, Shell’s campaign to offset emissions from road transport fuel has been described as “tokenistic” by green groups.
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This is a potentially world-changing shift from one of the largest petrochem players and one to be applauded as long as its performance is objectively measured by a 3rd Party organisation with credibility and against an Objective Standard. Is it known who would be that 3rd Party and what is the standard?