Shell AGM: shareholders back new energy transition strategy

Some 18.6% of investors had voted in support of the shareholder resolution put forward by a group of 27 investors with the backing of campaign group Follow This, representing a lower support than last year, where the resolution obtained 20%, according to provisional results. Meanwhile, some 78.17% of shareholders backed Shell’s new energy transition strategy.  The preliminary result is similar to the previous energy transition resolution put to vote last year which was backed by 78% of shareholders.

The Anglo-Dutch oil giant published its new energy transition strategy earlier this year, it relies heavily on the expansion of its Liquefied Natural Gas production capacity and has ditched its 2035 interim emissions reductions target whilst maintaining oil production levels until 2030.

The firm also advocates an increasingly selective approach to investing in the energy transition, as CEO Wael Sawan told Net Zero Investor on the side-lines of the AGM. “In sectors where we do not have competitive strengths like home energy in Europe, we will make decisions to sell or spin off our business but I would not generalise that across the whole of the low-carbon sector. There are some areas such as biofuels that play very much to our strengths” he emphasised.

But Nick Spooner, company strategy lead, UK, at the Australasian Centre for Corporate Responsibility (ACCR) took a more critical stance of the transition strategy: “The new management team claims a stronger focus on capital discipline. However, their actions do not reflect this, reducing hurdle rates for fossil fuel projects at a time when risks related to the energy transition are most acute.”

“Shell’s exploration capex remains persistently above that of peers. We asked the company to justify how this spending is in the interests of shareholders, considering that the IEA states that there is no need for exploration capex under the Announced Pledges Scenario (APS) or Net Zero Emissions by 2050 (NZE) scenario.

“During the AGM, Shell repeatedly described LNG as a ‘low carbon’ fuel. This is a misnomer that will increasingly be challenged by shareholders and regulators, perhaps via the courts” he adds. 

U turn on interim targets

Shell’s U turn on its interim emissions targets continued to dominate the debates at the AGM. The firm had come under increased fire from climate-conscious investors, with many arguing that its claim to be Paris Aligned was no longer credible. This year’s Follow This resolution was put forward by a record number of 27 investors representing more than €4trn in AUM, including the Swedish AP3 and AP4 funds, Greater Manchester Pension Fund, Brunel Pension Partnership and London CIV among others. Other major investors, including Aegon and MN, the ClimateAction100+ lead investor for Shell had come out in support of the resolution in advance of the shareholder meeting.

However, previous backers of its climate resolutions, including the Church of England pension fund and Dutch pension fund PFZW had last year divested from Shell and no longer attended the meeting.

Major sharenholder Norges Bank Investment Management had opted not to back the climate activist resolution, opting instead to call for enhanced disclosures on its interim emission reduction targets. Other major shareholders, including BlackRock, State Street and Vanguard did not disclose their votes in advance.

The Follow This Resolution is the only one put forward at the largest listed oil and gas firms with no resolutions being put forward for the BP AGM or the upcoming Exxon and Total AGMs.

Follow This founder Mark van Baal took to the floor asking how a company with no plans for emissions reduction within this decade could call itself Paris aligned.

Speaking to Net Zero Investor on the sidelines of the meeting, van Baal expressed his disappointment with the vote but stated that an opposition of 18% still constituted a shareholder rebellion. He also acknowledged that increased divestments from major asset owners may have played a role in the slightly lower vote count for Follow This at this year’s AGM.

“Votes for this climate resolution show which investors are committed to Paris and which investors endorse Big Oil’s refusal to take meaningful climate action. We thank the investors who voted in favour, especially the 27 co-filers. They are the true stewards of the global economy in view of the climate crisis” he added. 

Van Baal argued that Shell’s expansion push in LNG largely offset its emission reduction gains in other parts of the business and  said that shareholders had missed an opportunity to send a clear signal to Shell.

Vaishnavi Ravishankar, head of Stewardship at Brunel Pension Partnership which co-filed the investor resolution commented: "We are disappointed with the vote result, given the strong backing for the resolution from asset owners. That said, voting only presents a binary option to investors, which is why it is often viewed as a blunt tool. We know the resolution has initiated some timely and much-needed engagement conversations between the company and its shareholders. Brunel will continue to liaise with our managers to keep the pressure up on the company to align its targets with the goals of the Paris Agreement and to communicate transparently on progress and implications for low-carbon investments and policy advocacy."

Niger Delta impact

Another issue being raised was Shell’s planned sale of its Nigerian onshore subsidiary, which is due to be sold to Nigerian consortium Renaissance for an estimated $2.4bn. Indigenous communities in the Niger Delta say that this is an attempt for the oil giant to abrogate itself from its responsibilities towards the community and that the oil firm should bear the costs of clearing up the pollution.

People in Niger Delta have a life expectancy of less than 41 years, environmental campaigners argue that this is largely as a result of Shell’s pollution. “You will not be able to walk away from more than 70 years of poisoning indigenous people” said a woman representing the communities who talked of her experience of loosing loved ones due to pollution before being forcefully taken out of the room.

Campaigners, who have held an alternative AGM in Nigeria yesterday are now putting pressure on major investors in Shell such as Norges Bank Investment Management to hold the firm accountable.

More on this:

Asset owners call out Shell's LNG expansion plans

Follow This ditches 2030 deadline ahead of Shell AGM