Shell under fire from Europe’s largest asset manager over climate policy

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Europe’s largest asset manager Amundi has been joined by 26 investors demanding that Shell improve its environmental targets at its annual meeting, in the most significant shareholder push on climate policy faced by the oil and gas group.

The resolution, co-ordinated by the activist group Follow This, called on Shell to align its “medium-term” greenhouse gas emissions target with the Paris agreement to limit global warming. Global emissions must fall by almost half by 2030 for those targets to be met.

Shell has claimed its targets are already Paris-aligned but the activist group wanted the company to do better. This would include accounting for all the emissions of its products sold to its customers, known as scope 3.

“We urge Shell to set a credible scope 3 absolute emissions target,” said Diandra Soobiah, head of responsible investment at UK pension fund Nest. “This would demonstrate leadership, show Shell is serious about transitioning its business, and play a role in generating real world change.”

The activist group has organised similar motions at Shell meetings since 2016 but support for the upcoming resolution has drawn the largest number of investment managers, said Follow This founder Mark van Baal.

Together the investors oversee more than €3.8tn and own about 5 per cent of Shell. They include UK pension fund London CIV, and international managers Rathbones, Candriam and Edmond de Rothschild, Swedish pension fund AP4 and Ethos Foundation, representing Swiss investors.

Last year, two shareholders co-filed the resolution at Shell and drew the backing of about 20 per cent of the total investors who voted.

“With 2023 being the warmest year on record, and COP28 signalling ‘the beginning of the end of the fossil fuel era’, we are more aware than ever that climate change will create winners and losers,” said Matt Crossman, stewardship director at Rathbones, referring to the UN climate summit agreement last month to shift away from fossil fuels.

The goal was to set incentives for senior management “to align business strategies with net zero scenarios that will help the world thrive”, he said.

Traditional investment groups have historically avoided filing shareholder resolutions, preferring to rely on behind the scenes discussions. But some have become frustrated by a lack of action on climate risks, and turned to more activist measures.

Shell chief executive Wael Sawan outlined plans after he took over the role last year to keep investing in fossil fuels. He said that to meet global energy demand and maintain shareholder returns, Shell had to continue investing in oil production and growing its large gas business, even as it also invested in forms of energy with lower emissions such as biofuels, hydrogen and renewable sources.

Shell aims to cut absolute emissions from its own operations — also known as scope 1 and scope 2 emissions — by 50 per cent by 2030. It has also committed to reduce the “net carbon intensity” of the products it sells by 20 per cent by 2030, but not their absolute emissions.

Carbon intensity is a controversial measure that represents emissions as a proportion of all the energy it sells. Using this accounting treatment allows Shell to offset the carbon produced by its oil and gas business against its lower carbon products.

Shell said the shareholder resolution was “unrealistic and simplistic” and “broadly unchanged” from the resolution filed by Follow This last year.

“It would have no impact on mitigating climate change, have negative consequences for our customers, and was against the interests of the company and our shareholders,” it said.

Shell added that it was in the process of updating its energy transition strategy, which included climate targets, and that shareholders would have an opportunity to vote on the plan at the annual meeting.

The International Energy Agency has said that to meet the Paris agreement goals there should be no new oil, gas or coal projects developed.