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Major investors in Shell, including Amundi and Axa Investment Managers, have called on the fossil fuel maker’s other shareholders to send a “strong signal” to the oil and gas industry by supporting its decision for stronger climate action.
The 27 shareholders, who together own about 2.5 percent of Shell, filed a resolution ahead of this month’s annual general meeting calling on the company to align its “medium-term” greenhouse gas emissions target with the Paris Agreement to limit global warming . To achieve these goals, global emissions must fall by almost half by 2030.
Shell recommended shareholders vote against the resolution, saying its current “objectives and ambitions” were sufficient. However, in a letter to shareholders sent on Thursday, investors rejected this, warning that meeting the Paris targets was “essential for maintaining the health of the global economy”.
The January resolution and Thursday’s letter represent the most significant shareholder push yet on the oil and gas company’s climate policy and come at a time of increasing disagreement among investors over climate risks.
In the Paris Agreement, countries agreed to limit global temperature rise to well below 2°C and ideally to 1.5°C above pre-industrial levels. Last year was the hottest on record.
“This year’s vote is particularly important as Shell has recently backed away from its climate targets and reiterated its determination to continue oil and gas production,” said the letter, coordinated by green investor group Follow This.
“Now is the time to send a strong signal to the industry that investors are committed to reaching Paris.”
Last year, Shell CEO Wael Sawan backed off his goal of cutting oil production, arguing instead that the company needed to continue investing in oil production while expanding its gas business.
Shell aims to reduce absolute emissions from its own operations – also known as Scope 1 and Scope 2 emissions – by 50 percent by 2030 compared to 2016. Earlier this year, the company set a goal of reducing absolute Scope 3 emissions – those from the oil products it sells – by 15-20 percent by 2030 compared to 2021.
In their annual meeting call, Shell directors said the company’s “goals and ambitions” were consistent with the Paris Agreement. The company is making “good progress towards achieving these goals and ambitions”.
However, in the letter, investors argued that the oil and gas company’s claim that its goals were in line with the Paris Agreement was “baseless,” adding that the company’s directors would have supported the resolution if that were the case would have been.
Glass Lewis, the influential proxy advisor whose recommendations are used by many investors, said shareholders should vote against the climate resolution.
“Given the existence of the company [greenhouse gas] reduction targets and detailed disclosure of the steps the company is taking to mitigate its environmental impact, as well as insufficient evidence that would lead us to believe that it is significantly lagging behind its competitors, we do not believe this will be accepted
“The proposal would benefit the company or its shareholders,” Glass Lewis said.
The vote at Shell later this month is investors’ only chance this year to get oil and gas companies to comply with the Paris Agreement, after Follow This withdrew an application to Exxon when the U.S. oil and gas giant Investor group sued.
“All major oil companies will wait to see what happens at Shell,” said the letter, which was sent to nearly 2,000 investors, including major shareholders.
Follow This has filed applications with Shell since 2016, but this year’s application received the most support from investors.
Last month, Dutch investor MN said it would vote for the resolution. MN leads the collaboration with Shell on behalf of the investor alliance Climate Action 100+.
Shell was in court last month to appeal a landmark ruling that ordered the company to cut emissions. In a lawsuit, Shell said it would not reduce its overall Scope 3 emissions by 2030 due to growth in liquefied natural gas.
A spokesman for Shell, which will report its first-quarter results on Thursday, said LNG will play “an important role in the energy transition” as well as energy security.
Investments in carbon capture and storage, hydrogen and renewable energy would help produce LNG with lower carbon intensity in the future, Shell added.
Additional reporting by Brooke Masters