A $5trn, 30-investor coalition is due to confront the board of Royal Dutch Shell at its annual meeting in The Hague tomorrow seeking assurances that their worries about the climate resilience of its business model and the risks to shareholder value “will continue to be addressed”.
The investor coalition is criticising the oil giant over its failure to fully address the impact of reduced demand for oil and gas because of new technologies such as carbon capture and electric cars and suggesting that greater clarity is needed around risk and strategy disclosure in its reporting.
The investors include leading institutions such as Swedish state AP funds and France’s ERAFP as well as top fund managers like Aviva Investors, Legal & General Investment Management and AXA Investment Managers (full list below).
“For the long term future of the company to be secure it is paramount that Shell complete ongoing thorough, realistic assessments of the risks and opportunities posed by climate change, and develop a business strategy aligned with the findings of such assessments,” the statement reads.
It goes on: “Will the board please give assurances that shareholder concerns regarding the resilience of the company’s business model to climate change will continue to be addressed, including responding to the 2015 resolution in the Annual Report in future given the material nature of the risks to shareholder value?”
It will be read out at the meeting by Matt Crossman, ethical research and engagement analyst at Rathbone Greenbank Investments. It follows last year’s 98% shareholder support for the shareholder proposal on strategic resilience for 2035 and beyond (the ‘Aiming for A’ proposal).
This week sees not just the Shell AGM but also potentially key company meetings at Exxon Mobil and Chevron.
Stephanie Pfeifer, CEO of the Institutional Investor Group on Climate Change (IIGCC), which represents 122 pension funds and asset managers with €13trn in assets, said: “This week is the climax of the 2016 proxy season for investor shareholders active on the climate agenda with a statement at Shell’s AGM tomorrow and a suite of resolutions at Exxon and Chevron tomorrow designed to test how far and how swiftly the oil majors are willing to set about transforming their business models to align with the transition to a low carbon economy.”
She said investors would be watching closely to see whether the companies are prepared to make capital allocation decisions to ensure that assets do not become stranded.Both Carbon Tracker and ShareAction have both released analyses of Shell’s disclosures.
Carbon Tracker’s Shell climate disclosures: Déjà vu? says Shell’s “continued intransigence to be at best disappointing and at worst stonewalling”.
“This week is the climax of the 2016 proxy season”
“Shell has known about the carbon bubble for nearly 20 years, and used to be more transparent about the impact of its products. The company has all the information it needs to adopt a different course, if its management can get beyond its growth at all costs culture,” said Head of Research James Leaton.
Catherine Howarth, Chief Executive at ShareAction, said: “Our analysis finds that Shell is way behind the curve in preparing for a post-COP21 world. To retain the confidence of shareholders, and to serve the best interests of the millions of people exposed to Shell shares in their pension funds, Shell must take far stronger action to transition its business model for a low carbon world.
“We urge pension funds and their fund managers to engage with the company to make the necessary adaptations as a matter of urgency.”
Investors backing statement at Shell AGM:
Arjuna Capital/Baldwin Brothers
As You Sow
AXA Investment Managers
BMO GAM (EMAE)
BNP Paribas Investment Partners
Central Finance Board of the Methodist Church
Christopher Reynolds Foundation
Church Commissioners for England and the Church of England Pensions Board
Environment Agency Pension Fund
Epworth Investment Management
HSBC Global Asset Management
Kempen Capital Management
Legal & General Investment Management
Local Authority Pension Fund Forum (LAPFF)
Mercy Investment Services
Nordea Asset Management
Pensioenfonds Metaal en Techniek
Pensioenfonds van de Metalektro
Rathbone Greenbank Investments
Sarasin and Partners
Sisters of St. Francis of Philadelphia
Tredje AP-fonden (AP3)