Institutional shareholders to quiz Shell board over Canadian oil sands at AGM

A group of institutional shareholders will grill the board of Royal Dutch Shell about its controversial Canadian oil sands extractions at the company’s annual general meeting (AGM) on May 18. Over 140 pension schemes, fund managers and private investors, including the Co-operative Asset Management and the Unison Staff Pension Scheme have joined forces with FairPensions, the London-based lobby group, to file a shareholder resolution calling on the company to report on the investment risks associated with the oil sands projects and its plans to address them. The resolution was filed on December 31, and the company has confirmed that it will be on the AGM agenda. The resolution raises concerns over the long-term success of the company arising from the risks associated with oil sands. It points to expected carbon price rises, oil price volatility, expected fluctuations in demand, regulation of greenhouse gas emissions, and the legal and reputation risks arising from environmental damage and impairment of traditional livelihoods. Thirty percent of Shell’s total reserves is estimated to be represented by oil sands developments. In 2009, Co-operative Asset Management led a group of 44 institutional investors with $3trn (€2.1bn) in assets in writing to 19 companies involved in the oil sands extraction business. They argued that the industry had failed to justify the financial prudence of oil sands developments. Converting oil sands – the world’s second largest oil resource – into useable fuel produces three times the greenhouse gas emissions compared to conventional oil extraction, according to research. Oil sands developments are also prompting legal challengesfrom local indigenous communities such as the Beaver Lake Cree Nation in Canada, who claim they are affected by pollution, deforestation and wildlife disturbance as well as breaches of constitutional rights protecting their traditional livelihoods. Catherine Howarth, chief executive officer at FairPensions, said: “The coalition of shareholders which FairPensions has galvanised to file this resolution brings together both domestic and overseas shareholders, and the full spectrum of investors from major fund managers to small shareholders. We expect that Shell’s 2010 AGM could prove a watershed in the history of corporate accountability.” Niall O’Shea, head of responsible investing at the Co-operative Asset Management, said: “Given Shell’s level of commitment to oil sands there is a greater obligation to shareholders to reassure how it would cope under a number of scenarios. We acknowledge Shell has already done some work in this area but it does not go anywhere near far enough to allay our concerns.” Shell says the oil sands development is “proceeding under comprehensive federal and provincial government regulations that govern all aspects of air, water, land, wildlife and socio-economic impacts to the oil sands region and the wider environment”. It says its bitumen mining and extraction operations are strictly regulated. The oil giant also asserts that it respects the cultural diversity and rights of others and that it works with local municipalities, aboriginal groups, residents and other stakeholders to address the impacts of its operations. It has published a 73-page booklet on the impact of the oil sands operations.