Investor support builds for NGO’s climate proposal at Royal Dutch Shell

Some leading investors are already backing Follow This resolution

A shareholder resolution calling on Royal Dutch Shell to set greenhouse gas (GHG) emission reduction targets, promoted by the NGO Follow This, has seen growing support from leading investors.

Shell holds its annual general meeting (AGM) on May 23 and the oil giant has yet to disclose whether it will advise its investors to support the resolution – as it did with the earlier ‘Aiming for A’ proposal in 2015.

This is the second attempt of Follow This, whose ultimate goal is to turn Shell into a renewable energy company, after last year’s resolution calling for it to invest its profits in green energy rather than oil exploration. This gained 3% shareholder support and was welcomed by other investors who “shared its spirit” despite their negative vote.

Follow This CEO Mark van Baal told RI that this time round he expects a better outcome, as the previous year the focus was on getting the organisation started and ensuring it garnered the €5m in shares needed to submit the resolution.

“This year we have talked to as many investors as possible, in the Netherlands and outside, to get their input. We have ended up with a much subtler resolution, unlike last year’s one, which some shareholders said was too prescriptive.”

The resolution asks shareholders to support Shell in taking “the lead in the energy transition to a net-zero-emission energy system” and proposes setting reduction targets covering Scope 1, 2, and 3 emissions (i.e. the whole life cycle of emissions, including the supply chain and the use of its products), as well as annual reporting on the progress made.

Asked whether the inclusion of Scope 3 emissions could be a deterrent for Shell supporting the resolution, Van Baal said:

“It’s feasible for Shell to estimate those [Scope 3] emissions. Two years after the Aiming for A initiative, it’s now time to take responsibility for the whole energy system.”

ACTIAM, the Utrecht-based fund manager with €56bn under management, has already announced that it will vote in favour of the resolution.

The firm’s Head of Responsible Investment, Dennis van der Putten, said ACTIAM hopes that “an innovative company like Shell will take the transition to renewable energy seriously and that it will take an ambitious approach to climate change.”

Cesare Vitali, responsible for ESG research at Ecofi Investissements, the asset manager of France’s Groupe Crédit Coopératif, told RI that the firm also is supporting the resolution because it is “compliant with our voting policy and our concept of responsible finance.”Rients Abma, CEO of Eumedion, the Dutch Corporate Governance platform, told RI that before taking a stance they would like to know the position of Shell, which should be published in mid-April with the agenda notes for the AGM.

Willemijn Verdegaal, Advisor, Responsible Investment & Governance at €114bn Dutch investment house MN, told RI that it’s the firm’s policy not to disclose its voting intention until Shell publishes its opinion.

“The ball is now in Shell’s court and their response to the resolution is going to be key in determining how investors vote,” she said.

MN is supporting a climate proposal at Exxon Mobil filed by New York State Comptroller Thomas DiNapoli and the UK’s Church Commissioners.

“The ball is now in Shell’s court”

According to Verdegaal the Follow This resolution at Shell could align with MN’s ESG policy and strategy, which aims at building portfolios that are climate resilient and sensitive about employees and social issues.

“Last year the resolution was a bit prescriptive and too much focused on renewables. There are other ways in which Shell can align with the Paris Agreement outcomes. It’s not up to investors to decide it. This year however, we appreciate that Follow This have consulted us about the initiative and feel comfortable about it because the text aligns with our goals.”

Regarding Scope 3 emissions targets, she noted its inclusion represents an opportunity for companies to illustrate whether they are on the right path to achieve the Paris climate goals. Moreover, she added, it is consistent with the recommendations of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.

A spokesperson for Shell told RI that it is still too early to comment on the resolution and that the company will publish its recommendation on the vote to shareholders by around April 20.

Shell recently announced that it was selling most of its oil sands interests in Canada. CEO Ben van Beurden said the company strongly supports the overall ambition of the Paris agreement, although he noted that cleaner electricity alone is not enough to meet the challenge of producing more energy with less CO2. “This, like it or not, leaves us with an evolving mix of renewables and hydrocarbons.”

He added that Shell aims to grow investment in its New Energies business to “perhaps” $1 billion a year by the end of the decade.