Sarasin & Partners to support Paris-aligned proposal at Shell and Total, warning of “empty promises”

London-based asset manager calls for CapEx commitments from European oil majors

London-based asset manager Sarasin & Partners has announced that it will support Paris-aligned climate target proposals at Shell and Total this month, describing the European oil majors’ recent net-zero commitments as “empty promises”.

Both Total and Shell have published 2050 net-zero ambitions in recent weeks, following engagement with Climate Action 100+ (CA100+) investors, who have welcomed the commitments.

But in a statement on its website, Sarasin, while also welcoming the recent commitments, adds that until the companies set out how they will “shift capital” to meet these commitments they will “remain empty promises”.

“[N]either has set out how they will shift capital away from expanding fossil fuel production to the extent required by their ambitions. Until this happens, they will remain empty promises. Shareholders and the public deserve better”, the statement said. 

In “light of the rising urgency of the climate crisis” the manager adds it will support the proposals, which, if passed, would “critically” mean the directors have an obligation to act.

Last week, the Church of England Pensions Board (CEPB) announced that it will not support the proposal at Shell filed by Dutch campaign group Follow This in acknowledgement of the company’s recent climate commitments.

The faith investor leads engagement on Shell with Dutch asset manager Robeco as part of CA100+, the multi-trillion engagement initiative targeting the world’s dirty companies. 

Adam Matthews, Director of Ethics and Engagement at CEPB, told RI that the proposal was not needed and that he was “firmly of the view that we are achieving the scale and direction of change needed at Shell through engagement”. 

Earlier this week, however, the Transition Pathway Initiative (TPI), the asset-owner led initiative assessing the transition-readiness of high emitting sectors, which Matthews co-chairs, poured cold water on the net-zero climate claims of European oil majors, revealing that even the most ambitious target, which it attributed to Shell, is not aligned with the Paris climate goal of limiting warming to well below 2ºC.

Sarasin, which is also a member of CA100+, wrote to the Chair of Shell in July informing him that it had removed the company from its Climate Active Strategy and that it would review its holdings in other strategies. It followed Shell’s announced plans (June 2019) to invest 90% of capital expenditure (approx £27bn) in fossil fuels over the next five years. 

Total’s net-zero commitment does include reference to capital expenditure, agreeing to perform an assessment “for consistency with the goals of the Paris Agreement” as part of the firm’s annual reporting – such a component doesn’t seem to have been included in Shell’s ambition.

The proposal at Total was filed by 11 European investors – including Actiam, Candriam and Sycomore – and calls on the French oil firm amend its articles of association so that it must report yearly on its efforts to align with Paris, including disclosing “appropriate targets” for the “reduction of direct or indirect greenhouse gas emissions”.

Today, Norwegian state-backed oil giant, Equinor (formerly Statoil) will face a Paris-aligned climate target proposal, covering Scope 1,2 and 3 emissions, also filed by Follow This.

The resolution is being supported by US proxy advisor ISS; it is believed to be the first time one of the big advisors has backed such a resolution at a European oil major and could significantly buoy shareholder support. 

Interestingly, however, ISS is recommending a vote against the same Follow This proposal at Shell in its standard advice.

Shell’s annual meeting takes place on 19 May and Total’s on 29 May.