Big Dutch institutions challenge Shell rejection of climate shareholder resolution

Two major shareholders say they will back campaigners; others are weighing up.

Aegon, the Dutch provider of life insurance, pensions and asset management with total assets of €817bn, and the €42bn industrial pension fund Pensioenfonds van de Metalektro (PME), will support the climate change resolution promoted by share-owning activist group Follow This at Shell’s AGM on May 22. A third pension fund, the €17bn Pensioenfonds Detailhandel from the retail industry, is tentatively backing the resolution after its Chairman, Henk van der Kolk, publicly expressed his support. A spokesperson for Pensioenfonds Detailhandel told RI that Van der Kolk will try to convince the board of the pension fund to vote in favour this year after an abstention last year.
The resolution, co-filed with UK responsible investment advocacy group ShareAction, encourages shareholders to support Shell in its alignment with the Paris COP21 Agreement by setting and publishing emissions reduction targets and measurable metrics. However, Shell’s Directors have recommended shareholders to vote against the proposal arguing that it is “unnecessary” because the company has “already outlined an approach that it says is wider-ranging and more progressive” than the one proposed by Follow This. The Shell Directors added: “The resolution, if supported, ties the hands of existing and future Shell management to measures which could force the Company to move too quickly – or too slowly – through the energy transition.” This is the third resolution filed by Follow This. Last year, Shell’s Directors also rejected it calling it “unreasonable” and adducing that it showed a “basic misunderstanding” of the solutions needed to meet Paris goals. The 2017 proposal won 6% of shareholder support from MN, PME, Actiam, Van Lanschot Kempen, the Church of England, Aviva, Blue Sky Group and Ecofi Investissements (asset manager of France’s Groupe Crédit Coopérative).
Aegon, which last year abstained together with PGGM and Nationale Nederlanden, has now thrown its weight behind the resolution saying that the transition to a low-carbon energy supply requires publishing ambitious targets. Eric Rutten, Chairman of Aegon’s Commission for Responsible Investment, said that while Shell has taken significant sustainability steps in the last year, there is still a gap between its ambitions and a two Celsius degree scenario.Ruttten added that unlike last year’s proposal, Follow This is now giving the company enough room to determine the pace of emissions reduction. PME, which voted in favour last year, has also come forward to announce its support again because it says the resolution invites Shell to increase its ambition towards achieving climate targets. Eric Uijen, Chairman of the Executive Board at PME, said the scenario that Shell had outlined to reach the Paris Climate Agreement is “too risky” and said PME hoped the resolution garners greater support from all shareholders this year. A number of large investors are believed to be weighing up their voting intentions on the resolution.
Follow This and ShareAction see the AGM vote as a test of investors’ commitment to Paris goals. Mark van Baal, Founder of Follow This, told RI that Shell’s board has been very busy in the last two months persuading shareholders to vote against: “I wish Shell were more progressive than we are. They are not. We need investors that are well-informed and brave enough to vote for,” he said.Two proxy advisors, PIRC (which advises the UK Local Authority Pension Fund Forum (LAPFF) representing £200bn in combined assets) and the European Corporate Governance Service (ECGS), recommended last year to vote for the resolution, although they haven’t so far issued an advice for this year. ECGS stated in its 2017 proxy report that Shell “has the resources and balance sheet capacity to increase investment in renewable energy from current low levels to complement its strategic focus on natural gas.”
Separately, investors representing $1trn and coordinated by ShareAction have launched the Investor Decarbonisation Initiative. As part of the initiative the group of investors have sent letters to the companies they own encouraging them to set ambitious science-based climate targets in line with the global Paris Agreement and to commit to cleaner energy like renewable electricity. According to ShareAction, the campaign is independent of the Science Based Targets Initiative but works collaboratively to further shared aims.