Shell board faces tough questions from Follow This at AGM on future risks
Follow This chose not to submit a climate resolution this year for strategic reasons, but we were present at Shell’s AGM to pose some urgent questions to the board.
Follow This pressed the Shell board on dividend sustainability and the potential for stranded assets once oil demand peaks in 2029, according to the International Energy Agency (IEA). The answers provided were insufficient.
Mark van Baal, from Follow This, observed, “Today’s AGM shows that a growing number of shareholders are unwilling to accept the board jeopardizing the company’s future by clinging to an outdated business model that faces disruption within five years.”
Dividends
Rosa High of Follow This asked Shell CEO Wael Sawan whether the company could maintain its dividend payouts if the oil price drops below $40 per barrel – a realistic scenario after 2029 when demand for oil and gas will decrease according to the IEA. The board dismissed the IEA scenarios once again and did not answer the question.
Rosa High told journalists: “The absence of an answer demonstrates that the board cannot guarantee dividend payouts in a declining oil and gas market. This is worrisome for shareholders. The only way to mitigate this high dependency on fluctuation of oil prices is to diversify in new technologies and new business models in clean energy. We as shareholders support Shell to do so.”
Stranded assets
Tarek Bouhouch of Follow This reminded the board that in all IEA’s scenarios oil and gas demand will decline by 2029. He questioned the logic of pursuing new oil and gas projects in a contracting market without risking stranded assets, referring to CarbonTracker’s research. The chair dismissed the IEA scenarios as “one view of world” and pointed to Shell’s own scenarios. Bouhouch responded: ”I feel a responsibility to warn fellow shareholders: our board is putting our investments at risk by doubling down on a declining sector. Mr. Sawan and Mr. MacKenzie, are you continuing with business-as-usual because you believe the fallout will come only after your tenures end?”
