INVESTOR BRIEFING
High-level analysis of Shell’s new Energy Transition Targets
Shell published its updated Energy Transition Strategy 2024 (ETS24). In response, global headlines were almost univocal: Shell ‘waters down’ (CNN, Fortune), or ‘weakens’ (Reuters, Bloomberg) its emissions reduction target(s).
In this investor briefing we wish to highlight five key takeaways based on our preliminary analysis.
1. 2030 target watered-down
Shell has abandoned its medium-term climate targets that were set in 2021 after pressure from shareholders who voted for the Follow This climate resolution requesting Paris-aligned emissions reduction targets:
The company lowers the target to reduce its Net Carbon Intensity (NCI) and is now ‘targeting a 15-20% reduction in the NCI of the energy products [they] sell by 2030, compared with 2016, against 20% previously’ (ETS24, page 7, item 9).
2. 2035 target scrapped, just before it becomes pertinent
Of greater concern is that Shell has now completely scrapped (‘retired’) its emissions reduction target of 45% by 2035. When pressed on the matter by Reuters, Shell’s CEO responded that attempts to be ‘forensic’ about Shell’s emissions in 2035 are ‘perilous’.
In 2021, when Shell set its 2035 and 2050 targets, these targets were outside its ten-year planning period. Shell always stated in the legal disclaimer of its Climate Target: “Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCI target, as these targets are currently outside our planning period.”
It’s very telling that Shell scraps its 2035 target in 2024, just before it moves into its ten-year planning period. This begs the question: what is the value of the 2050 net-zero target, when Shell can scrap it before it becomes pertinent?
3. Shell moves further away from Paris alignment
One thing is certain: the retired and watered-down targets will take Shell even further away from Paris alignment than it was before. After another year with record-breaking global temperatures, backtracking on essential emissions reduction targets clearly shows what Wael Sawan means by a ‘ruthless focus’.
The previous targets were not Paris-aligned, as established by the Climate Action 100+ Benchmark, and the recent Carbon Tracker report Paris Maligned II.
The new medium-term target will contribute even less to significant reductions in global emissions this decade. To achieve the goal of the Paris Climate Agreement, global emissions must almost halve by 2030.
4. The new Scope 3 ambition for oil products is insufficient
Specifically for its oil products, Shell has set a ‘new ambition to reduce customer emissions’ (Scope 3) by 15-20% by 2030 (ETS24, page 7, item 7). Although we welcome an absolute Scope 3 emissions reduction target, oil products cause only half of Shell’s total Scope 3 emissions.
The new ambition will not contribute to significant reductions in global emissions this decade, nor a reduction in Shell’s carbon intensity. On the contrary, the carbon intensity target was scaled down from 20% to 15-20%.
On top of this, Shell claims the new ambition is ‘more than 40% compared with 2016 reported emissions’. Of this ambition, more than 90% was already achieved in 2023. Our preliminary analysis shows that this is largely a result of the introduction in 2020 of new accounting standards for oil products sales (ETS24, page 7, footnote), as well as the decision in 2020 to divest from eight out of fourteen refineries (Shell Q3‘20 press release).
In summary, a new ambition that only covers half of emissions, combined with weakening two medium-term targets that cover all emissions, represents no progress towards Paris alignment.
5. Liquefied Natural Gas (LNG) business to grow
Shell will grow its liquefied natural gas (LNG) business by 20-30% by 2030, compared to 2022 levels (ETS24, page 22). The Intergovernmental Panel on Climate Change (IPCC) stated that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach.”
Conclusion: climate ambitions follow climate votes
Shell’s retreat from climate targets demonstrates that climate ambitions follow climate votes, both positively and negatively.
Since our first climate resolution in 2016, we have witnessed how your votes influenced strategy: as votes increased, so did Shell’s climate ambitions. When votes fell and remained stagnant, climate ambitions were abandoned, as shown by Shell’s most recent update.
Please keep this in mind when you make your voting decision this year.
The Follow This climate resolution, co-filed by 27 institutional investors with €3.9 trillion in assets under management, will be the only climate resolution that comes to vote at an oil major. By voting for the climate resolution, shareholders support Shell to align its medium-term Scope 3 emissions reduction targets with the Paris Climate Agreement.
We hope you will follow the leadership of 27 of your peers by predeclaring your vote in favour of our climate resolution at Shell’s AGM on 21 May. This will be investors’ only opportunity to vote for Paris-aligned emissions reduction targets at an oil major in 2024 and will send a clear signal to the entire oil and gas industry.
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Attachments and links
- Shell Energy Transition Strategy 2024
- CNN: “Shell waters down 2030 carbon emissions target in latest fossil fuel industry backslide”
- Fortune: “Shell waters down its 2030 carbon reduction target, but still aims to reach net zero by 2050”
- Reuters: “Shell weakens 2030 carbon emissions reduction target”
- Bloomberg: “Shell Weakens 2030 Emissions-Cut Target in Move Away From Clean Power”
- Reuters: “Setting of 2035 climate targets ‘perilous’ for Shell, CEO says”
Climate resolution at Shell 2024
‘Shareholders support the Company, by an advisory vote, to align its medium-term emissions reduction targets covering the greenhouse gas (GHG) emissions of the use of its energy products (Scope 3) with the goal of the Paris Climate Agreement: to limit global warming to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C.
The strategy for achieving these targets is entirely up to the board.
You have our support.’
Please read the entire resolution including supporting statement here.
