INVESTOR BRIEFING
Climate resolution, co-filed by 27 investors and endorsed by the CA100+ engagement lead, promotes good governance and protects your reputation as a value-focused investor
As you know, Shell has no plans to decrease its total emissions up to 2030. The company will only align their targets with Paris if your vote compels them to. Resolution 23, co-filed by 27 of your leading peers, supports exactly that.
Furthermore, as announced in its notice of meeting, Shell will interpret your vote for resolution 22 as validation for its current strategy, which is not Paris-aligned: ‘Any future shareholder engagements will take into account the voting outcome for Resolution 22 at the 2024 AGM.’ (page 7)
Your votes will leverage the engagement position of CA100+ lead MN, who predeclared their votes against resolution 22 and for resolutions 23. If you vote otherwise, you undermine the lead’s engagement.
Moreover, the shareholder climate resolution at Shell will be your only opportunity to show your climate credentials at Big Oil. Media and public will be closely watching investors’ voting behaviour; the votes in recent years were widely reported, for example in the UK, where The Guardian, The Independent, and many other media pointed to HSBC as the leader.
Therefore, if you want Shell to align its targets with Paris, you must vote against its Energy Transition Strategy 2024 (item 22) and in favour of the shareholder climate resolution (item 23).
In this final briefing prior to the Shell AGM, the main points are outlined and Shell’s smokescreens are lifted.
Good governance: clear direction without being prescriptive
Shell makes a contradictory claim that resolution 23 is “against good governance” by stating that the resolution “fails to provide a clear course of action” and “attempts to remove the setting of strategic targets from the Board’s control.”
Investors indeed may be disinclined to vote for a resolution if they feel it gives an unclear direction or if they feel it is too prescriptive. A resolution cannot be both unclear and prescriptive at the same time.
Resolution 23 is irrefutably clear without being prescriptive; it supports the board to align its medium-term targets with the Paris Climate Agreement. The metrics for proving Paris-alignment and strategy for achieving these targets remain completely under the control of management.
The resolution puts the high-level question to shareholders as to whether or not the company should align its medium-term targets with the goal of the Paris agreement.
Shell is throwing in technicalities about governance to divert attention from the fact that it is not Paris-aligned; the company will not further reduce its emissions this decade as it confirmed in court. Shell fabricated a governance issue to suppress votes to align with Paris. After the AGM, Shell will use votes against Paris alignment (resolution 23) and votes for Shell’s Energy Transition Strategy (resolution 22) as evidence that shareholders have approved its retreat. Please read page 7 of the notice of meeting: ‘Any future shareholder engagements will take into account the voting outcome for Resolution 22 at the 2024 AGM.’
UK company law allows the board to decide if a shareholder requisitioned resolution is either special or ordinary.
Shell’s inconsistency in treating Resolution 23 differently from its own proposed Resolution 22, despite both being advisory, suggests a strategic attempt to subject Resolution 23 to a higher approval threshold for their benefit.
Responsible investors recognized by media and public
Investors who actively engage in corporate voting are seen as leaders, shaping company direction and governance. In the UK, for example, institutions like HSBC and Schröders exemplify this, gaining media attention for their proactive climate stance. Their voting behaviours underscore their commitment to drive positive change and responsible investing.
Co-filed by 27 Institutional Investors who call on you to vote in favour
This year’s resolution, co-filed by 27 institutional investors managing approximately €4 trillion, reflects escalating dissatisfaction with Shell’s climate strategy. It underscores investors’ recognition of climate risks and their fiduciary duty to safeguard portfolios. This coordinated effort signals a call for Shell to align strategies with environmental imperatives and shareholder interests, emphasizing the urgency of addressing climate-related risks.
On May 2nd, these investors called on you to support their resolution with your vote in an Investor briefing on climate resolution 23 at Shell.
Shell’s recent backtracking
Shell’s recent climate targets retreat, notably reducing the 2030 target and scrapping the 2035 target, emphasize the urgency of voting for a shareholder climate resolution. Investors must signal to Shell that such backtracking is unacceptable and push for alignment with the Paris Agreement. This resolution is pivotal in reinforcing the importance of climate action and protecting shareholder value. Recent events, like Shell’s statement in court that the company will not further reduce emissions through 2030, heighten the urgency to vote for Resolution 23.
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, and the emissions decrease will be undone by the 20-30% growth in LNG Shell plans for.
Therefore, 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 abandoned.
Moreover, the overall emissions reductions of the ‘new ambition’ are impossible to verify, because Shell introduced new accounting standards for oil products sales in 2020 (ETS24, page 7, footnote) and divested a large number of refineries.
In summary, a new ambition that only covers half of emissions, combined with weakening and scrapping of medium-term targets that cover all emissions, represents no progress towards Paris alignment.
Therefore, Shell’s ‘belief’ that the company has Paris-aligned targets is unfounded.
No third-party source has confirmed that Shell’s medium-term targets are aligned with a 1.5°C warming scenario. If Shell were Paris-aligned, they could advise their shareholders to vote in favour of this resolution.
Follow CA100+ lead investor MN’s predeclaration to vote in favour
This is also the main reason that MN, the lead investor on behalf of the CA100+, pre-declared votes in favour of resolution 23. The Dutch investor, with € 140 billion assets under management, states: “We do not believe this level of fossil LNG growth [20-30% by 2030] aligns with pathways to the Paris Climate Agreement.” (full statement below or on the PRI website)
With this pre-declaration, MN is basically urging all CA100+ members to vote for as well in order to give their lead engager greater leverage at Shell. In 2023, after the votes stagnated at 20%, Shell backtracked on climate targets, demonstrating that one fifth of the votes is not enough to compel the board.
Additionally, the asset manager will vote against Shell’s board remuneration (resolution 2) and energy transition strategy (resolution 22).
If CA100+ members want to leverage the engagement position of their lead at Shell, they will need to vote in favour of Paris-aligned targets. A vote against would undermine their lead’s engagement as we saw when Shell backtracked.
The pre-declaration creates a litmus test for the credibility of the CA100+: the number of members who will cast their votes with their lead investor rather than the board of Shell.
Climate targets follow climate votes
Shell has set and improved its climate targets three times after votes for climate resolutions increased. After the votes decreased and stalled, Shell lowered and scrapped climate targets. Therefore, the only way for shareholders to compel Shell to improve its targets is to make sure the votes increase again.
Shell’s own Energy Transition Strategy 2024 resolution (item 22)
If you want Shell to align its targets with Paris, a vote against Shell’s own Energy Transition Strategy 2024 resolution (item 22) is also warranted. In Shell’s own words: ‘Any future shareholder engagements will take into account the voting outcome for Resolution 22 at the 2024 AGM.’ (notice of meeting, page 7)
Key factors of resolution
Resolution 23 advocates for Shell to align its medium-term Scope 3 targets with the objectives outlined in the Paris Agreement—an imperative step given that Scope 3 emissions constitute approximately 95% of Shell’s total emission profile.
Aligning these medium-term targets with scientific recommendations is crucial for mitigating risks associated with stranded assets, liability, reputational damage, and other negative consequences.
The urgency of action is underscored by the Intergovernmental Panel on Climate Change (IPCC), which indicates that global emissions must peak by 2025 and be reduced by 43% by 2030 compared to 2019 levels to limit the worst impacts of climate change.
It is important to note that the resolution does not dictate specific targets or methodologies, but rather urges the company to align targets and develop a strategy that will lead to these targets. Therefore, voting against the resolution due to concerns of prescriptiveness would inadvertently signal a disregard for the urgency and importance of aligning corporate actions with global climate imperatives outlined in the Paris Agreement.
27 co-filing investors, the CA100+ engagement lead, and the world hope you will take the right voting decision and vote FOR resolution 23, or ask your Asset Manager to vote FOR it.
