Published on December 4th, 2018 | by Joshua S Hill0
Shell Partners With Institutional Investors To Set New Climate Targets
December 4th, 2018 by Joshua S Hill
On Monday, British-Dutch oil and gas company Royal Dutch Shell announced new climate targets developed in partnership with institutional investors on behalf of Climate Action 100+, which include new public short-term Net Carbon Footprint targets which will be linked to executive pay.
It is of no surprise that Shell has been and will remain under the microscope for years to come due to whatever role they may or may not have played in addicting the globe to fossil fuels and suppressing the threat of climate change. But, for the moment at least, Shell deserves praise for taking consistent steps to modifying its business practices away from fossil fuel industry business-as-usual.
This was further solidified on Monday when Shell announced new plans to implement short-term (three to five years) Net Carbon Footprint targets in support of its long-term ambition to reduce its Net Carbon Footprint associated with the energy products it sells, in step with society’s drive to meet the goals of the Paris Agreement. Specifically, Shell is aiming to reduce its Net Carbon Footprint by around 20% by 2035 and by around 50% by 2050. Shell will now also begin setting Net Carbon Footprint targets from 2020 for shorter-term periods of three to five years, with a new target to be set each year for the next three- or five-year period.
As a means to both incentivize the company and to also garner the trust of the public and shareholders, Shell will link its energy transition to long-term remuneration for its executives.
“Meeting the challenge of tackling climate change requires unprecedented collaboration and this is demonstrated by our engagements with investors,” said Shell Chief Executive Officer Ben van Beurden. “We are taking important steps towards turning our Net Carbon Footprint ambition into reality by setting shorter-term targets. This ambition positions the company well for the future and seeks to ensure we thrive as the world works to meet the goals of the Paris Agreement on climate change.”
Shell’s new policies were developed in partnership with a leadership group of institutional investors on behalf of the global investor initiative Climate Action 100+, an investor-led initiative with over $32 trillion in assets under management.
“As long-term institutional investors who manage retirement savings and investments for millions of people, we believe climate change to be one of the greatest systemic risks facing society today,” wrote the leadership group in a joint statement published on behalf of Climate Action 100+ and Royal Dutch Shell. “We believe comprehensive and effective government policy is necessary to drive change across the global economy. All parts of society have a role to play, not least energy-intensive, publicly listed companies.”
- To provide a world-class investment case by growing free cash flow and increasing returns, all built upon a strong financial framework and resilient portfolio
- To thrive through the energy transition by providing the mix of products its customers need as the energy system evolves
- To sustain its societal license to operate by being a responsible energy company that operates with care for people and the environment.
“We applaud the joint statement by Shell and lead investors for Climate Action 100+,” said Anne Simpson, the inaugural Chair of the Climate Action 100+ Steering Committee and Director of Board Governance and Strategy at the California Public Employees’ Retirement System (CalPERS). “The commitment by Shell to fully respond to the engagement shows the value of dialogue and global partnership to deliver on the goals of the Paris Agreement on climate change. Shell is setting the pace, and we look forward to other major companies following its lead.”
Shell will also publish an annual update on its progress towards lowering its Net Carbon Footprint and will also continue to support and promote the implementation of the recommendations put forward by the Taskforce on Climate-related Financial Disclosures (TCFD).
The Church of England Pensions Board was one of the key members of the Climate Action 100+ leadership group, with Adam Matthews, Director of Ethics and Engagement of the Church of England Pensions Board acting as co-lead.
“Investors like ourselves will be able to track Shell’s performance through the Transition Pathway Initiative (TPI), an independent academic tool at the London School of Economics which is supported by funds with $11 trillion in assets,” said Matthews. “This joint statement is the first of its kind, sets a benchmark for the rest of the oil and gas sector and shows the benefit of engagement – aligning institutional investors’ long-term interests with Shell’s desire to be at the forefront of the energy transition.
“Shell have also made important commitments to review the corporate climate lobbying of trade associations in line with the investor expectations we had developed with Sweden’s AP7 and the Institutional Investors Group on Climate Change. The review will be published early next year and Shell should be applauded for this step.”
Of course, while I may be willing and able to momentarily set aside the supposed sins of Shell’s past, not all are so forgiving — not to mention the simple fact that, with Shell’s resources, the company could probably do more.
“Whatever emissions targets Shell chooses to set until they align their capital expenditure with the Paris objectives, they aren’t even close to responding adequately to the challenge of climate change,” Kees Kodde, a Greenpeace Climate & Energy Campaigner. “And Shell’s expenditure remains overwhelmingly focused on adding to their oil and gas reserves, including in sensitive areas like Vaca Muerta in Patagonia. As a first step, Shell needs to align its spending with limiting global temperature increase to 1.5 degrees.”
Greenpeace’s point of view might be considered looking for the cloud in a silver lining, but when you look at the company’s capital investment plans, you begin to see their point.