Shell Commits to Short Term Climate Targets

Shell announced December 3 it has agreed short-term targets with activist shareholders including the Church of England that reinforce its 2017 Net Carbon Footprint programme. Fulfilment of these targets will also influence executives' pay.

In 2017, Shell said it was the first international oil and gas company to set the ambition to reduce the Net Carbon Footprint of the energy products it sells, expressed as a measure of carbon intensity, taking into account their full life-cycle emissions. Shell aims to reduce the Net Carbon Footprint of its energy products by around half by 2050, and by around 20% by 2035.

Now, Shell is committing to build on that long-term ambition with the commitment to setting specific Net Carbon Footprint targets for shorter periods of three, or five years. Shell will set the target each year for the following three- or five-year period. The target-setting process will start from 2020 and will run to 2050. Moreover Shell says it plans to link such targets and other measures to its executive remuneration policy; the revised remuneration policy will be put to shareholders for approval at the company’s annual general meeting in 2020.

The engagement was led by Dutch asset management firm Robeco and the UK-based Church of England Pensions Board and included Eumedion, a Dutch platform for institutional investors.

“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," said Adam Matthews of the Church of England Pensions Board. The church's head Archbishop of Canterbury Justin Welby added: “As governments meet at the UN climate negotiations in Poland, I am delighted to see a unique announcement on climate change between investors and one of the largest companies in the world - Royal Dutch Shell." 

Legal & General Investment Management corporate governance chief Sacha Sadan added: “LGIM very much welcomes this positive result from an open dialogue between Shell and its shareholders in setting a target that’s in line with the global Paris goal. The need to finance an orderly and successful transition to a low-carbon economy is paramount and this shows our mutual commitment to make it a reality.”