'We need the oil industry to rapidly change': Follow This Founder

Shell shareholders are pushing for further action regarding climate. Follow This Founder Mark van Baal joins Yahoo Finance Live to discuss.

Video transcript

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- In our Tipping Point segment this week, we are taking a closer look at increased shareholder activism among oil or fossil fuel companies, shareholders of Royal Dutch Shell voting overwhelmingly today in favor of the company's energy transition plan. But there's another proposal that was on the table that calls for more aggressive action that garnered more than 30% of the vote today, activist investor Mark van Baal rallying shareholders on that front, along with many other companies. And let's bring him in. He is the founder of Follow This, and he joins us from Amsterdam today.

Mark, it's great to talk to you today. I want to talk about this shareholder vote in just a bit. But I think there's a lot of people that may not be as familiar with how active Follow This has been. So walk me through the structure right now, because you've taken on an interesting approach over the last several years, which is to go into these companies and try to call for change from the inside.

MARK VAN BAAL: Yeah, that's basically our motto, change the system by entering it. We need the oil industry to rapidly change and rapidly invest in renewables. And I thought the only way to achieve that is by shareholder pressure, because these are the only people the boards of these companies have to listen to, their shareholders.

- So you've essentially encouraged people to buy shares in the company. You can go to the Follow This website and buy shares of Shell or Exxon or any one of these companies. How much of that have you seen pick up as there's more and more scrutiny on the climate policies of gas and oil companies?

MARK VAN BAAL: In 2015, I went to the AGM of Shell on behalf of a few hundred shareholders with just one share. Now we have over 6,000 retail shareholders, people who buy just one symbolic share on our website. But more important, more and more institutional investors, like pension funds, support our resolution now, because they fully understand that climate change is such a big threat to all their billions that these companies, the companies who can make or break the Paris Climate Agreement, that these companies have to change. So they're increasing the pressure now. And 30% today is really unprecedented. We started at 2.7% in 2016. And 30% is a very strong signal to Shell, OK, it's great that you have a nice promise for 2050, but we need you to act now. We need you to decrease emissions now. We need you to shift the investment away from fossil fuels to renewables. We need big oil.

- And we're showing a chart here that shows just how many more resolutions have been voted on over the years. 30% is progress, but you still didn't get the vote, because at the end of the day, shareholders voted for a resolution that was put forward by the company itself. What's wrong with that? And why does it need to be more aggressive?

MARK VAN BAAL: Yeah, let's first have a look at the first 19 resolutions, where 99% of the shareholders vote with management. So that's normally North Korean, so 30% is really impressive. It's very difficult for shareholders to vote against the board. What we ask for basically is short-term and medium-term emission reduction targets. We don't ask for any policy. That's up to the board. But we fully understand, and the board fully understands, if they will set aggressive emission reduction targets, they need to substantially shift investments. That's why they're so against our resolutions. But to achieve the Paris Climate Agreement, we need to make very much progress in this decade. We need to decrease emissions by at least 25%, preferably 45%, to be on a 1.5 degrees pathway. Otherwise within this decade we lose every opportunity to meet the Paris Climate Agreement, and more and more investors understand that.

- And we should point out you've put forward resolutions with a number of these oil and gas companies, not just Shell, whether it's ConocoPhillips. You've got additional shareholder meetings coming up later in the month with the likes of Exxon as well as Chevron. When you look down the line though, as a shareholder, there's certainly going to be people who say, well, what's the value in these companies as they shed more and more of their oil assets? How do you measure that? What is the future?

MARK VAN BAAL: That's very difficult, but it's absolutely clear that there's a disruptive innovation going on. Renewables are getting cheaper and cheaper. The technology is there. The technology gets cheaper. The big problem to solve or the big challenge is to store renewable energy, but that's the only issue. But technically it's possible, economically it's possible, only these incumbents are reluctant to change. And luckily their shareholders are telling them to change now. But they can keep their value. They're great companies. They have billions to spend every year.

And the only thing we're asking for, please don't spend these billions on more fossil fuels, because these will be stranded assets. Please spend these billions on whatever renewable projects you can get a hold of. We need the Sahara full with solar panels. We need the North Sea full with wind turbines. Shell would be excellently positioned to to put offshore wind farms in a big scale on the North Sea, for example.

- And Mark, finally we got this study out from the IEA today that said, essentially, energy companies need to stop all new oil and gas exploration projects from this year on in order to reach that goal laid out in the Paris Climate Agreement of net zero carbon emissions by 2050. We haven't seen any companies say they're going to halt things altogether. So where does that leave that timeline?

MARK VAN BAAL: Yeah, it's great that even the EIA makes this report. It's simple math. We only have 450 gigatons to go, and we are emitting 43 as a world every year. So we have 10 years to go to change course. And every new oil and gas production will not be needed within the Paris Climate Agreement. That's simple math. But it's great that such a huge organization tells the oil majors now, basically every dollar spent in looking for more oil and gas, every dollar spent in drilling for more oil and gas will be wasted if we will achieve the Paris Climate Agreement. And that's what the world agreed upon.

- Mark van Baal, founder of Follow This, joining us from Amsterdam today. Appreciate your time.