Shareholders Divided Over Shell's (SHEL) Climate Plan at AGM
Shell plc SHEL shareholders have decisively rejected a climate resolution proposed by the activist group Follow This, during an annual general meeting (“AGM”) marked by protests and intense debate. The resolution, backed by 27 investors managing approximately $4 trillion, sought to align the London-based supermajor’s medium-term carbon reduction targets with the Paris Climate Agreement, focusing on emissions from fuels burned by consumers (Scope 3 emissions). It received 18.6% support, a slight decrease from last year’s 20.2%.
Company’s Revised Strategy
In contrast, Shell's board's climate strategy received 78.2% support from its shareholders. This plan, introduced in March, aims for a 15-20% reduction in the net carbon intensity of its energy products by 2030 from the 2016 levels. This marked a retreat from the previous 20% target and the abandonment of a 2035 objective. Shell's CEO, Wael Sawan, emphasized that the company's plan focuses on maintaining profitable operations, mainly in oil and gas, citing strong gas demand and energy transition uncertainties.
Activist Backlash
The activist group Follow This criticized Shell’s approach, arguing that it failed to adequately address the urgent need for carbon reductions. Founder Mark van Baal accused Shell’s board of clinging to traditional hydrocarbon-based business models rather than investing in clean energy. Despite the resolution’s lower support compared to last year, van Baal noted that nearly 19% of shareholders backing the climate resolution signifies a minority pushing for stronger climate action.
Protests and Disruptions
The AGM was notably disrupted by climate protesters, both inside and outside the venue. Demonstrators from groups like Extinction Rebellion and Fossil Free London chanted slogans, highlighting their dissatisfaction with Shell’s climate policies and alleged environmental destruction in regions like the Niger Delta. The protests reflected widespread discontent with Shell’s environmental impact and its perceived slow pace in transitioning to renewable energy sources.
Shell’s Defense
Shell’s leadership defended the company’s strategy, stressing the importance of ongoing investment in oil and gas to meet current energy demands. Chairman Andrew Mackenzie and CEO Wael Sawan reiterated the necessity of hydrocarbons in the near term, even as Shell aims to become a net-zero emissions energy business by 2050. They argued that premature divestment from oil and gas could jeopardize global energy security.
Shareholder Dissent
Despite the majority support for Shell’s revised strategy, there was notable dissent. Over 20% of shareholders voted against Shell’s current climate plan, indicating significant concern about the company's commitment to meaningful climate action. Under UK corporate governance rules, this level of opposition requires Shell to engage with dissenting shareholders and report back within six months on how it plans to address their concerns.
Looking Forward
Shell’s leadership expressed confidence in its approach, with Sawan asserting that the reduced support for the Follow This resolution indicates growing trust in the company’s ability to navigate the energy transition. However, the company remains under pressure from both activist shareholders and external protest groups to accelerate its decarbonization efforts and align more closely with international climate goals.
Conclusion
The AGM underscored the ongoing conflict between Shell’s management and a significant minority of its shareholders over the company’s climate strategy. While Shell's leadership is committed to a gradual transition, focusing on profitability and energy security, activists and a notable portion of investors demand more aggressive action to combat climate change. This dynamic is likely to continue as Shell navigates its path toward a more sustainable future.
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