Shell investors back oil major’s move to weaken climate targets

Shell shareholders largely backed the oil major’s decision to weaken its climate targets in a blow for environmental groups that have pushed the company to take stronger action to cut emissions.

About 78 per cent of shareholders on Tuesday voted for the group’s revised energy transition strategy under which it will cut emissions more slowly than previously planned.

While the 22 per cent vote against the strategy is a significant rebellion, it was in line with 2022 and 2023, when 20 per cent of investors opposed the progress Shell had made against its previous strategy.

Shareholders also rejected a resolution filed by the activist group Follow This and 26 other investors urging the company to set tighter climate targets. About 19 per cent of shareholders voted for the resolution, compared with 20 per cent a year earlier.

The twin votes were seen as a referendum on the role shareholders want Shell to play in the energy transition, after the company in March weakened a 2030 emissions-reduction target and scrapped a 2035 target completely.

In his opening remarks, chair Andrew Mackenzie said Shell remained committed to cutting its emissions to net zero by 2050 but that more investment in hydrocarbons, particularly in liquefied natural gas, would be needed during the energy transition.

“I believe Shell’s leaders neither overestimate what can change in the short term nor underestimate what can change in the long term,” he said.

Under the UK corporate governance code, a resolution that gains at least 20 per cent of the votes against management advice means the company must report on “actions taken” to address shareholder concerns within six months. Shell said it would meet this obligation by continuing to engage with shareholders on why the revised energy transition strategy will keep the company “on the right path”.

Heightened security meant the annual general meeting proceeded more smoothly than in the previous two years when activists disrupted the event for several hours. This year, protesters gathered outside the venue and a small number gained access to the meeting but were quickly removed.

However, in a sign of the level of concern about Shell’s climate commitments during the three-hour meeting, all but a handful of shareholder questions were climate-related.

When Shell set its original energy transition strategy in 2021, under former boss Ben van Beurden, it pledged to reduce the net carbon intensity of its energy products by 20 per cent from 2016 levels by 2030, 45 per cent by 2035 and to net zero by 2050. Some 89 per cent of shareholders voted for the strategy at the time.

Under the revised plan it is now aiming for a 15-20 per cent reduction by 2030 and has dropped the 2035 target. 

Rather than a commitment to cut the absolute emissions generated by burning fossil fuels, carbon intensity is an accounting treatment that allows Shell to offset the carbon produced by its oil and gas business against its growing sales of lower-carbon products.

The revised pledges reflect chief executive Wael Sawan’s plans to keep growing sales of LNG, while being more selective about the type of low-carbon energy products — such as biofuels, hydrogen and renewable power — it sells.

Sawan told the meeting that Shell had “retired” the 2035 target because of “uncertainty around the pace of change in the transition”.

“As we grow our sale of low-carbon energy solutions to our customers, we expect to gradually reduce sales of oil products such as petrol and diesel,” he said. “For all our investments . . . we’re making clear choices about where we can create the most value.”

Shell’s share price was steady at £28.06 by late afternoon on Tuesday.

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