Shell will defend ESG targets to shareholders ahead of activist showdown
Shell will defend its lack of ‘scope three’ emission targets at its annual ESG update today, Morning Wire has learned, despite intense pressure from activist shareholders who have filed another motion calling for the energy giant’s climate goals to be toughened up.
Scope three emissions encompass those not produced by the company itself, but those it’s indirectly responsible for, up and down its value chain.
This includes its customers, and the emissions they produce when they burn purchased oil for energy.
Ed Daniels, Shell’s sustainability, strategy and corporate relations director, will tell investors that scope three emission targets are dependent on customers and how they use the energy products they sell them – which is not under their control.
Instead, Shell will push for scope three emission reductions through reaching its net zero goals rather than absolute targets, such as selling more products with low-carbon emissions.
Daniels will say: “These emissions can go down in two ways. First, if we stop selling products to our customers, which is not a strategy but corporate self-destruction. Second, if our customers increasingly buy energy products with lower emissions.”
Shell will point to biofuels and electric vehicle charging as key growth areas for the company, and argue that its current net carbon intensity targets are ahead of the global energy system.
Today’s gathering follows last year’s passing of the Energy Transition Progress Report – which was published earlier this month.
It will include many of Shell’s largest institutional shareholders from both the sell side and buy side, who will now once again vote on motions calling for its climate goals to be ramped up.
The report’s targets were green-lit by shareholders last year despite opposition from activist investors such as Follow This, including on its carbon intensity targets.
Follow This has filed a new motion, demanding 2030 emissions reduction goals in line with the 2015 Paris UN accord on climate change.
This includes targets for end-user emissions – as scope three accounts for about 95 per cent of the energy company’s greenhouse gas pollution.
The group’s stake in the energy giant is less than one per cent, but City A.M. understands its position is backed by multiple Dutch institutional investors.
Shell achieving carbon targets, says Daniels
Daniels will highlight the carbon intensity of Shell’s products declined 3.8 per cent last year, compared to two per cent across the global energy system.
The energy giant is targeting a 100 per cent cut in carbon intensity, in line with its 2050 net zero goals, but has also introduced multiple intermediate goals.
This includes a 20 per cent cut in carbon intensity by 2030 and a 45 per cent cut by 2035.
“We believe our net carbon intensity target is the best way to measure our transformation and how we are changing our product mix to help customers decarbonise,” Daniels will say.
This includes encouraging shareholders to vote down proposals to toughen its climate ambitions, which will take place during the day.
Daniels will argue Shell is determined to become a net-zero emissions business, but that it wants to do this “in a profitable way”.
He will suggest that Follow This’ resolution is “against good governance” because it is “unclear, generic and would result in confusion”.
He will also say it should be opposed because it “does not help shareholders”.
“To be successful, we must provide the energy the world needs, now and in the future, purposefully and profitably. And our success can have a real, positive impact on the energy transition. Our strategy aims to do that,” he will say.