A fifth of shareholders voted for a resolution at Shell’s AGM yesterday calling for the board to adopt climate targets aligned with the Paris Agreement, heralding cautious optimism from commentators as the company will now be required to report on ‘actions taken’.
At a lively meeting in London disrupted by protestors, a climate resolution put forward by Follow This received 20.2% support, according to a preliminary count from the company, mirroring last year’s 20% vote in favour.
Shell’s own climate plans, its Energy Transition Progress resolution (in other words, the company’s Say on Climate) received 80% of shareholder votes.
Shell CEO Wael Sawan said: “I’m pleased the vast majority of our investors remain supportive of our strategy to become a net-zero emissions energy business by 2050.
“We are focused on performance and discipline to achieve the levels of returns our shareholders expect across all our business areas, and to ensure the company is valued fairly.
“As we continue this journey, we are delivering the energy the world needs today, and investing in low-carbon energy solutions for the future.”
See also: – Barclays AGM: ‘World cannot function without fossil fuels’
Industry commentators were somewhat disappointed with the result.
Tony Burdon, CEO of Make My Money Matter, said the majority of the UK pensions industry had “stayed silent” on Shell’s climate plans and that it, and other investors, “must do better”.
“This means declaring they will vote against, or directing their asset managers to vote against, any fossil fuel company director who refuses to rule out oil and gas expansion,” he added.
“Anything less is placing people, planet and our pensions in jeopardy.”
Follow This founder Mark van Baal added: “We have made it easy for investors to use the power of their votes, but many investors have yet to decouple short-term profits from long-term risks for the company and their portfolios.”
Reporting on action
However, van Baal was also optimistic. “Prominent investors have voted in favour of our climate resolution,” he said.
“Considering that up to 99% of shareholders voted along with the board on the other 25 resolutions, 20% of support and a significant number of abstentions in spite of a negative board recommendation clearly indicates shareholder discontent.”
The UK corporate governance code requires companies to report on ‘actions taken’ within six months after 20% or more vote against management at an AGM.
Shell said: “We will meet this obligation by continuing to engage with shareholders on why we believe our strategy keeps us on the right path.”
Van Baal added: “Now is not the time to roll back ambitions, but for Shell to invest its profits in the transition.
“According to the International Energy Agency, [recent] windfall gains provide a once-in-a-generation opportunity […] for major oil and gas companies to do more to diversify their spending.”
Shell reported an annual profit of £32.2bn earlier this year – the biggest in its 116-year history, which Laura Hoy, ESG analyst at Hargreaves Lansdown, said calls into question whether its green energy strategies were really a priority, and whether we can expect further retreat.
Although Shell’s most recent results had no indication the group is planning to reduce its climate commitments, Hoy commented: “Shell and BP have recently started to tip-toe away from their climate-friendly pledges. It has highlighted a key ESG risk at these companies that investors should be considering governance.”
Vote of no confidence
Another resolution voted on at yesterday’s AGM was a vote of no confidence in the reappointment of Shell’s chair, Sir Andrew Mackenzie.
Although just 6.9% of shareholders voted against his reappointment, Simon Rawson, deputy CEO of ShareAction, said the vote represented a growing trend in investors demanding more from companies, which he expects to continue.
“The scale of today’s vote against the chair of Shell at its AGM is a clear indication of the growing frustration of shareholders and investors at the company’s failure to adapt its business model and move away from their reliance on climate damaging fossil fuels by moving to cleaner and sustainable forms of energy production,” he added.
“This pressure will only become more intense as more and more investors put pressure on companies like BP and Barclays to change what, and who, they do business with.”