Shareholders of energy conglomerate Shell should vote against the company’s energy-transition resolution at the upcoming AGM, according to Pensions & Investment Research Consultants (PIRC).
PIRC, a corporate governance and shareholder advisory consultancy, recommends investors vote against resolution 25, which asks shareholders to approve Shell’s Energy Transition Progress for the year 2022. The consultants argue that the $213 bn energy giant has failed to address its climate risks in the latest report.
The report reflects the company’s targets to become a net-zero emissions energy business by 2050. But the proxy adviser highlights that since signing the Paris Agreement, Shell has shown a lack of adequate targets.
Paul Hunter, head of policy at PIRC, says: ‘While targets are now being set, too often they are not aligned to a 1.5°C pathway not heavily reliant on unproven offsetting technologies.
‘The absence of adequate targets can only be viewed as an indicator of governance shortcomings. As such, PIRC is recommending investors hold board members to account where targets fall short of the climate expectations of responsible investors.’
Short and medium-term effects
PIRC also argues that while Shell has short and medium-term targets, there is specific concern that these targets are not completely aligned with the Paris Agreement, which focuses on limiting global warming to 1.5°C.
The adviser further expresses concerns over the company allegedly not setting ‘absolute’ emissions reduction targets for Scope 3 emissions. PIRC instead recommends investors vote in favor of shareholder resolution 26 filed by activist group Follow This, which calls on the company to align its Scope 3 reduction targets with the goals of the Paris Climate Agreement.
The Shell board has urged shareholders to vote against resolution 26, saying it has a material negative financial impact on the company and would not mitigate global warming.
In its notice of AGM it says: ‘Shell already has ambitious and Paris-aligned targets to reduce emissions with the goal of becoming a net-zero emissions energy business by 2050.
‘Shell would have to decrease oil and gas sales to reduce its Scope 3 emissions in line with this resolution. Doing so, without changing demand and the way in which customers use energy, would [in effect] mean handing over retail and commercial customers to competitors.’
The AGM will be held in London on May 23.
