Climate: Target setting at Shell – in the thick of it
Urging Shell to align with the Paris Agreement, by disclosing interim scope 3 emission reduction targets, has been the topic of a resolution co-filed by Brunel, Follow This and 26 other investors. As an evolution of previously filed resolutions by Follow This, we believe that the wording of this resolution encourages the company to reframe its current target to align with the Paris agreement in a way that best aligns with its strategy and long-term climate ambitions.
Co-filing this resolution is an escalation of our previous engagements with Shell. Last year, we voted against the CEO and Chair and the Energy Transition Progress report due to climate related concerns and voted FOR the resolution requesting interim scope 3 emissions reduction target for 2030. Not only was Shell one of the top contributors to Brunel’s financed emissions in 2022, but we also have ongoing concerns regarding the credibility of its climate commitments and the alignment of its targets with Paris goals. These concerns were amplified by announcements at their Capital Markets Day in June 2023 which included a retraction of expected decline in oil production to 2030.
We co-filed as, at the time the resolution was filed, the company had an intensity target for its combined scope 1, 2 and 3 emissions which made it difficult to independently assess targeted scope 3 emissions reductions. Furthermore, our engagement conversations with the company indicated that it is unlikely to provide substantive targets on scope 3 due to implications to sales volume.
Updating in real time…
Since the resolution was filed, Shell has come out with an update to its energy transition strategy. While the company did disclose partial scope 3 emissions reduction targets (covering oil sales) we don’t consider it to be comprehensive given that it does not cover the LNG business which is projected to expand. The company has also retired its medium-term targets and scaled back its short-term emissions reduction target.
We don’t expect to withdraw the resolution considering its relevance in our portfolio, the materiality of scope 3 emissions for the company and the broader context of oil and gas majors backtracking on climate commitments. However, we are keeping the doors open for further dialogue with the company.
