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February 03, 2015
Board of Directors Endorses Climate Change Resolution at Shell
    by Robert Kropp

By endorsing a shareowner resolution filed by members of the Aiming for A investor coalition, the oil giant agrees to report on several aspects of climate risk, including portfolio resilience in post-2035 scenarios.


In what the Interfaith Center on Corporate Responsibility (ICCR) properly described in a press release as “an unusual move,” the Board of Directors of the oil super major Royal Dutch Shell has endorsed a shareowner resolution co-filed by As You Sow and members of the Aiming for A coalition.

By endorsing the resolution, Shell's Board has agreed to report on a number of climate related risks and opportunities:
1. Ongoing operational emissions management;
2. Asset portfolio resilience to post-2035 scenarios;
3. Low carbon energy R&D and investment strategies;
4. Strategic KPIs and executive incentives; and
5. Public policy interventions.

What makes the response of Shell's Board “unusual” was the company's response to shareowner concerns over stranded assets, published last year. In its response Shell referenced the conclusions of the Intergovernmental Panel on Climate Change (IPCC) and stated that there is “a high degree of confidence that global warming will exceed 2°C by the end of the 21st century.” But instead of considering the IPCC observation as a call to vigorous action, Shell stated, “The world will continue to need oil and gas for many decades to come, supporting both demand, and oil & gas prices. As such, we do not believe that any of our proven reserves will become ‘stranded’.”

Shell also criticized the concept of stranded assets, somehow concluding “that some interest groups will trivialize the important societal issue of rising levels of CO2 in the atmosphere.”

In response, Anthony Hobley, CEO of the Carbon Tracker Initiative (CTI)—the organization that in 2011 introduced the concept of stranded assets, the reserves already on the books of fossil fuel companies that will have to stay in the ground if the worst effects of climate change are to be avoided—stated, ““With this combative stance, Shell has missed an opportunity to explain to its shareholders how its capital expenditure plans are resilient to the impending energy transition.”

Since Shell claimed that the world's need for oil and gas would support oil & gas prices “for many decades to come,” the price of oil has plummeted, effectively rendering further exploration—of reserves that cannot be burned anyway—a potential financial loss for oil companies and their investors.

“It’s remarkable that a supermajor like Shell supports a shareholder resolution that boldly questions its own business model,” said Andrew Behar, CEO of As You Sow. “This acknowledgment of the need for change will ripple through the entire industry.”

“We see this as a signal to policymakers that the business community supports a robust global climate accord in Paris in 2015,” Behar continued.

Also remarkable is that Aiming for A, a mostly faith-based coalition of UK-based institutional investors, managed to surmount the considerable challenges to filing a shareowner resolution in the UK in the first place. ICCR reports that a minimum of 100 co-filers is required to submit a resolution on proxy ballots there; in the US, requirements are much more friendly to activist shareowners.

“Shell’s support of the resolution demonstrates what can be achieved on climate change through cross-country, collaborative shareholder engagement,” said Julie Tanner, Assistant Director, Catholic Responsible Investing, for Christian Brothers Investment Services. “Shell has one of the highest carbon footprints in the FTSE100. If it takes carbon reduction goals seriously as this announcement suggests it will, its ability to serve as a model and a catalyst for positive change in the fossil fuel industry could be tremendous.”

“Shell’s statement provides evidence that business as usual is no longer working for shareholders or industry, either from a global warming or markets perspective,” said Danielle Fugere, President and Chief Counsel of As You Sow.

 

 
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