Shell Changes Stance on Carbon as Investors Push for Disclosures

(Bloomberg) -- Royal Dutch Shell Plc's decision to give more details on its emission-reduction plans sheds light on private discussions between the oil major and its shareholders, which led to a change in stance following years of resistance.

The capitulation will see the Anglo-Dutch company set carbon-output targets annually for the following three or five years as it works to halve its “net carbon footprint” by 2050. The goals will be tied to executive pay.

Shell will start setting targets in 2020, it said in a statement that -- unusually -- was co-signed by some of its largest investors. Most conversations about climate between oil majors and shareholders are held behind closed doors, making it hard for outsiders to know if they're adequately tackling the issue.

“This joint statement is the first of its kind,” said Adam Matthews, director of ethics and engagement for the Church of England Pensions Board, which helped lead shareholder talks with Shell. It “gives us the confidence that Shell is committed to this path.”

The oil company also said it will review its work with trade associations to ensure it's not financially supporting groups that could undermine its climate goals. It will publish the results of that review in the first quarter.

Carbon Footprint

Shell last year announced long-term targets for reducing its net carbon footprint, which includes emissions from its oil and gas extraction as well as from the subsequent burning of the fuels by customers. Some competitors are also cutting their footprint, but mostly limit that work to their own operations.

In the past, Shell Chief Executive Officer Ben van Beurden has resisted calls for more detail on carbon-reduction plans, saying they can be fodder for lawsuits. For three years in a row, managers have successfully urged shareholders to reject resolutions from an investor group called Follow This, which wants the company to show clearly how it will align itself with the Paris climate accord.

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The Church of England supported Follow This's filing earlier this year, which was voted down by 95 percent of Shell stockholders. That seemed like a definitive defeat, but Matthews said the Church was still intensely engaging the company behind the scenes. Over the past few months, those discussions crystallized into the request to set short-term climate targets.

In addition to the Church of England, Robeco, the Universities Superannuation Scheme and the Environment Agency Pension Fund have been among the most active participants in those talks, according to Matthews. Monday's announcement was also co-signed by other members of an investor initiative called Climate 100+, including insurer Legal & General Group Plc, which owns 1.8 percent of Shell's B shares, and UBS Group AG.

“We hope that other companies will follow Shell,” Corien Wortmann-Kool, chair of pension fund ABP, said in a statement. “That Shell has now embedded its ambition in its remuneration policy offers confidence.”

To contact the reporter on this story: Kelly Gilblom in London at kgilblom@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Amanda Jordan, Rakteem Katakey

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