Shell faces a shareholder challenge in its approach to climate change

Royal Dutch Shell faces a shareholder challenge over climate change this week, as investors insist oil and gas firms should offer more transparency and action on carbon emissions.

A growing number of pension funds have backed a resolution at Shell’s AGM on Tuesday that calls on the company to set tougher carbon targets that are in line with the goals of the Paris climate deal.

The proposal has been backed by the Church of England, the Dutch pension fund Aegon and, most recently, Nest, the workplace pension scheme set up by the UK government, which has £7m invested in Shell.

Mark van Baal, the founder of Follow This, a Dutch campaign group that brought the resolution, said: “Investors have a choice: vote for Shell’s ‘whatever world’ or vote for the world of the Church of England, a world in which all companies set targets to limit climate change to well below 2C.”

The resolution has been highlighted by 60 large investors managing more $10.4tn (£7.72tn) in assets, though they stopped short of publicly backing it.

“Regardless of the result at the Shell AGM, we strongly encourage all companies in this sector to clarify how they see their future in a low-carbon world,” the investors – who include Axa Investment Managers and Legal & General Investment Management – wrote in an open letter.

It is the third year in a row that Follow This has brought a climate resolution to Shell’s AGM. Ben van Beurden, Shell’s chief executive, has admitted the resolutions played a role in convincing the firm to announce a plan to halve the carbon footprint of the energy it sells by 2050. Follow This has welcomed the move but said it is not enough.

Meanwhile, influential shareholder advisers have urged investors to oppose the CEO’s remuneration package, which rose to €8.9m (£7.79m) in 2017.

Institutional Shareholder Services (ISS) said Van Beurden’s €3m (£2.63m) bonus was not warranted, given how the firm performed on its sustainable development targets. The advisory group Pensions and Investment Research Consultants (Pirc) also recommended opposition.

A Shell spokesperson said the company “strongly disagreed” with ISS’s concerns, noting that the advisory group had supported the policy that put the bonus framework in place.

The spokesperson added: “We share the objective of Follow This for Shell to show leadership in the energy transition but we consider their resolution unnecessary as we have already outlined an approach, through our industry-leading net carbon footprint ambition, that is wider-ranging and more progressive.”

The rival oil firm BP also faces a potential challenge – over pay – during its AGM in Manchester on Monday, the first time the London-based firm has held the event outside the capital in more than a century.

The British firm said about 40% of its shareholders lived north of Birmingham, and Manchester’s location and transport links would be convenient for retail investors.

The company’s healthy profits off higher oil prices mean the extraordinary 2016 shareholder revolt over chief executive Bob Dudley’s £14m pay package is unlikely to be repeated.

But some proxy adviser groups have urged investors to reject Dudley’s £9.5m remuneration for 2017, which Pirc said was at an “unacceptable” ratio of 48:1 compared to average employee pay.

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