Shell Faces Shareholder Split on Climate Plan

With holders of Shell stock (LON: SHEL) having seen growth of more than 21% over the past 12 months, you might expect complete alignment between the board and shareholders, but the recent AGM raised a repeated thorny issue.

During their recent annual general meeting (AGM) on the 21st May, Shell found itself in the spotlight as shareholders cast their votes on the company's climate change resolutions. Despite setting ambitious targets, Shell shareholders showcased a division on the energy giant's approach to tackling climate change.

The crux of the dispute lay in a climate resolution proposed by the activist group Follow This, which called for the company to set carbon reduction targets aligned with the Paris Climate Agreement, with a keen focus on Scope 3 emissions—the indirect emissions that come from the company's value chain. Activist groups and impact investors like Follow This are trying to push companies like Shell into improving their position on various issues relating to corporate social responsibility. However, Shell's shareholders ultimately rejected this proposal, with only 18.6% in favour, a slight decrease from the previous year's 20.2% support.

In contrast, the climate strategy introduced by Shell's board in March won the approval of the majority, with 78.2% of shareholders backing the plan that aims for a 15-20% reduction in net carbon intensity by 2030 from the 2016 levels. Shell's CEO Wael Sawan underscored the importance of maintaining profitable operations, particularly in the lucrative oil and gas sectors, where high demand remains amidst the uncertainties of energy transition.

Despite Shell's leadership defending its comprehensive strategy, which not only supports profitability but also outlines a path to becoming a net-zero emissions energy business by 2050, activist group Follow This remained critical. The group chastised Shell for clinging to traditional hydrocarbon-focused business models instead of pivoting more aggressively towards clean energy investments.

The AGM was also marked by interruptions from climate protesters associated with Extinction Rebellion and Fossil Free London, who expressed their strong dissatisfaction with Shell's climate policies and its broader environmental impact. The over 20% dissenting votes against Shell's current climate plan signaled a significant faction within the shareholder base that is pressing for more substantial action towards climate objectives.

Shell is now under continued pressure from both activist shareholders and external protest groups to expedite its decarbonization efforts. These groups advocate for a business approach that more closely aligns with the demanding and urgent international goals for climate action set forth in global agreements such as the Paris Climate Agreement.

As the world grapples with pressing climate concerns, companies like Shell play a pivotal role in shaping the future energy landscape. The results of the AGM reflect the current tension between immediate profitability and long-term sustainability—a balance that energy companies will continue to navigate as expectations for environmental accountability rise from shareholders and the public alike.