11% of shareholders revolt over Shell tar sands resolution
GLOBAL - A pension fund-led shareholder resolution calling on Royal Dutch Shell to disclose more information about its involvement in Canadian tar sands projects has been defeated at the oil company's annual general meeting (AGM). However, some 11% of shareholders did not back the company.
The special resolution, led by UK pension fund campaign group FairPensions, secured 5.42% of the shareholder vote in favour of more disclosure, while a further 5.56% abstained and 89.02% followed the company's recommendation to oppose the resolution.
A spokeswoman for FairPensions said the 11% of shareholders who refused to back the management's recommendation is still a significant figure, because normally such resolutions only receive close to 5% backing.
The shareholder group, made up of 142 individual and institutional investors, including the UK's UNISON staff pension scheme and fund managers Robeco and Rathbone Greenbank Investments, asked Shell to examine the financial, social and environmental risks associated with tar sands extraction and present a report to shareholders in 2011.
But in his opening speech at the AGM, Shell chairman Jorma Ollila said: "Although we share some of the concerns that underlie the resolution, your directors believe that they are already being comprehensively addressed by your company.
"Your company follows a policy of transparent disclosure and published a report in March disclosing relevant information on oil sands. Given your company's approach to scrutiny and transparency, this resolution is unnecessary."
FairPensions acknowledged that Shell had engaged in "sustained dialogue with shareholders as a result of the resolution process", and had made some disclosures about its current tar sands operations. But it argued that many investors complained the company had "not yet provided sufficient reassurance about how it will manage the risks of its planned ‘in-situ' projects". FairPensions said such projects accounted for the majority of Shell's vast undeveloped tar sands resources, and had "higher production costs and greenhouse gas emissions".
Despite losing the vote on the resolution, FairPensions claimed that several investors involved in the debate at the AGM had argued the resolution had stimulated significant investor engagement and that further engagement was planned.
Duncan Exley, director of campaigns at FairPensions, said: "Today sent a clear signal that shareholders are concerned about the risks associated with tar sands, and need to see greater transparency from Shell. Tar sands have shot to the top of the City's agenda, and the oil companies have been forced to respond."
He added that in the wake of the Gulf of Mexico disaster, "the need for investors to scrutinise companies' risk management strategies - and to recognise that environmental risks are also financial risks - has been made abundantly clear, and we hope that investors continue to press for a much greater level of disclosure from the oil majors in the future".
A similar vote at BP's AGM last month also resulted in campaigners losing the vote, with approximately 93.9% against the resolution and 6.1% in favour. But over a billion votes abstained from the discussion, which, according to the campaigners, makes the proportion of shareholders against the project to approximately 15%. (See earlier IPE articles: Pension funds lose oil sands campaign against BP and Funds boost engagement).
Matt Crossman of Rathbone Greenbank Investments added: "While we welcome the increased level of disclosure around tar sands risks made by Shell, Rathbone Greenbank voted in favour of the resolution because we feel that significant gaps remain concerning the macro-economic outlook of tar sands, and the likely impact of the next generation of in-situ projects.
"We feel that it is appropriate for long-term shareholders such as ourselves to seek relevant disclosures on Shell's risk management processes - a duty which has been made all the more pressing in light of the recent Gulf of Mexico disaster."