European pension funds turn to co-filing at Shell to up climate credibility

Major European pension funds are among a record number of investors who have agreed to co-file a shareholder resolution at Shell with NGO Follow This in a bid to get the oil and gas major to set tougher emission reduction targets.

The biggest support Follow This received previously was co-filing from 17 investors for a shareholder resolution at TotalEnergies’ annual general meeting last year, helping it secure 30% of votes.

The group of co-filers for this year’s Shell resolution is bigger and also includes more heavyweight asset managers, such as Amundi, and large asset owners.

“This is a big step for our campaign,” Mark van Baal, founder of Follow This, told IPE. “Now it’s a financial question.”

In a statement he added: “This escalation of 27 leading investors puts the call for emissions reductions by energy companies front and centre for all institutional investors.”

The pension funds co-filing the shareholder resolution are: AP3, AP4, Brunel Pension Partnership, Emmi-Vorsorgestiftung, Greater Manchester Pension Fund, London CIV, NEST, Pension Protection Fund and Ethos, representing five other Swiss investors.

Also part of the co-filing group, in addition to Amundi, are Candriam, and Scottish Widows. Degroof Petercam Asset Management and Edmond de Rotschild are the only investors who have previously joined Follow This as co-filers at Shell.

Seeking Scope 3 credibility

The shareholder resolution asks Shell to tighten its medium-term targets for reducing the greenhouse gas (GHG) emissions of the use of its energy products (Scope 3). The investors do not think these targets are aligned with the goal of keeping global warming to 1.5°C above pre-industrial levels, but Shell disagrees.

“We are escalating our engagement by co-filing this resolution led by Follow This, as it is essential that companies demonstrate credibility in their climate ambitions in alignment with the Paris Agreement,” said Faith Ward, head of responsible investment at Brunel Pension Partnership.

“We believe that a reversal of progress on climate at oil and gas majors is misaligned with our and our beneficiaries’ long-term interests,” she added.

“The credibility of active ownership is also at stake”

Vincent Kaufmann, CEO of the Ethos Foundation

For Vincent Kaufmann, chief executive officer of the Ethos Foundation, “when shareholder dialogue is not enough to change a company’s practices, it is necessary to resort to intensification measures”.

“The credibility of active ownership is also at stake,” he said. “We cannot simply encourage companies to improve and do nothing more if this commitment does not bear fruit, especially when we are dealing with an issue as urgent and fundamental as climate change.”

Diandra Soobiah, head of responsible investment at NEST, said that setting a credible Scope 3 absolute emissions target “would demonstrate leadership, show Shell is serious about transitioning its business, and play a role in generating real world change”.

Shell is aiming to reduce the net carbon intensity of the energy products it sells by 20% by 2030, compared with a 2016 baseline.

New language in supporting statement

Shell will publish the first update of its energy transition strategy in early 2024. A spokesperson for the company said the new Follow This resolution was broadly unchanged from the 2023 resolution, which, as in previous years, was rejected by shareholders.

In 2023, 20% of shareholders voted in favour of the Follow This climate resolution, which has been described as a shareholder rebellion.

Jacqueline Amy Jackson, chief sustainability officer at London CIV, said the oil and gas sector wielded the potential to influence global outcomes but that “pursuing significant changes comes with a price, and the shareholders’ insistence on immediate returns poses a natural conflict for Shell’s management”.

“The resolution is designed to give Shell a shareholder mandate to drive the energy transition”

Mark van Baal, founder of Follow This

According to Follow This, the supporting statement for this year’s shareholder resolution has been completely rewritten “to reflect investor requests for a more agnostic text that is solely focused on emissions”.

“It’s in investor language,” said Van Baal. He said the NGO expects votes in favour to increase given the support for the resolution at the co-filing stage.

“Large shareholders hold the key to tackling the climate crisis with their votes at shareholders’ meetings. Shell will only change if more shareholders vote for change. The resolution is designed to give Shell a shareholder mandate to drive the energy transition,” he noted.

The Shell spokesperson said the company’s board had previously advised shareholders that the Follow This resolution was “unrealistic and simplistic, that it would have no impact on mitigating climate change, have negative consequences for our customers, and was against the interests of the company and our shareholders”.

 “Continued, targeted investment in oil and gas will remain necessary to meet global energy demand over the coming decades as the world transitions to a lower carbon future,” the spokesperson added.

ShareAction recently reported that asset manager backing of resolutions on important environmental and social issues fell to a three-year low in 2023.

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