A group of major pension funds has called on Shell shareholders to back a resolution asking the oil giant to explain how it would create shareholder value if oil and gas demand falls sharply.
The investors, representing more than €1trn in assets, published a public letter today ahead of Shell’s annual general meeting (AGM) on 19 May.
The timing is significant. BP faced a shareholder revolt after it excluded a similar Follow This resolution from its own AGM earlier this year.
At BP’s AGM, shareholders expressed a record-level opposition to its chair, Albert Manifold, while rejecting two high-profile resolutions.
The Shell resolution, known as Resolution 23, was filed by investors including Bernische Pensionskasse, Falkirk Council Pension Fund, Lothian Pension Fund, Swiss Federal Pension Fund PUBLICA and West Yorkshire Pension Fund.
It asks Shell to explain how its strategy would hold up if oil and gas demand falls structurally.
“Shell’s current disclosures do not address it,” the investors said in a statement published today. “The question is straightforward: how would Shell create shareholder value if demand for oil and gas declines?”
The investors argue that Shell’s focus on a $35-per-barrel breakeven point for new investments tests price sensitivity but ignores the bigger risk of sustained structural decline in demand. If that happens, sales volumes could fall, competition would intensify, and assets could become less viable.
The investors point to Shell’s 66% dividend cut in 2020, following a temporary demand shock, as a warning that a sustained structural decline could pose a greater challenge.
“The resolution does not bind the Company to any specific strategy or scenario; it requests disclosure of the kind increasingly expected across capital markets. The question it poses is one the Board should welcome, not resist. A company confident in the resilience of its strategy has every reason to demonstrate it,” the investors added.
Resolution 23 has the backing of Follow This, an investor campaign group, along with institutional investors representing €1.2trn in assets.
Follow This founder Mark van Baal told IPE he expected support for the resolution to rise compared to previous years, although he said the outcome remained difficult to predict.
“It’s a fair ask of an oil major to show how it is going to create shareholder value in a likely scenario, [that of the] International Energy Agency (IEA) scenarios,” he said.
The IEA has projected that global oil demand will peak by 2029 and decline from 2030, though its forecasts vary on long-term gas demand.
