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Investors support Shell’s strategy for net-zero emissions despite backlash

Royal Dutch Shell has secured the backing of shareholders for its energy transition plan but the oil company faced mounting support for an activist group’s demands to set more ambitious targets to combat climate change. 

Nearly 89 per cent of shareholders at the company’s annual investor meeting on Tuesday voted in favour of Shell’s strategy to create a net-zero emissions business by 2050. 

The poll of shareholders on corporate strategy, though non-binding, was unprecedented for a major oil and gas company, and did not reach the more than 95 per cent support that is usual for proposals put forward by management. 

Shell also faced a shareholder rebellion over a separate resolution by Dutch shareholder activist group Follow This that wanted the oil company to set more “inspirational” targets, which attracted the support of 30 per cent of shareholders.

Even though the proposal failed to attract the 75 per cent threshold required to pass, the group managed to more than double its support base from a similar vote last year. UK corporate governance rules dictate Shell now also has to consult these shareholders and report back within six months.

“Shareholders are sending a strong signal that Shell will have to set new targets,” said Mark van Baal of Follow This, who filed a similar resolution last week at rival BP’s shareholder meeting.

The meeting coincided with a new report from the International Energy Agency saying all new oil, gas and coal projects and exploration would have to stop if the goals of the 2015 Paris agreement were to be met. It also said oil demand would need to shrink nearly 75 per cent by 2050 while gas consumption would have to halve. 

Shell, meanwhile, will continue to explore in new regions for oil and gas until 2025. It also plans to invest the bulk of its cash in hydrocarbons for the foreseeable future, while aiming to shift spending towards cleaner fuels “over time”, expand its low-carbon businesses and offset emissions.

Oil and gas companies have faced a backlash from environmentalists and some investors who believe they are not taking drastic enough action to combat climate change. 

But executives are in a conundrum — how to move away from lucrative oil and gas production that pays investor dividends that shareholders are still after when lower-carbon businesses are still not able to generate as much cash. 

Shell chief executive Ben van Beurden said that while the company wanted to “accelerate the transition” of the business towards cleaner fuels, it had to do so not just “with purpose” but also “with profit”. 

“If we had to reduce the [fossil fuel] footprint of the business . . . would this help society? No,” said van Beurden to shareholders. “If we didn’t supply [this oil and gas], someone else would.”

While Shell plans to reduce emissions on an absolute basis by 2050 to zero, its shorter term targets are largely focused on “energy intensity”, a measurement of carbon per megajoule of energy sold, which has faced criticism.

Additional reporting by Attracta Mooney

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