5 Key Takeaways from the Shell AGM

By Juliet Phillips, Campaigns Manager, ShareAction

Each year, the Shell Annual General Meeting (AGM) feels more and more like a climate change conference. The speeches get slicker, the questions get sharper, but dig a little deeper and the answers remain fundamentally the same. Shell is still an oil and gas company which premises its business strategy on the assumption that fossil fuels will be required for decades to come, and the majority of its shareholders have no problem with that. The company nonetheless received a roasting at this year’s meeting. Here are my takeaway points.

Shell supports the Paris Agreement… but it’s a fantasy that won’t happen

Shell really, really supports the Paris Agreement. That was the message they wanted to hammer home. The façade was blown by an insightful question by Louise Rouse, who asked for clarification around what it meant for Shell’s strategy to be consistent with the envisioned implementation of Paris – the 1.5°C ambition, or the current Nationally Determined Contributions, which take us well above 3°C.

The CEO described the <2°C ambition as in the “realm of the fantastic”, only possible with great advances in negative-emissions technologies and carbon offsetting through reforestation.

While it’s true that great social and economic changes will be required in order to meet the emissions targets, by aligning their business model for “success” in a 3°C+ degree world, Shell is actively contributing to the fossil fuel supply which is preventing timely emissions reductions. Which leads on to the second point…

Climate accountability, and the great disappearing act

Shell isn’t some passive observer in the climate crisis – the company’s actions could make or break the future. One study suggests that Shell is responsible for 2.12% of historical emissions between 1751 and 2010. Shell, however, wants to be the invisible man. Climate change is “too big a problem” for any one company to act alone – it will take a variety of industrial, societal and political changes to ensure a smooth transition.

The subtext is clear: since climate change is a bigger issue than any one company can tackle alone, if others aren’t fully engaged, neither can Shell. This logic allowed the company to sweep aside the comments of AG Saño, a Filipino typhoon survivor who had travelled over with Greenpeace Philippines, who invited Shell to invite Shell to cooperate with an investigation into the responsibility of carbon producers for climate-related human rights harms.

While Shell isn’t solely responsible for reducing global emissions, as one of the world’s largest energy suppliers, they certainly have a significant role to play. At a minimum, they should not be actively blocking climate action. However, the company continues to fund and participate in trade associations that play active roles in watering down emissions legislation. When pushed by InfluenceMap to publicly distance themselves from the policy positions put forward by groups like Western Petroleum State Association, the company decided not to.

Forecasting failure

While many governments procrastinate and delay moves to a low-carbon economy, technological and market shifts are driving faster change. The price of renewables and electric vehicles is plunging, as demand soars.

These advances are eroding future demand for fossil fuels, and challenge the bullish projections put forward by the oil and gas industry. When pushed by Greenpeace for more information on the scenarios that Shell uses to predict the future, the company said that they’d consider what was suitable for disclosing to the public. Watch this space.

Electric vehicles have been described by one ratings agency as likely to create a “investor death spiral” for fossil fuel companies. India has announced plans to electrify 100% of its vehicles by 2030. China, too, has recently unveiled major plans to scale up its electric vehicle fleet by 2025. ShareAction asked whether Shell had considered scenarios where electric vehicles are in the majority by 2030, to which the firm responded it had.

It’s encouraging that Shell is considering these scenarios, but hard to know how much this information is actually being used to inform their strategy and how money is spent. When asked how Shell is planning for these more disruptive scenarios, the CEO pointed us to their recent report ‘A better life with a healthy planet’. While a perfectly charming piece of literature, it misses one critical ingredient: numbers. Without these, it’s hard to know what the trends described would really mean for Shell’s business model, and how (and whether) the company could respond to these.

The future is gas – or is it all hot air?

Ah, natural gas. This is the new big thing for oil majors, competing for the title of the ‘gassiest company’. This shift is justified in part by the supposedly low-carbon credentials of gas. This fell under scrutiny. Den Haag Fossielvrij highlighted the fact that the methane emissions associated with leakages are a highly potent greenhouse gas. If these leakages aren’t eliminated, gas can be just as bad for the climate as oil and even coal.

ShareAction called into question Shell’s outlook for gas, noting that the LNG market looks set to remain oversupplied for years to come, with prices subdued. What’s more, the predicted growth hot-spots of India and China have seen much weaker demand than market analysts once predicted. Since Shell’s future resilience hinges on the value of its gas portfolio, this is a major challenge for the company. Shell acknowledged this was a big risk, but refused to get drawn into the details of how the company would handle a low demand situation.

On the whole, shareholders are okay with points 1-4.

Shell has made progress on climate change over the last few years. The company has a more nuanced understanding of the problem than many of its rivals, and has taken more active steps to address certain issues. However, the speed of this learning curve does not match the shrinking timelines we have left to act. As the owners of the company with rights and ability to influence its behaviour, shareholders have an important role to hold the company accountable and push for greater progress. However, this was not a muscle that was flexed at the 2017 AGM.

A shareholder resolution filed by Follow This requested the company set targets to limit its greenhouse gas emissions in line with the Paris Agreement. This was dismissed by 94% of shareholders. While a few investors expressed that they agreed with the spirit of the resolution, but not its wording, the majority silently rejected the resolution. 93% of shareholders also voted to approve Shell’s new remuneration policy, which encourages and rewards executives for delivering their current high-carbon strategy and producing more hydrocarbons.

While there are certain problems where incremental progress can be welcome, the same is not true for climate change. The stakes are too high, the timescales too tight. More has to be demanded from investors: what are their timelines for engaging with the oil majors, and what are the consequences (including divestment) for companies that are unwilling or unable to transition? A pragmatic response to the problem we face now needs to be a radical one.

Thanks Juliet! To find out more about our campaign on engaging high-carbon companies on transitition to 2 degrees, click here

Beau O'Sullivan5 Key Takeaways from the Shell AGM