Investors Ask Shell to Align Medium-Term Targets with Paris Agreement

A group of investors accounting for about five percent of Shell PLC’s share capital has urged the British energy giant to revise its medium-term emission reduction targets to align with the Paris Agreement.

Shell has set a 2030 target of cutting planet-warming emissions in the scopes 1 and 2 category by half relative to 2016, toward climate neutrality by 2050. The medium-term target covers emissions only from Shell’s operations and the energy it buys to run these operations.

The 27 petitioners, led by shareholder group Follow This, are now asking Shell to set a "credible" roadmap to curb Scope 3 emissions, or emissions from the use of its products. The group comprises over EUR 3.9 trillion ($4.2 trillion) of Shell's stock, according to Follow This.

“This extraordinary step shows how dedicated these investors are to tackling the climate crisis at its source”, Follow This founder Mark van Baal said in a press release by the group.

The petition revises Follow This’ climate resolution last year, which the group said had been voted for by 20 percent of Shell’s shareholders. The news release said that in the new resolution, “‘2030 target’ was replaced by ‘medium-term targets’ and the supporting statement was completely rewritten to reflect investor requests for a more agnostic text that is solely focused on emissions”.

Matt Crossman, stewardship director at co-filer Rathbones Group, added, “With 2023 being the warmest year on record, and COP28 signaling ‘the beginning of the end of the fossil fuel era’ we are more aware than ever that climate change will create winners and losers”.

“We hope to create incentives for senior management to align business strategies with Net Zero scenarios that will help the world thrive”, Crossman added.

The World Meteorological Organization (WMO) and the United States National Aeronautics and Space Administration (NASA) separately confirmed earlier this month that Earth in 2023 experienced its warmest year in recorded history.

“In 2023, hundreds of millions of people around the world experienced extreme heat, and each month from June through December set a global record for the respective month”, NASA said in a media statement January 12.

“Overall, Earth was about 2.5 degrees Fahrenheit (or about 1.4 degrees Celsius) warmer in 2023 than the late 19th-century average, when modern record-keeping began”, it added.

The WMO reported the same day “the annual average global temperature was 1.45 ± 0.12 °C above pre-industrial levels (1850-1900) in 2023”.

It was against this backdrop that the United Nations’ main climate forum held at the end of 2023, or the COP28, reached an agreement for the world to transition away from fossil fuels. The UAE Consensus, which lays out all agreements reached at COP28, included “an unprecedented reference to transitioning away from all fossil fuels to enable the world to reach net zero by 2050”, said a statement December 13 from host the UAE, providing no timeline. The text of the UAE Consensus has yet to be published.

“Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end”, said UN Climate Change Executive Secretary Simon Stiell in his closing speech at the forum. “Now all governments and businesses need to turn these pledges into real-economy outcomes, without delay”.

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

Another signatory, AP4, said, “We are realizing the need for fossil fuel in the short-term horizon and we support the idea of integrated energy companies transitioning their business models”.

“Shell has a real opportunity to drive meaningful change in society, and we want to work together to help reduce the overall global emissions by almost half this decade”, added petition co-filer Pension Protection Fund.

The petitioners are based in Belgium, France, the Netherlands, the United Kingdom, the United States, Sweden and Switzerland.

“We expect votes to increase as more investors follow their leading peers by voting for change at Shell, which is the bare minimum they can do”, Van Baal said. “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”.

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