Ahead of Royal Dutch Shell’s AGM next Tuesday, responsible Investment charity ShareAction has published a report analysing the company’s recent climate risk reporting. The report A post-Paris overview and analysis of Shell’s climate reporting, looks into the company’s business model from a climate perspective. Last year, a shareholder resolution was passed which required Shell to share more information in regards to its climate risk strategies.
ShareAction’s analysis finds that whilst progress has been made, Shell’s current business model is still far from aligning with what is required to achieve the goal of limiting temperature rises to ‘well below’ 2°C, with an ambition for 1.5°C, set at COP21.
ShareAction’s report finds that whilst providing investors with narrative reporting on what a below 2°C outcome might look like, Shell explicitly states that it has “no immediate plans to move to a net-zero emissions portfolio over [its] investment horizon of 10-20 years”. This disclaimer raises questions about Shell’s ability to adapt for the full decarbonisation of the energy sector needed by 2045-2055 in order to achieve the below 2°C pathway.
The report also found that key performance indicators (KPIs) and executive incentives continue to encourage the replenishing of fossil fuel reserves, with climate receiving negligible consideration and weighting.
Whilst making progress by establishing ‘New Energies’ as a division to invest in low-carbon power, Shell does not provide details of a more comprehensive re-alignment of R&D and investment strategies for consistency with a below 2°C world.
Also, to evaluate whether the company is truly supportive of the target set in Paris, there is a need for much greater transparency regarding Shell’s public policy interventions.
ShareAction’s report provides investors with key questions on each of the five areas, providing ideas for future engagement.
Catherine Howarth, Chief Executive at ShareAction, said: “Our analysis finds that Shell is way behind the curve in preparing for a post-COP21 world. To retain the confidence of shareholders, and to serve the best interests of the millions of people exposed to Shell shares in their pension funds, Shell must take far stronger action to transition its business model for a low carbon world. We urge pension funds and their fund managers to engage with the company to make the necessary adaptations as a matter of urgency.”
The full report is available online here.