February 4, 2015 / 2:41 PM / 5 years ago

Breakingviews: Shell oils gears for climate-activist investors

NEW YORK (Reuters Breakingviews) - Shell has oiled the gears for climate-activist investors. The Anglo-Dutch energy firm announced last week that it is backing a resolution from a group of shareholders wanting more disclosure about how climate change might affect the company’s business. The demands are hardly taxing, so a refusal might look defensive. Nonetheless, the episode highlights the growing power of environmentally focused investors.

The consortium of 150 mostly UK-based investors accounts for some 200 billion pounds ($300 billion) of assets under management and calls itself the Aiming for A coalition. The name is a reference to its first demand: that Shell do all it can to get an A grade from environmental research firm CDP for efforts to cut carbon emissions.

Some 767 investors with $92 trillion of assets use CDP’s data to judge how well companies do on everything from reducing carbon emissions to conserving water. And thousands of companies send in their information - including Shell, whose current grade is only a B.

The coalition’s other four demands are also aimed at making Shell more transparent. One asks the company to disclose how it is complying with an International Energy Agency plan, signed by 190 countries, to limit global temperature increases to 2 degrees Celsius by 2035. Exxon Mobil pledged last year to divulge similar information. The group also wants better data on Shell’s low-carbon research and development plans, public policy program and efforts to link executive pay to action on environmental sustainability.

The information will give investors a way to measure progress, but is otherwise pretty benign for now. It’s not as if the coalition is trying to force the company suddenly to change how it does business. Still, the group’s efforts can have an impact. Climate-related resolutions put forward by shareholders are getting more support. Mutual funds, for instance, backed 33 percent of them in the 2014 proxy season, according to sustainable-investing lobbying group Ceres.

It’s rare, though, for an environmentally focused resolution to gain approval, and even then the vote is usually not binding on management. So Aiming for A has achieved a bit of a coup in getting Shell’s support - and environmental shareholder activism as a whole will be stronger for it.


- Royal Dutch Shell on Jan. 29 recommended that its shareholders vote in favor of a resolution put forward by a group of the company’s investors. The Aiming for A coalition of UK investors submitted the resolution on behalf of 150 institutional and individual investors in December 2014 for consideration at Shell’s 2015 annual general meeting.

- The resolution makes five demands of Shell: improve emissions management disclosures so that the company receives an A grade from environmental research firm CDP; outline how drilling and the sale of hydrocarbons might be affected by the International Energy Agency’s agreement with 190 countries to limit global temperature increases to 2 degrees Celsius by 2035; give more information on its low-carbon energy research and development and investment strategy; detail how executive pay can be linked to sustainability; and provide more insight into the company’s public policy program.

- The group has submitted the same resolution to BP.

- The 150 investors in the coalition manage almost 200 billion pounds ($300 billion) in total. Members include the UK Local Authority Pension Fund Forum, Church Commissioners for England and the Central Finance Board of the Methodist Church.

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

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