Royal Dutch Shell PLC says it will set short-term targets to reduce its net carbon footprint each year; the company is linking its executive pay structure to the meeting of these targets. The energy company has a goal of reducing the net carbon footprint of its energy products by 20% by 2035, and by 50% by 2050, but institutional investors have been demanding that the company do more to reduce emissions. Now, the company says that each year, Shell will set a target for the following three- or five-year period.
A revised remuneration policy for executives will be put to shareholders for approval at the company’s annual general meeting in 2020; the short-term goal-setting process will begin at that time.
Shell’s announcement was made in a joint statement developed with institutional investors on behalf of Climate Action 100+, a group of 310 investors with more than $32 trillion in assets under management. Climate Action 100+ says it strongly supports Shell in taking these steps.
Shell says it will publish its progress towards lowering the net carbon footprint of its energy products in its sustainability report. In line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the company will integrate this disclosure into its Annual Report and Form 20-F as appropriate. Shell also says it will seek third-party assurance of the reported net carbon footprint.
Shell also said it acknowledges the Institutional Investors Group on Climate Change’s (IIGCC) “Investor Expectations on Corporate Climate Lobbying,” and recognizes the importance of ensuring that its membership in relevant trade associations does not “undermine its support for the objectives of the Paris Agreement on climate change.” Shell will undertake a review of these memberships to “assess alignment with the company’s stated positions,” Shell says. The result of this review will be made public in Q1 2019.
Peter Ferket, Chief Investment Officer of Robeco, said that, when it comes to meeting the demands of the Paris Agreement on climate change, it is necessary to “strengthen partnerships between investors and their investee companies to accelerate progress towards reaching such an ambitious common goal.” This joint statement, he says, is an example of such a partnership.
As an institutional investor in Shell, Robeco will continue to support Shell on its journey in the energy transition, and encourage other companies to follow suit, Ferket says.
Stephanie Pfeifer, chief executive of the IIGCC and a member of the Climate Action 100+ global steering committee, says that linking short- and long-term climate targets to executive remuneration is a model that other companies across the sector should follow. She adds that investors working through IIGCC will continue to evaluate Shell’s progress closely to ensure that it continues to increase its climate target ambitions.
The Financial Times says that Shell is ahead of its peers, including BP and ExxonMobil, in its public commitments to reduce carbon emissions.
