A “revolt.” “A bloody nose.” A “signal.” These are some of the terms analysts used to describe the message sent by shareholders to the oil and gas supermajor Shell last week.
Despite the industry’s recent retreat from climate policies and harassment of sustainable-investment advocates, a significant number of shareholders supported a resolution asking the company to justify its expansion of liquefied natural gas (LNG).
Shell shareholders’ expression of concern contrasts sharply with the ExxonMobil and Chevron shareholder meetings, where no climate-related resolutions will come before the two largest fossil fuel companies in the United States for the first time in at least a decade. The Shell resolution’s outcome, however, shows that despite Big Oil’s efforts to stop time, investors won’t let corporate leaders deny the reality of the fossil fuel-driven climate crisis.
Tricky math I: emissions targets
The resolution, introduced by three UK pension funds and co-filed by the Australasian Centre for Corporate Responsibility, asked Shell to show how its plan to increase liquified natural gas (LNG) production is consistent with its climate commitments, including its target to reach net zero emissions by 2050. Shell has released energy outlooks this year projecting global gas demand to rise 60% by 2040 and corresponding plans to increase its gas business 20-30 percent by 2030.
These reports followed an update of its energy transition strategy last year that downgraded Shell’s climate targets. Shell, like competitors ExxonMobil and Chevron, uses an “intensity” metric for measuring the global warming emissions it produces, which allows them to project reductions in their relative carbon emissions via increases in renewable power and technologies like carbon capture and storage. The company dumped its goal of reducing the net carbon intensity of its products by 45% by 2035. Shell CEO Wael Sawan revealed last March that the company will limit its investment in low-carbon businesses to below 10% of its total expenditures on infrastructure and development.
Yet Shell still touts its cornerstone climate target of reaching net-zero emissions by 2050 as in line with the Paris Agreement. The resolution authors want to know how the company would meet its net zero commitments if the high levels of LNG demand it’s betting on materialize—and how it will meet its financial projections if they don’t.
A look under the hood of Shell’s strategy shows that the company—like so many in the oil and gas industry—plans to reach its climate goals through advantageous accounting. As several industry analysts have pointed out, Shell was only able to meet its net carbon intensity target over the past two years by getting rid of polluting assets and cashing in dubious carbon credits..
Tricky math II: industry demand projections
The resolution points out that the projections for global demand laid out in Shell’s outlook are higher than every scenario generated by the International Energy Agency (IEA), including the baseline scenario that doesn’t factor in new climate policies. If Shell’s demand projections are wrong, the strategy exposes investors to significant risk of lower returns—and all of us to more planet-warming emissions.
Shell is not the only large oil and gas company that releases energy outlook scenarios—companies including ExxonMobil and BP do as well. Comparative studies of corporate and NGO energy outlooks show that corporate scenarios project higher future demand for fossil fuels. Corporate climate scenarios also tend to underestimate changes in consumer-driven demand and fail to mention their lobbying against policies that would reduce demand. These outlooks are not the same as business plans, but are used to justify a company’s actions and attract investment.
The accounting magic by which companies arrive at their conclusions is a closely guarded secret, preventing investors and analysts from questioning them too closely. The UK financial think tank Carbon Tracker has criticized the industry and regulators for misleading investors by failing to disclose such assumptions in financial statements, where they carry more legal weight. Because the Shell resolution won more than 20% support, a consultation process is triggered between Shell and the shareholders under UK law. In opposing the resolution, Shell claimed that its existing disclosures were sufficient and promised more reporting on LNG, but clearly a significant subset of its investors weren’t satisfied with those pledges.
Simple math: carbon pollution
Independent bodies such as the UN Intergovernmental Panel on Climate Change say no new oil and gas exploration is needed in order to keep global warming to 1.5 degrees Celsius over pre-industrial levels. “Producers need to explain how any new resource developments are viable within a global pathway to net zero emissions by 2050 and be transparent about how they plan to avoid pushing this goal out of reach,” stated the IEA in 2024.
While companies like Shell plan for increased oil and gas production, and blame customers and governments for the slow pace of the energy transition, civil society groups are increasingly growing restless. The Dutch NGO Milieudefensie recently notified Shell of its intention to file a new lawsuit demanding that the company stop developing new oil and gas fields.
Both climate change and a reckoning over responsibility were predicted long ago by Shell’s own scientists. A new UCS report Decades of Deceit excerpts an internal Shell report from 1998 that predicted with chilling accuracy the environmental, social and economic consequences of Shell’s decisions. The 1998 report accurately forecasted not only climate impacts, but the public’s eventual outcry at the company’s abdication of its responsibility to act on its extensive internal knowledge.
That’s why UCS is demanding that companies like Shell fully disclose—and regularly and publicly report on—risks and impacts to the climate, communities, and the economy, among other demands. My colleague Kathy Mulvey attended the Shell meeting virtually and asked when the corporation would cease disinformation and greenwashing on climate science, public policy, and corporate actions. Shell’s Chair Andrew Mackenzie had nothing to say in response.
Climate change math can’t be denied
Back in the United States, oil and gas companies are facing no climate resolutions after a year in which sustainable investment advisors were dragged before Congress and accused of collusion and ExxonMobil filed a lawsuit against shareholders to stop them from reintroducing resolutions on emissions reduction. In fact, no independent resolutions appear on ExxonMobil’s proxy tickets at all.
This change is the result of a broader pushback against past shareholder successes in forcing oil and gas companies to address climate change. One tactic in this pushback is tweaking federal regulations to limit shareholder resolutions. The Trump-appointed leader of the US Securities and Exchange Commission, the independent agency responsible for protecting investors, made changes to regulations earlier this year that raised the bar for shareholders to file resolutions.
This effort is also evident in a recent report from the Business Roundtable, a nonprofit association of corporate CEOs, essentially arguing that only the largest asset managers should be allowed to file resolutions. BRT—which counts the largest US fossil fuel companies among its members—knows full well that asset managers are less incentivized to engage with companies on long-term risks such as climate change because their holdings are so large and diversified. Together, these political forces effectively suppress the investor rights that are a pillar of our market-based economy and protect the financial system.
As the vote at Shell demonstrates, however, politics cannot alter the basic math of climate change. The planet is already seeing record-breaking heat waves, deadly floods, and billion-dollar disasters that are roiling the insurance industry, and savvy investors know other industries—indeed, the entire financial system—is not far behind. Corporations ignore their input at their peril.
Editor’s Note: An earlier version of this blog stated there was only one independent resolution on Chevron’s proxy ticket. This has been corrected.