April 16, 2018, by Kelly Gilblom
Chief Executive Officer Ben van Beurden has the same message for activists seeking to bind Royal Dutch Shell Plc to deep emissions cuts, and investors concerned about the merits of shifting away from oil and gas: Trust me.
He advised shareholders on Monday to reject a resolution from climate group Follow This that would set clear targets for the company’s greenhouse-gas emissions, more specific than its current broad “ambition.” He also reiterated his intention for Shell to make most of its money from clean energy in 20 years, such as renewables, hydrogen or carbon capture in 20 years.
By his own account, Van Beurden understands best how to steer Europe’s largest oil and gas company through a world-shaking energy transition and is already several steps ahead of the activists pushing for a stronger stance on climate, and the fund managers who are dubious Shell has any role in a low-carbon world.
“Understanding what climate change means is one of the most important strategic questions on our mind today,” Van Beurden told reporters in a phone call Monday morning. “We are testing the boundaries of our thinking.”
The push to eliminate carbon emissions from the world is a life-altering challenge for oil and gas companies. By Shell’s estimate, to achieve goals set out in the Paris Climate Agreement and reduce the risk of catastrophic climate change, by 2060 the world must be eliminating more carbon than it’s emitting.
Van Beurden has previously announced an ambition for the company to halve its “net carbon footprint” by 2050. That figure includes the company’s direct emissions as well as the those released when customers burn its products.
He plans to achieve this by reducing the carbon intensity of its products, meaning its portfolio will be less oil-heavy in the future. Shell is positioning itself to instead sell more natural gas and expand in biofuels. It also plans to increase its presence in the power market, providing renewable electricity for homes and vehicles.
That approach has drawn criticism. Follow This, the Dutch environmental group, has filed a shareholder resolution for the third straight year asking Shell to set specific targets for curbing greenhouse gas emissions in line with the Paris agreement. Investors will vote on the proposal on May 22.
In a 40-minute call with reporters, Van Beurden made the case that Shell’s existing energy transition plan is more progressive than what Follow This is proposing. Binding the company to a target would make it hard to shift course in the event that government policy or other changes affect the profitability of different technologies, he said.
“Do you want to follow a company that’s really internalized” the climate issue, he said. “Or do you want to have the more narrow and rigid views of an activist?”
The backers of the climate resolution weren’t satisfied with his assurances. “The rejection of this climate resolution shows the board does not want to commit to the Paris climate agreement,” said Mark van Baal of Follow This.
While Shell has yet to convince activists, it also has to mollify mainstream investors that doubt the merits of being anything besides an oil and gas company. There are signs these concerns may already be affecting the share price of big oil companies, which haven’t rebounded as much as the rally in crude over the past six months.
Van Beurden’s got a message for them, too: Shell isn’t just an oil producer and won’t shrink along with hydrocarbons’ role in the energy mix of the future.
“We have to demonstrate that no there are some really sensible and good adjacencies that allow us to go into the new energy space,” he said. “We are more than just a pure exploration and production company.”