CB BureauRoyal Dutch Shell, one of the world’s biggest oil and gas companies, has announced that executive pay will be linked to carbon-emissions target. This unprecedented move comes after sustained pressure from investors, led by asset manager Robeco and the Church of England Pensions Board. The British-Dutch company will link energy-transition targets to long-term remuneration, subject to a shareholder vote at the 2020 annual general meeting (AGM).
If approved, the remuneration policy will include a net carbon footprint-related measure, as well as other metrics, over a three- or five-year performance period. Currently the final plan is being discussed with shareholders, including appropriate remuneration structure and measures and metrics on which the former will be based. As per estimates, around 1,300 high-level employees could be affected by this new policy.
This move came after shareholders criticised the company last year for failing to set binding targets on carbon emissions. Shell has now signed a joint statement with a group of 310 investors, called Climate Action 100+, who have more than $32 trillion assets under management, with aims to drive clean energy transition and help achieve the goals of the Paris Agreement.
Shell will also publish annual updates on its progress towards lowering its net carbon footprint. It will continue to work closely with institutions, such as the Transition Pathway Initiative (TPI), to assess its progress towards its sustainability goals. Every five years, Shell will review the updated nationally determined contributions (NDCs) that are in line with the Paris Agreement, which will then be used to calibrate Shell’s own climate targets. The first such review is scheduled to take place after 2022.
In 2017, Shell was the first international oil and gas company to announce its intention to reduce the net carbon footprint of its energy products, taking into account their full lifecycle emissions that include emissions from its own operations, use of the products by its customers, and those generated by third parties in its supply chain. Shell aims to reduce its net carbon footprint by around half by 2050 and by about 20 per cent by 2035 as an interim step.
As per BBC, David Cumming of Aviva Investors said: ‘This is evidence of the growing power of what they call ESG – environmental, social and governance – investing. Investors are increasingly concerned over environmental and social metrics like carbon emissions…. and encouraging moves like the one seen today.’