Shell, Europe’s largest oil and gas firm, has announced better-than-expected first quarter profits and taken steps to appease shareholders amidst pressure from a group of major investors to take stronger action against climate change.
The company reported a main profit measure of $7.7bn (£6.14bn) for the first three months of 2021, exceeding analysts’ forecasts by over $1bn. However, this figure is down from the $9.7bn achieved in the same period last year. Shell attributed the strong performance to robust oil trading and higher refining margins.
In a move to reward shareholders, Shell also announced a $3.5bn share buyback and maintained its dividend at the same level as the previous quarter of 2023. These positive developments were reflected in a 1.6% increase in shares at the opening of the market.
The release of these impressive results coincides with a push from a group of shareholders, holding a combined 5% stake in the company, to impose stricter climate targets on Shell. Led by activist shareholder Follow This, the resolution will be voted on at Shell’s annual general meeting on 21 May. Other signatories include Amundi, Axa IM, and Scottish Widows.
The resolution specifically calls for Shell to align its medium-term carbon emissions reduction targets with the Paris Climate Agreement, including emissions from fuels burnt by consumers (known as Scope 3 emissions). However, Shell’s board has urged shareholders to vote against it, stating that the company already has targets and ambitions in line with the more ambitious goal of limiting global warming to 1.5 C above pre-industrial levels.
The US proxy advisory firm Glass Lewis has also recommended shareholders to oppose the resolution, citing Shell’s greenhouse gas emission reduction goals and disclosure on its efforts to mitigate carbon emissions. Glass Lewis stated that there is insufficient evidence to suggest that Shell is significantly lagging behind its peers and that adopting the resolution would not benefit the company or its shareholders at this time.
This resolution is not the first time that Follow This has challenged Shell. Last year, a similar resolution received nearly 20% support from investors at the AGM. Follow This, whose goal is to align large oil companies with the legally binding targets set at the 2015 Paris summit, has accused Shell of shirking its responsibilities.
In March, Shell revised its 2030 carbon reduction target and scrapped its 2035 objective, citing strong gas demand and uncertainty in the energy transition. However, the company reaffirmed its commitment to reach net-zero emissions by 2050. Mark van Baal, founder of Follow This, responded to these changes, saying “Now the ball is in the court of other responsible investors. We expect that they will side with their peers instead of the board of Shell.”
