The Ethos Foundation and several of its members are among the co-filers of a shareholder resolution demanding that the oil company align its climate targets with the objectives of the Paris Agreement. The resolution, which was coordinated by Follow This, will be put to a shareholder vote at the 2024 Annual General Meeting in May.

Shell is one of the world's leading oil and gas producers and, as a result, one of the largest emitters of greenhouse gases (GHGs). Although the British company has committed to reduce its net GHG emissions to zero by 2050 ("Net Zero 2050"), it continues to invest heavily in fossil fuels, particularly in the exploration of new fields. Faced with this contradiction, a coalition of 27 institutional investors representing more than EUR 3’800 billion in assets and almost 5% of Shell's share capital has filed a climate resolution at the 2024 General Meeting to be held in May. Led by the organisation Follow This, the coalition includes the Ethos Foundation and several of its members.

This resolution requires Shell to align its GHG emissions reduction targets, including those associated with the use of its petroleum products (scope 3), with the objectives of the Paris Agreement. In other words, it must meet its own commitments by reviewing its strategy, investments and business model in order to emit an amount of GHGs that is consistent with a global warming scenario of below 2°C and as close as possible to 1.5°C by 2050. If approved by a majority of shareholders, this resolution would require the board of directors to develop a strategy to achieve this objective.

For the co-filers, this resolution is as much about helping to limit global warming as it is about protecting the long-term interests of the company's shareholders. Indeed, the move towards policies that are less favourable to fossil fuels, the transition to renewable energies and the legal disputes that threaten companies in this sector pose numerous financial risks for shareholders. 

Intensification of measures linked to active ownership

The filing of a resolution, and its support at the AGM, is one of the ways in which shareholders can intensify their efforts to have a positive influence on the practices of the companies which they co-own. It generally takes place during or after the shareholder dialogue and just before the divestment of a company. 

Vincent Kaufmann, CEO of the Ethos Foundation, points out that "when shareholder dialogue is not enough to change a company's practices, it is necessary to resort to intensification measures. The credibility of active ownership is also at stake. We cannot simply encourage companies to improve and do nothing more if this commitment does not bear fruit, especially when we are dealing with an issue as urgent and fundamental as climate change".

While the Ethos Foundation remains convinced that shareholder dialogue is the best way to bring about changes in corporate practices, it has decided to make greater use of intensification measures in the future, and in particular the (co-)filing of shareholder resolutions, to encourage companies to reduce their climate impact so that they can meet the objectives of the Paris Agreement. This applies in particular to companies with high GHG emissions, such as Shell.

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