Shareholders back management on climate change

Shareholders in oil giant Shell overwhelmingly gave their backing to management and its approach to planning for a transition to a low carbon economy at its AGM this week (23rd May). The voting results show that only 6.3% of investors supported the shareholder resolution calling for it to set and publish targets for reduction of its greenhouse gas emissions (GHG) aligned with the Paris Agreement targets.

The resolution suggested that following the management and shareholder backing of the resolution put to Shell in 2015 by the Aiming for A coalition of investors which directed that annual reporting by the company would include information relating to climate change, the next step for the company would be to disclose more detailed targets. The resolution noted that investors have said that increasingly they will adjust their portfolios with the aim of reducing their exposure to climate risk.

Investors also rejected the call by responsible investment pressure group, ShareAction, to vote down its revised remuneration policy although there was some opposition to both its pay policy and its remuneration report. The figures show that there was a 92.3% vote in favour of the remuneration policy in what is a binding vote and a  93.2% vote in favour of the remuneration report.

ShareAction had said that the executive remuneration for executives at Shell and at rival oil company, BP, was rewarding the achievement of corporate strategies which could put shareholder value at risk as the economy shifts towards low carbon energy production. However, voting results at BP's AGM (17th May) showed even stronger support for management. There was 97.3% in favour of BP's remuneration policy and 97% in favour of BP's remuneration report.

Last year BP's remuneration report was rejected by shareholders due to the high pay awarded to its chief executive Bob Dudley relative to the poor performance of the company in 2015. However, BP's remuneration committee had engaged with investors and simplified its remuneration policy and Dudley's total remuneration for 2016 was $11.6 million, 40% lower than he received for 2015.

Meanwhile in the US shareholders are eyeing up Exxon Mobil's AGM on 31st May as the next test for the shareholder resolutions seeking commitments from energy companies there to address climate change. Sustainability pressure group, Ceres and their supporters, want the management to support the implementation of a scenario analysis, including low-carbon economic scenarios aligned with the Paris Agreement’s goal to limit global temperature rise to less than 2 degrees Celsius. A similar resolution at Exxon's AGM last year gained 38% support.