Coinciding with the first day of global climate talks in Poland, Royal Dutch Shell laid out a plan to create and publicly report near-term carbon targets and link their achievement to executive remuneration.
The commitment is another indication of shifting tides in the fossil fuel industry. Last year, Shell proposed reducing the carbon footprint of its products 20 percent by 2035, ratcheting up to 50 percent by mid-century. But those goals were non-binding. The new plan, in addition to offering short-term accountability using three- to five-year targets set annually starting in 2020, ties the goals to executive salaries. Shareholders will have to approve the remuneration plan in 2020.
Shell also announced it would assess its membership in trade organizations, to ensure climate lobbying doesn’t “undermine its support for the objectives of the Paris Agreement.” Shell Oil, for instance, still belongs to the American Petroleum Institute, which encouraged the U.S. to reject the Kyoto Protocol through the Global Climate Coalition. Shell said it will present the results of that review in Q1 2019.
A spokesperson for Shell told Greentech Media that the carbon target plan helps underpin its strategic ambition to “thrive through the energy transition.”
“Shell’s future success is contingent on its ability to effectively navigate the risk and the opportunities presented by climate change,” the company wrote in a joint statement with Climate Action 100+, an investor-led initiative launched in 2017 that pushes for climate action. The initiative now represents 310 investors with more than $32 trillion in managed assets.
Investors that worked with Shell on the announcement said it was “the first of its kind” and creates a transparent reporting process for Shell’s emissions. Adam Matthews, director of ethics and engagement of the Church of England Pensions Board — which helped lead investor engagement with Shell — said the agreement “sets a benchmark for the rest of the oil and gas sector.”
Other majors such as British Petroleum, Statoil, Total and ExxonMobil have also signed on to efforts to curb certain types of emissions. But Shell’s move is wider-reaching in including full life-cycle emissions from its products, not just its operations.
Mindy Lubber, president and CEO of Ceres and a member of the Climate Action 100+ global Steering Committee, agreed with Matthews in calling the agreement “a critically important benchmark against which the other oil and gas majors will be assessed.”
“The agreement to address the full scope of its emissions, including emissions related to product use, clearly sets Shell apart from its peers and demonstrates the power of collective investor engagement,” said Lubber in a statement.
Shell’s announcement aligned with the first day of the COP24 climate talks in Poland, where global governments are meeting to lay out a "rulebook" for meeting the under 2°C goal set out in the Paris Agreement. Stephanie Pfeifer, another member of the Climate Action 100+ global steering committee, said the timing underscores the importance of the fossil fuel sector working toward the Paris goals as well.
“It is now down to the [oil and gas] sector to demonstrate they understand this,” she said, adding that investors would continue “to make clear their expectations.”
Shell has framed the energy transition and climate action as a smart economic choice. Last year it announced a goal to increase its yearly spend on clean energy to $1 billion.
“Investing in assets that will remain financially resilient in the energy system of the future is key to delivering a world-class investment case to Shell’s investors,” said the major. “Shell aims to grow its business in areas that will be essential in the energy transition, and where it sees growth in demand over the next decades.”