At most 14% of Shell’s investments to renewables in 2022 despite windfall profits

PRESS RELEASE response Follow This to Shell’s 2022 results


Shell’s investments (cash Capex) in the division Renewables and Energy Solutions (RES) were $3.5 billion out of a total of $24.8 billion (14%), the company’s fourth quarter results published today show. Since RES also includes gas and carbon offsets*, the actual investments in renewables are lower. According to Global Witness just 1.5% in 2021.
“Shell can’t claim to be in transition as long as investments in fossil fuels dwarf investments in renewables,” responds Mark van Baal, founder of Follow This. “The bulk of Shell’s investments remain tied to fossil fuel businesses, because the company doesn’t have a target to slash its total CO2 emissions this decade, as is required to reach Paris.”


Lack of targets leads to lack in investments

“To meet Paris, global emissions must fall by 45% by 2030; yet Shell lacks a target that leads to a large-scale emissions reduction this decade (#); this lack is reflected in the low investments in renewables. With our climate resolutions we support Shell to set Paris-aligned targets and invest accordingly.”

(#) The company’s current target to reduce the average carbon content (Net Carbon Footprint (NCF)) of its energy products by 20% by 2030  is not yet Paris-aligned; it will not lead to large-scale (net) reductions in total emissions in this crucial decade.

To obscure these low investments in renewables, Shell screens with a confusing figure: Energy Transition Spend (Opex and Capex together, see below).

Windfall profits & share buybacks: lack of imagination “The current windfall profits could be used to make the enormous investments in renewables that are needed to address the climate crisis and to ensure the long-term future of the company.” “Instead, Shell buys back shares. Share buybacks show a lack of imagination in large-scale investments in the energy transition. A company that buys back shares is effectively saying to investors: ‘We know of no better use for this money than to return it to you’.”


Shareholder resolution at AGM will bring clarity
In May, shareholders will again cast their votes on the Follow This climate resolution, which this time focuses on Shell’s 2030 Scope 3 (product) emissions – which account for around 95% of Shell’s total emissions, as reported in the Financial Times (Activist group Follow This launches climate campaign against Big Oil), Reuters, Bloomberg, and Responsible Investor on December 19, 2022.
“This focus will bring clarity about which investors are determined to reach Paris’ key condition – slashing emissions this decade – and which investors enable Big Oil to ignore this key condition,” Van Baal explains. 



Shell’s smokescreen: Energy Transition Spend
To obscure the low investments in renewables, Shell screens with an Energy Transition Spend of one third of total expenditures (investments (Capex) and operation expenses (Opex)). Merging investments and operational expenses is confusing: Opex is an indicator of current business; Capex is an indicator of future business for most investors.

Further, the figure Energy Transition Spend is problematic for other reasons: First, Shell doesn’t provide details to give investors the opportunity to verify the one third. Second, the definition of energy transition spend is very broad; for example it also includes Chemicals, Lubricants, Convenience Retail and low carbon fuels. Third, it’s quite implausible for a company to spend so much Opex without giving clarity on the revenues and financial results from these activities. Finally, if Opex spend would be an investment, it should be reported under Capex. According to generally accepted accounting principles, Opex are expenses without, or with highly uncertain economic benefits outside the reporting year.

“Together with major investors, we continue to support Shell to put its full weight behind the energy transition.”

With best regards on behalf of the Follow This team,   

Mark van Baal +31 6 22 42 45 42
McKenzie Ursch +31 6 40 16 26 72 
Jesper Vaarwerk +31 6 83 13 97 36

Attachments: climate resolutions Shell, BP, Chevron, and ExxonMobil.

Press images

Media coverage of the Follow This climate resolutions in December 2022:
Financial Times: Activist group Follow This launches climate campaign against Big Oil
Reuters: Investors ramp up pressure on Big Oil firms to set 2030 climate targets
Bloomberg: Big Oil Investors Call for More Aggressive Climate Targets
Responsible Investor: ESG resolution round-up: Refined Follow This proposals filed at oil majors 



Shell’s definition of ENERGY TRANSITION SPEND (Q4 2021 results, page 19)
Energy Transition Spend as presented consists of Underlying opex and Cash capex to support the decarbonisation of our customers (e.g., electric vehicle charging, low-carbon fuels, Renewable & Energy Solutions) as well as spend to provide non-energy products (e.g., Chemicals, Lubricants, Convenience Retail) that have no Scope 3 carbon emissions. Classification deviates from EU Taxonomy definitions, which will be subject to separate disclosures. Opex = Underlying opex, Capex = Cash capex

Shell’s definition of Renewables and Energy Solutions:
* Renewables and Energy Solutions
Renewables and Energy Solutions includes Shell’s production and marketing of hydrogen, nature and environmental solutions as well as our integrated power activities. Our integrated power activities comprise:
■ generating electricity through wind and solar;
■ providing electricity storage;
■ marketing and trading gas and power;
selling gas and power to commercial, industrial and retail customers;
■ providing electric vehicle charging services; and
■ providing customers with digitally enabled solutions.
(annual report 2021, page 49)

Global Witness has lodged a complaint with the SEC, arguing that in 2021 just 1.5% of Shell’s capital expenditure has been used to develop genuine renewables; by claiming 2-3 billion (around 12%) Shell has misleadingly overstated how much it is spending on renewable energy.

Global Witness just filed a complaint at the SEC about Shell’s misleading reporting of investments in renewables – Bloomberg.