Short- and long-term activists disagree over Shell’s future, Shell announces new targets

Response of Follow This to call for breakup of Shell by activist fund Third Point AND response to Shell’s new target

Activist fund Third Point called for the breakup of Shell into a “legacy” oil and gas arm and a “cleaner energy” entity. The sum of the separate companies would be worth more than Shell as a whole, Third Point wrote to its shareholders (See page 4 attachment).

“At first sight, this is short-term activism that will not help Shell or the fight against climate change,” responds Mark van Baal, head of Follow This. “We think it’s better to generate cash flow with declining fossil fuel sales and invest this in renewables.” In May, 30% of Shell’s shareholders voted in favour of the Follow This climate resolution (up from 14% in 2020).

Result of Shell’s ambiguous strategy
“Shell is prey for a short-term activist, because of its ambiguous strategy. Shell claims to be Paris-consistent while increasing fossil fuel output. These are incompatible goals. Paris calls for emission reductions of around 40% by 2030,” says Mark van Baal. Shell plans to increase emissions by more than 4% by 2030, a recent report of Global Climate Insights (GCI) revealed last week. Third Point, led by Daniel Loeb, accuses the oil supermajor of “incoherent” strategies.

Tale of two shareholder resolutions in 2022?
“Maybe Shell will finally recognise Follow This as a supportive shareholder,” says Van Baal. “Shell has the brains, the billions, and the global reach to drive the energy transition.

“The Follow This climate resolutions traditionally start with ’Shareholders support the company to set Paris-consistent targets.’ Follow This will file its seventh shareholder resolution for Shell’s 2022 AGM. We are keen to learn whether Third Point will also file a shareholder resolution. Under the British Companies Act, Third Point will need another 99 shareholders to do so, or otherwise it would need to extend its capital to 3% in Shell in order to file in the Netherlands.”

Shell’s new targets
Today, Shell announced plans to reduce its operational emissions (Scope 1 and 2) by 50% by 2030. “Targets for operational emissions (Scope 1 and 2) are tokenism. Operational emissions are around 10% of Shell’s total emissions. The elephant in the room consists of the emissions that occur when fossil fuels are burnt (Scope 3 product emissions). Setting targets for operational emissions is like a tobacco producer who promises to smoke less himself while continuing selling more cigarettes.” According to research by GCI, Shell still plans to increase Scope 3 emissions by 4% by 2030, while Paris calls for a reduction of around 40%.