Published on 17 December 2018


Shell to link executive compensation to climate targets

Shell has announced several ambitious climate engagements amidst growing pressure from its investors. The oil company wants to link executive compensation to the achievement of specific climate targets. In addition, the Anglo-Dutch giant agrees to disassociate from lobbying groups that are unfavorable to the Paris Agreement objectives.

Shell will also set annually reviewed short-term climate targets for a period of three to five years, starting in 2020.

This announcement is an important strategy shift for Shell. In a joint statement at COP24 in Poland, the oil giant and Climate Action 100+, a group of 310 institutional investors with more than $32 trillion in assets under management, committed to several climate engagements.

One of the most striking announcements is the implementation of environmental performance criteria to determine executive compensation. Such a measure would concern 1,200 executives, according to the Financial Times. This decision will be put to vote at the 2020 Annual General Shareholders Meeting.

Annual review of climate targets

Shell has also announced plans to set short-term carbon footprint reduction targets for 2020. An annual review will be published in the company's sustainability and annual reports. At the end of 2017, the Anglo-Dutch group adopted two long-term objectives: a reduction of direct and indirect carbon emissions of 20% by 2035 and 50% by 2050.

Last May, during the Group's General Meeting, a coalition of investors called on Shell to go further and "translate [ambitions] into firm medium and short-term targets, aligned with the Paris Agreement". Had their resolution not been adopted, they would have nevertheless managed to put climate at the center of the debate. Months later, there is no doubt that the investors’ actions paid off.

Shell has also committed to reviewing its membership of certain lobbies that undermine the objectives of the Paris Agreement on climate, and the group plans to submit a report on this subject in the first half of 2019.  Lastly, every five years Shell will review nationally determined contributions (NDCs) in line with the Paris Agreement mechanism to adapt its own strategy. The first review of this kind should take place after 2022.

Concepcion Alvarez, @conce1

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