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Shell links concrete climate targets to executive pay

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad.



Shell links concrete climate targets to the top reward

Royal Dutch Shell CEO Ben van Beurden

Bert van Dijk: 3 December 2018

Oil and gas multinational ShellRDSA € 26.71 – will set concrete medium and short-term climate goals. The remuneration of the top of the company is partly made dependent on the achievement of those goals. With this, Shell is meeting pressure from large shareholders who asked for it.

Shell announces the changes in a joint statement with shareholders. The changes must go into effect in 2020.

Climate agreement of Paris

In 2017, Shell formulated the ambition for the first time to reduce its CO₂ footprint (a measure to measure CO₂ emissions, ed.) Of its energy products by 2050. Although CEO Ben van Beurden then indicated that he wanted to be settled, the company did not give concrete medium and short-term goals. Shell did not want that, because the company was afraid, among other things, to lose too much flexibility when making business decisions.

Shareholders, however, put pressure on Shell to set such concrete goals in order to comply with the Paris climate agreement. Shareholders also asked Shell CEO Ben van Beurden if he would be willing to link climate targets to the remuneration of the top.

‘New insights’

For Van Beurden that was a step too far for a long time, because the objectives are about variables in the distant future. ‘But we are looking at it’, according to Van Beurden in May. Now Shell is still meeting those wishes.

‘We have had a long dialogue with institutional shareholders. Call it advancing insight, but together we have found a way to translate long-term ambitions into concrete short-term objectives and to incorporate that into our reward system, “Van Beurden said in a telephone explanation.

Take care of it

This means that if the new remuneration policy is approved at the shareholders’ meeting in 2020, management will set climate targets for the next three or five years each year. If these goals are not subsequently achieved, this has consequences for the remuneration at the top of the company. ‘Hopefully, this worries and doubts that we do not take climate goals seriously and do not want to connect them with consequences,’ says Van Beurden.

The group of investors with whom Shell has been talking in recent months, including the pension fund of the Church of England, ABP, Robeco, and Eumedion, according to Van Beurden, represents ‘all leading shareholders of Shell’.

Follow This

‘It is very important to us that the goals of Paris are met. We expect Shell to make an active contribution to this, ‘says ABP board chairman Corien Wortmann in a reaction. The pension fund was pleased with Shell’s earlier ambition to halve its CO₂ footprint, “but it remained in the air whether the company really wanted to be paid. It is positive that this step is now being made. ‘

According to Wortmann, activist shareholder collective Follow This has also played a positive role by exerting pressure on Shell. Follow This submitted a climate resolution in May, but it did not get enough support from shareholders.

‘Full support’

ABP then abstained. The pension fund thought it was still premature to require Shell to revise its newly formulated ambition, as the resolution requested. According to ABP, it was more important that Shell work on its climate ambitions. “That is happening now,” says Wortmann.

Robeco calls Shell, through the head of investments Peter Ferket, ‘leading in setting long-term climate ambitions. ‘That is great, but it has to be translated into medium and short-term objectives. After the shareholders’ meeting, we indicated that we wanted to enter into discussions about this and that we responded. Shell now fully meets our questions. We therefore fully support this. ‘

Membership lobby clubs

Shell also announces that it is reconsidering all its memberships of corporate lobby clubs. ‘There will be a few organizations here,’ expects Van Beurden. ‘In the past we sometimes disagreed with a position within such an association and took our own position. Now we do not always find that good enough anymore. If an important position on the climate undermines the Paris agreement, we try to change that. If that does not work, there will be cases when we step out of such an organization. ‘

Shell expects to be able to announce the outcome of this reconsideration in the first quarter of 2019.


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