A good step along the way to a lower carbon world, but companies should go further
Stephen Beer, Chief Investment Officer of the Central Finance Board of the Methodist Church
"This announcement is a good step along the way to a lower carbon world. It is right that executive remuneration is linked to progress on reducing carbon emissions. Shell has set a standard here for other fossil fuel companies."
CFB and Epworth respond to Shell’s announcement on carbon targets
The Central Finance Board of the Methodist Church (CFB) and Epworth Investment Management Limited (Epworth) have welcomed the announcement by Royal Dutch Shell that it will set carbon footprint targets. We are looking for still more action from fossil fuel companies on climate change.
Shell will incorporate net carbon footprint targets in its remuneration policy. It has also announced it will review its membership of lobbying organisations to ensure they are consistent with its stated positions on climate change. These are significant steps and set an example for other oil and gas companies to follow.
Shell’s announcement came in a joint statement made with investment institutions which are part of the Climate Action 100+ coalition, of which the CFB and Epworth are part. Climate Action 100+ is a five year initiative led by investors to engage on climate change especially with “systemically important greenhouse gas emitters”. It consists of 310 investors with over US$32 trillion in assets under management. It is coordinated by the Institutional Investors Group on Climate Change (IIGCC), of which the CFB is a founder member.
Shell has previously announced an “ambition” to reduce its Net Carbon Footprint “in step with society’s drive to meet the goals of the Paris Agreement”. It believes this translates to a reduction of its Net Carbon Footprint by approximately half by 2050 and around 20% by 2035. The Net Carbon Footprint includes not only direct carbon emissions from Shell, but emissions from the use of its products.
Shell has now announced that it intends to incorporate this ambition into its remuneration policies from 2020, as short term targets set each year for the following three or five years.
Stephen Beer, Chief Investment Officer of the CFB and Epworth said: “This announcement is a good step along the way to a lower carbon world. It is right that executive remuneration is linked to progress on reducing carbon emissions. Shell has set a standard here for other fossil fuel companies. We also welcome the news that Shell will review its membership of lobbying organisations. It doesn’t make sense for an oil and gas company to say one thing about climate change but support a lobbying organisation which is resisting measures to limit global warming.
“However we believe Shell – and other fossil fuel companies – should go further. A key test is, what investment decisions taken by the company will now be different?”
The CFB and Epworth apply three climate change policies to their investment process. They are currently undertaking a further review of fossil fuel companies. This review aims to understand the extent to which fossil fuel companies are aligned with the Paris Agreement to limit global warming to “well below 2°C”.
Stephen Beer added:
“Shell states that its Net Carbon Footprint “ambition” is set by the progress society makes to meet the Paris Agreement goals. Yet companies are part of society; they are not merely passive. This is what corporate responsibility is about.
“The Paris Agreement on climate change sets the target of limiting climate change to “well below 2 degrees”. It would be great to have fossil fuel companies publicly commit to ensuring their business models will be aligned with this goal no matter what. The urgency is clear, with consensus is moving to regard a limit to global warming of +1.5°C as the key measure.”