Putting its money where its mouth is
Energy giant the first of major oil companies to tie cuts to carbon emissions to top salaries
Shell links climate change goals to executive pay.
Royal Dutch Shell said Monday it will link its carbon emission reduction goals to the pay of its executives starting in 2020, making the Anglo-Dutch energy giant the first of the world’s biggest oil companies to make that leap.
The move came as some 22,000 delegates from 200 countries met in Poland with the aim of translating the Paris climate agreement reached at the end of 2015 into action. The pact aims to cut greenhouse gas emissions — largely from burning fossil fuels such as oil, coal and natural gas — and slow global warming to less than 2 degrees Celsius.
In Poland, U.N. Secretary-General António Guterres on Monday called climate change “the most important issue we face,” appealing to world leaders to act quickly and aggressively to avert a global environmental catastrophe. Less than two weeks earlier, the U.S. government issued a dire report warning that the effects of climate change are already here in the form of devastating hurricanes, deadly wildfires and more intense heat waves. More disasters are coming, the report warned.
President Donald Trump withdrew the United States from the Paris agreement and dismissed the findings of his government’s report.
Shell is admittedly bowing to shareholder pressure, announcing the plans with an investor group called Climate Action 100+, a global group of shareholders focused on the transition to cleaner sources of energy. Shell said it will set updated three-to-five-year emission reduction goals each year. Details will be made final next year.
“Meeting the challenge of tackling climate change requires un-
precedented collaboration, and this is demonstrated by our engagements with investors,” said Shell Chief Executive Officer Ben van Beurden, who had previously resisted linking goals to CEO pay. “This ambition positions the company well for the future and seeks to ensure we thrive as the world works to meet the goals of the Paris agreement on climate change.”
Anne Simpson, the inaugural chair of the Climate Action 100+ steering committee and director of strategy at the California Public Employees’ Retirement System, one of the nation’s biggest institutional investors, praised Shell’s move as a step toward meeting the goals of the Paris accords.
“Shell is setting the pace, and we look forward to other major companies following its lead,” Simpson said.
Among oil companies, Shell has been at the forefront of efforts to combat climate change, warning the industry that it is an issue that can no longer be ignored. Shell previously announced its plans to cut its carbon emissions in half by 2050 — and by 20 percent by 2035. Shell also supports a potential “sky scenario” that envisions the world achieving netzero carbon emissions by 2070 to keep global temperatures from rising above 2 degrees Celsius.
Earlier this year in Houston, van Beurden emphasized that Shell is spending more on cleaner-burning natural gas, offshore wind farms, biofuels, carbon capture projects and the planting of trees and forests, which absorb carbon dioxide. Shell also is rolling out a program in Europe to charge about 1 or 2 cents more for gasoline to fund tree-planting projects worldwide.
“There’s no other issue with the potential to disrupt our industry on such a deep and fundamental level,” van Beurden said of climate change.
But Shell, in a sustainability report released this year, conceded that its greenhouse-gas emissions rose last year as the energy sector rebounded with rising oil prices and Shell added refineries. In a separate report, the company explained how it would reduce — but not eliminate — its oil production.